MoviePass Is Trying to Disrupt Hollywood — Will It Succeed?

Photo: Cultura Exclusive/Samantha Mitch/Getty Images

The subject of the week in Hollywood is MoviePass, a company from the co-founder of Netflix and Redbox that’ll let you go to the movies once a day, every day, for just $9.95 a month — just barely more than the average price of a single ticket, and less in cities like New York and Los Angeles. While MoviePass has been around for a little while now, it’s in the news at the moment because of that new, comically low price point, as well as the controversy it’s provoking among theaters.

AMC has come out guns blazing, even going so far as to include a solid alchemy burn in its press release trashing the company’s plan. As AMC points out, MoviePass — which buys tickets directly from the exhibitors, then redistributes them to its subscribers by way of a MoviePass-specific debit card — will lose money on every customer who sees more than one movie a month. So what’s MoviePass’s angle here? Is this a strange form of cinematic philanthropy? Or do they have a plan?

They do have a plan — but it’s one straight out of the Silicon Valley playbook, marking what isn’t the first, and certainly won’t be the last, attempt to disrupt Hollywood. To understand MoviePass’s move, it’s essential to know that, simultaneously this week, they sold a $27 million stake to the data firm Helios and Matheson Analytics, with the intention of an IPO in early 2018. And it’s important to note the trajectory of moviegoing in the United States: Summer box office is down 12 percent from last year, and AMC’s stock, as MoviePass has noted publicly, is way down.

MoviePass is counting on the idea that exhibitors, faced with fleeing audiences and a seemingly flawed business model, are panicking. What the company hopes to offer over time is a large base of proven, frequent moviegoers — and the proprietary information that comes from having access to their every ticket-buying decision. It’s a Big Data move, one that will utilize investor money to subsidize a money-losing business model in the hopes that other revenue streams will eventually open up, most likely coming from the likes of AMC, who might one day offer MoviePass tickets at a discount and use the consumers’ behavioral information to improve advertising, curation, concessions, and so on.

Could it be successful? Depends on what you mean by success. AMC is absolutely right when it calls MoviePass a “small fringe player,” but the MoviePass execs are also right when they say that they seem to have struck a nerve, both with the public and exhibitors. You don’t need Big Data to know that going to the movies now has to compete with a greatly improved home-viewing experience, facilitated by better technology as well as on-demand and subscription services like Netflix, and that many potential customers see it as too expensive to be a regular activity.

But a more complicated aspect of the question is what needs to be done to change that. Lowering prices is certainly an option — but it’s one that conflicts with the entire structure of the film industry as it currently stands. Hollywood is a notoriously complicated nut to crack for outsiders because of the sheer amount of money, players, and relationships that exist, and the way that those relationships tend to be mutually beneficial, or at least navigable, for the parties involved — including the studios, the exhibitors, the talent, the financiers, and the immense support apparatus that exists around those groups. Right now, the fruit of that ecosystem has been a concentration on movies that cost hundreds of millions of dollars, and the necessity of those movies to then gross hundreds of millions more dollars internationally, across a byzantine array of markets and revenue streams.

MoviePass compares itself to Netflix and Redbox, but there’s a major difference. Netflix and Redbox had an actual product: the movies they allowed you to watch, in a manner you could not watch them otherwise. MoviePass, on the other hand, does no such thing. Unlike home viewing, movie-theater attendance is more of an experience than a consumable product. While moviegoers no longer visit the theater to just see whatever happens to be playing, there are still a variety of factors that impact their purchase of a ticket beyond the mere notion of watching a film. There’s popcorn, soda, Friday or Saturday night, the rarefied notion of a movie on the big screen — divorce these from the raw commodity of the purchased ticket, and you’re talking about a fundamentally different experience of moviegoing than the one had by the vast majority of the theatrical audience.

According to the Motion Picture Association of America, in 2016, just 11 percent of moviegoers went to the theater once a month or more. However, that 11 percent of the audience accounted for 48 percent of tickets sold. The viability of MoviePass depends on the idea that the company could turn the other 89 percent of the United States and Canada into frequent moviegoers. That’s the only way it could be valuable both to consumers and to the theaters, who would benefit from peripheral increases in revenue due to the increased foot traffic in their businesses, even if they didn’t get the full yield of the extra tickets sold. And that’s the group that MoviePass would lose the least money on — because every subscriber going to the movies once a week, or more, is basically money lit on fire, since those customers are of little use to theaters, who already have a good understanding of them through their own loyalty memberships and market research.

But for your average family of five, MoviePass does little good. Five subscriptions are hardly less complicated than five tickets, and you’re probably not getting to the theater once a week. Concessions still cost a fortune. And for the studios and distributors, the prospect of decreased ticket revenue is an absolute no-go, even if theaters sell more Raisinets. That’s the dilemma MoviePass faces going forward: It isn’t a question of whether people would subscribe, it’s a question of how many.

Netflix and Redbox solved actual, practical problems for the vast majority, if not the totality, of people who wanted to watch movies at home. MoviePass’s challenge is that it threatens to cut into the revenue stream of Hollywood’s most loyal customer, with the added, ethereal benefit of “data,” a concept with which theaters already have a complicated relationship, considering the struggles of tracking and the unpopularity of in-theater advertising. And ultimately, it isn’t good for anyone in the business of movie-making if people become used to the idea that they should be entitled to all movies for ten bucks a month. Just look at the music industry.

MoviePass Is Attempting to Disrupt Hollywood — Will It?