When MoviePass first made it public that it intended to offer members access to one movie a day at over 90% of theaters in the United States for just $9.95 a month, the announcement was met with a lot of skepticism.
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That was at least partly because the deal seems too good to be true. Since the average price of a movie ticket hit an all-time high of $8.84 in the first quarter of 2017, according to the National Association of Theater Owners, MoviePass loses money if members see just two movies a month.
The company, which was started by Netflix co-founder Mitch Lowe, told Motley Fool in an email that it plans to cover its deficits by selling the data it amasses. That seems a little far-fetched, but that's what Ted Farnsworth, CEO of Helios and Matheson Analytics Inc. (which owns MoviePass) told us.
For now, it's selling access at $9.95 a month. And while it seems too good to be true, it does actually work. And while it's not a particularly smooth system, it got me a ticket to a movie without too much trouble.
How does MoviePass work?
MoviePass, it's worth noting, has actually been around for a while at price points ranging from $30 to $50 a month. At those prices, it essentially had the same model as many gyms, where it offers just enough value that people don't quit even when they are not getting their money's worth.
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To get and use MoviePass consumers must follow five steps:
- Download the company's app on an Android or iOS phone
- Wait 5-7 business days for your card to arrive
- Go the theater where the movie you intend to see is playing.
- When you are within 100 yards of the theater, you can check in and essentially tell the app you intend to buy a ticket.
- Use your MoviePass card (it's a MasterCard debit card) to buy your ticket at a kiosk.
When I first used the system I walked over to a theater owned by AMC Entertainment Holdings (NYSE: AMC), a company that came out strongly against MoviePass. The theater chain called the $9.95 offer "not in the best interest of moviegoers, movie theatres, and movie studios," in a press release and said it's pursuing legal strategies to block it.
So far, that has not worked. I was able to walk up to my local AMC-owned Muvico theater, pick a movie, check in, and buy a ticket. It wasn't a completely smooth process -- the check-in took a few tries, and MoviePass does not explain what to do once you complete that. I assumed that I would be using the "pickup pre-ordered tickets" feature at the kiosk. In reality, you go through as if you are buying a new ticket and simply use your MoviePass card to pay. Once you do that you get a ticket that looks no different from one purchased any other way.
It still may be too good to be true
MoviePass works well enough that I plan on seeing some movies I otherwise may not have. That's perhaps good news for some films that are not blockbuster hits, but it also shows how untenable the company's model is.
For every film I see, MoviePass pays my local AMC full price (roughly between $9 and $11 dollars) for any non-3D or IMAX film I want a ticket for each day. I generally see maybe 2-3 movies a month, perhaps more in the summer. With MoviePass I will probably see at least one each weekend, bringing along my wife and son. That's roughly $120 worth of movie tickets a month that MoviePass must buy on $29.85 in revenue without getting any sort of kickback from the most theater chains (the company does have deals with a few smaller players).
That's a big deficit, and the data MoviePass will gather has some flaws too. For example, the company will know that I was willing to see Despicable Me 3 for free, and lots of other movies I would not pay for.
It's hard to see this business model having any sort of long-term viability despite what MoviePass claims about monetizing its data. At some point the company will either go away, raise its prices, or be squeezed out by AMC finding a legal or technical angle to block it.
For movie fans, this is an enjoy-it-while-it-lasts situation that does work, but probably won't last too long.
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