AMC Looks to Crush MoviePass

Movie theater giant AMC Entertainment (NYSE: AMC) wants to show MoviePass how to do subscription services right. After railing against the upstart service from Helios and Matheson (NASDAQ: HMNY) that lets you see one movie a day, every day, for just under $10 a month, the world's largest movie theater chain has unveiled its own competing service that has one key difference: AMC wants to make it a viable business.

As part of its AMC Stubs member loyalty program, AMC is launching a new tier to its rewards program called A-List that lets members view as many as three movies per week for $19.95 a month. While that seems like it shortchanges moviegoers compared to what MoviePass allows, the AMC service gives members enhanced benefits, including:

  • Seeing movies more than once
  • Seeing movies in 3-D, IMAX, Dolby Cinema, and special AMC formats
  • Tickets can be purchased on a whim or in advance through AMC's advance reservations system
  • You can see all three weekly movies in a single day
  • A-List members get all the benefits of AMC Stubs Premiere, such as free upgrades on popcorn and soda, free refills on large popcorn, etc.
  • No member card is needed; the service is web- and smartphone-based

Moviegoers may see those options as a significantly better opportunity than what MoviePass allows since MoviePass only permits you to see a movie once; showings are limited to 2-D films; you have to check in at the theater to get your tickets; you can only see one movie a day; and you need your member card to buy the tickets.

Beating the high cost of movie tickets

In announcing the new program, AMC Entertainment CEO and president Adam Aron made sure to highlight what the A-List program was about, noting that "... AMC Stubs A-List rewards guests with something that no one else offers: the very best of AMC ... for one simple, sustainable price."

It's that last part that is the dig at its rival. Because MoviePass pays movie theaters full price for the tickets its customers buy, it will typically start losing money on the membership as soon as someone buys a second ticket in a given month.

MoviePass has sought to offset the money-losing service by negotiating a percentage of concession stand revenue, as well as entering into the movie distribution business. It is acquiring movies in partnership with distributors so that when the films are released on DVD, streaming, or on-demand, it will get a cut of the proceeds.

That's a risky proposition, however. Its first film deal was to pay $3 million for the North American rights to a heist thriller called American Animals, which opened on June 1. Thus far, the film has earned less than $1.5 million in domestic box office receipts, according to Box Office Mojo.

Worse, MoviePass' second film -- Gotti, a biographical film about New York mafia boss John Gotti, starring John Travolta -- has been universally panned by critics and moviegoers alike, reportedly because of its sympathetic treatment of the violent crime boss. Gotti has earned a 0% rating on Rotten Tomatoes and has generated $3.5 million at the box office since opening on June 15.

How many movies do you go to?

AMC and MoviePass have been sniping at each other from the start, as AMC balked at giving MoviePass a cut of its lucrative concession stand sales. In response, MoviePass cut off access to 10 AMC locations.

Other services have also sprung up, including one from theater chain Cinemark Holdings, which charges $8.99 for one movie a month, and Sinemia, which offers tickets for as little as $4.99 per month. Sinemia actually thinks AMC's new program isn't sustainable because it targets a select group of "super moviegoers" who only visit one theater chain. MoviePass tweeted out its own critique of AMC's A-List, saying, "Heard AMC Theaters jumped on board the movie subscription train. Twice the price for 1/4 the theater network and 60% fewer movies. Thanks for making us look good AMC!"

The popularity and increasing proliferation of these subscription services show that the moviegoing public is looking for a better deal on movie tickets. They have MoviePass to thank for that. Yet AMC Entertainment is looking to take out its main rival with a plan that offers perhaps the broadest options for a reasonable price, as long as you don't mind only going to AMC theaters.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.