MoviePass Offers 'Unlimited' Movie Tickets For $29.99 A Month -- But Can It Ever Hope To Turn A Profit?
from the if-you-offer-'unlimited'-goods-at-a-fixed-rate,-don't-be-surprised-i dept
David sends in the news about a startup called MoviePass, which has a plan to get you out of your comfy chair and into the theater. Being touted as a possible savior for the theater industry and the "Netflix of local theaters," MoviePass promises "unlimited movies" at theaters nationwide starting at $29.99 a month.As plans go, it's not bad. All-you-can-eat-pricing and an integrated app might prove tempting to film buffs. But these same film buffs pose a major problem for MoviePass. The customers the service will most appeal to -- frequent moviegoers -- are the same customers that will make it very tough for it to turn a profit. Theater owners may have partnered with MoviePass for the potential uptick in sales, but it's unlikely that much of a discount has been applied, as the profit margin just isn't there. Generally speaking, tickets are loss leaders for theaters. The real profit comes from the concessions. MoviePass can get more people through the door, but whoever's eating the loss on the ticket sales is going to be hurting if members take full advantage of the service.
This business plan needs a wide variety of customers to pay off. It needs a number of "subscribers" to pay a minimum of $360 a year while rarely using the service in order to subsidize frequent filmgoers. The problem is that casual viewers can do the math and realize that they're losing money unless they attend more movies. And so, they'll attend more movies, making the situation better for them, but worse for MoviePass. It's what the economics kids call adverse selection.
Another hitch is that MoviePass requires you to sign up for an entire year, which is the sort of thing people shy away from. Once again, those who dive into a one-year contract will likely be those whose heavy usage will make it tough for MoviePass to turn a profit. Memberships can be cancelled, but MoviePass assesses a $20 fee and, if you've used more than $29.99 worth of tickets, you're responsible for paying the difference.
There are other stipulations too, all of which are in place to keep MoviePass from getting completely screwed. First, the $29.99/month is the starting price. Most people will be charged in the "and up" range. You're only allowed to buy one ticket per day and only one ticket per specific movie. No repeat viewing. No cruising the theater all day, waving around your MoviePass card. No 3D, XD, IMAX, etc.
How MoviePass plans to turn this into a profitable venture remains to seen. Assessing it from the information available makes success seem unlikely, mainly because the people who want it most are the worst for the business.
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Filed Under: adverse selection, economics, unlimited movies
Companies: moviepass
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There was another attempt at this..
There was another attempt at this a few years back; I think from one of the main movie ticket selling sites like Fandango or movies.com. ( Don't hold me to that last part). I think Theater owners freaked out, as they were left out of the loop; and the service was cancelled.
That said..
I think you're premature on declaring this service a failure. Just like any subscription service; I bet there will be some heavy users and some light users. I might consider something like this for convenience. If I go to a movie w/ a friend; it's easily a $30+ trip if we get popcorn and soda. So, 2 movies a month is the payoff point if refreshments are included.
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Re: There was another attempt at this..
All this service really has to do is make sure the tickets aren't valid during the initial peak days. The rest of the time, it's going to cost the theater nothing to provide a seat. If the customer buys any refreshments, they come out ahead.
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Re: Re: There was another attempt at this..
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Re: There was another attempt at this..
Lifehacker currently redirects to a backup page while they get their New York datacentre back up and running. The direct link will start working again once that's done.
As for the scheme itself, it sounds very much like something I was using when I lived in the UK, although that scheme was limited to a particular cinema or chain. It must have been successful, as a quick glance at the cinema in Nottingham I most often frequented shows that it's still going even though the cinema itself have changed ownership.
The idea is solid - heavy users get to see lots of movies while potentially spending more on concessions, light users end up paying more per movie than they would have done but always have the option to see more if they choose. As a consumer it was great for me as it meant I'd go to the cinema at least once a week to get use out of the card, and thus ended up seeing some great films I might otherwise have skipped. You don't mind risking a crappy movie if it's part of your subscription rather than paying full whack, and there's some gems out there.
With the Moviepass I'm not so sure. It's premature to call it a failure, but the general restrictions (yearly sub, no extras such as 3D, only certain theatres who might not always show the film you want, no repeat/multiple viewings, etc.) do mean that the average consumer would be put off in many ways.
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Re: There was another attempt at this..
Except you would each have to have a $30/month subscription since you can only buy one ticket per day with it. And popcorn and drinks aren't included. So to break even, if tickets at your theater are $10, you'd have to already go at least three times a month to break even.
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Re: Re: There was another attempt at this..
"All-you-can-eat-pricing and an integrated app might prove tempting to film buffs"
I had assumed that food was included; although could find no other information on the web about the service.
In retrospect; he may not be referring to food.
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I've already stopped going to theaters. Cost of tickets has just kept going up and the price of concessions leaves me feeling like I've been the victim in a robbery.
Going to theaters isn't on my list of things to do as long as the prices are sky high, the experience is bad in the surrounding atmosphere, and I don't like the idea of commercials just because I spent my money to go to the theater.
If I haven't made it plain already, I HATE COMMERCIALS. That's not likely to change under the present way things are done. I tend to spend my money as a vote for something I believe in when I have the choice.
This isn't one of them.
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But from what I remember, there was about 75 of us, which definitely surprised me.
I personally will be dropping my subscription soon, but during the Summer when lots of good movies come out, I see it paying off for the subscriber. The slow times when dull movies are being released is where MoviePass will make the majority of the money.
Movie tickets where I live are $15.50 a piece for a standard 2D movie, so it pays off for my area. Other areas where it's $10 per 2D movie, it may not be as lucrative.
Regardless, there's a larger following than most figure.
I don't see it lasting years and years, but at the same time I don't see it fialing too quickly.
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Also I'm not sure that the no-3d thing will really work. Moviepass just changed the way it works, but I suspect it still works very similar. You used to have to print out a "pass" which was really just a one-time credit card from hollywoodmoviemoney.com for up to $13.00. More than once the cashier rung me up for the wrong movie because they were a brain dead teenager. Now I suspect it works the same only it should be easier. You have to check in at the theater, but you just tell the cashier which movie you want to see and hand them the card. If it is less than $13 I bet it just works. That is still only one movie a day though.
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The no-3d thing is working fine since I don't really care for it. The working of piracy is super simple, just download and watch. Never had any problems with printing, cashiers, or checking in. Some days I go on binges where I watch as many movies as I want, as many times as I want.
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Gosh, it's a "mashup" of running themes! With surprise twist!
Then are themes of: movies, reviving movie theaters, a tip to Netflix, fixed price, long-term contract, and I suppose by implication it's an innovation and experiment.
Fine; I was interested. But it's Writer who unexpectedly goes wobbly on whether it can make a profit! -- "Generally speaking, tickets are loss leaders for theaters. The real profit comes from the concessions." -- Now, looking just at tickets, seems to me that Mike's infamous "sunk (or fixed) costs" would be exactly relevant here: everything is going and ready except for people in the seats, and how does one more person watching bring anything except profit? Especially with the likelihood that after an initial rush, most non-lunatics would be exhausted going out to a movie per day, yet they're on the hook to pay the buck, regardless.
I just don't see how "these same film buffs pose a major problem for MoviePass." It likely brings them in at no actual "marginal" cost, AND they'll buy concessions, and tell their friends who'll buy regular tickets... You basically seem to reverse the usual hopeful hoopla here. It's like uv ejad all over again.
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Re: Gosh, it's a "mashup" of running themes! With surprise twist!
The trick is being the dominant form of entertainment. When people have free time, you have to be the first thing they think of. They'll think "I'm paying for it, so I should use it" and the next thing you know you've got a loyal customer. Moviepass can do that, and $30 a month is cheaper than cable.
The dealbreaker will be all the restrictions. If you tempt people with the freedom to come and go to the theatre whenever they want, but limit what they can see once they're there, that loyalty will be quickly destroyed. You should be rewarding them the more they use it as an incentive to keep going, and telling their friends - because people don't want to go to the movies alone.
One of the main things that made Netflix work was great customer service and very simple one-size-fits-all rules. I'll be surprised if movie theatres can match that.
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Re: Gosh, it's a "mashup" of running themes! With surprise twist!
Then again, it depends on who "pays" that ticket. Is MoviePass independent of the theater, and thus pays the ticketprice? In that case they can EASILY loose money on you.
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Re: Gosh, it's a "mashup" of running themes! With surprise twist!
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I could see a lot of subscribers going to the theater every weekend with their "free" ticket and then blowing $10 on snacks and drinks since they aren't factoring the cost of the ticket into the cost of their outing. Anything that gets people in the door feeling that they can afford to splurge on snacks is a win for the theaters who don't pocket much if any ticket revenue, so they will be willing to offer MoviePass a good discount on the tickets.
While there are certainly people out there who have the time and the desire to spend 2+ hours going to the theater more than once or twice a week, if MoviePass can move beyond that minority of moviegoers then they can probably succeed.
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The downside may be difficult to calculate, but I'd be surprised if it isn't quite small.
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I'm 56 and qualify for senior discounts at the movie theater I frequent. That means I get to go to a movie for $5. Pretty cool, hmm?
Wait, there's more! If I go to this theater during certain times of the week, I get in (as does everyone else) for 1/2 price. That's $4.
Is this the only theater I go to? No. Does it have all of the movies I'm interested in? No. However, since Hollywood is making so many quality movies (don't break your sarcasm meter), I can hardly see where I'm going to exceed $30 per month seeing films even at full price.
In short, this is a bad idea that's too expensive to work.
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This sounds like a win all around if you watch a few movies every month (or enough that 360/year is a discount).
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What if MoviePass has to pay the theater for each ticket? It sounds to me like that's how it works. Maybe they get a discount, but I think they're incurring costs every time someone uses the service.
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As the article says, the number of people who would spend more than $360 a year on movies is pretty small. Even with my Australian ticket prices I wouldn't reach half of that sum.
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Profit?
I think theater will have incentive to accept the fixed amount plan. Afterall, ticket fee is not the only source of income. A few cinema lines even create their own club that when you pay the annual subscription fee, you get a few coupons that can exchange for any ticket of films on that cinema line. Some even attach popcorn discount coupons on it. As long as that session is not a near-full one, the cinema should be able to gain more profit this way.
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Personally, I suspect this plan to be successful. The annual membership will probably mean that customers don't exceed the average viewership by too much. What would the "break even" point be, 30+ movies a year? It will probably be like those health club memberships where half the people who sign up never actually get around to going. :)
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you make so many assumptions, most wrong, probably all wrong.
so for starters you assume you have a fixed number of people willing to go to the movies, that is faslse from the start. The die hard film buffs are not that many, it's mostly just normal people who like to go out to the movies, when they can afford to.
It is those people who will take advantage of a system such as this.
it's not going taking away anything from the number of people willing to watch a movie, but it does make it far more possible to put bums on seats, and a seat filled with a low paying customer is far better than an empty seat.
its about getting new customers, not converting existing customers. it's about turnover.
any, every business plan needs a range of customers to pay off, but this is not a business plan,, (do you know what a business plan is ??)..
this 'thing', is not a business plan, take a look at a business plan, (the type you are required to create for finance)..
this is an aspect of a plan, one small part, it is in itself not a business plan.. clearly you've never had to develop or deploy a business plan..
do you think that if a store put some products on special or offered a 'special deal' that that is a business plan ?
it is a marketting stratagy, that forms clearly a very small part of an overall businss plan..
Tim, go and do a small business course,, please, and some economics studies..
A part of the small business course will be teaching you how to write a business plan, it will teach you how to perform the analysis that you clearly do not have a clue about.
Once you learn what a business plan is, it will all become much clearer for you. You will notice your childlike 'analysis' of this, and your claim it is a 'business plan' is, or should be a bit of an embarrasment for you..
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A good example of a business missing key economic principles
Examples can be shown where after first run something like this could be viable. I have a theater near me that does $1 viewings of popular films after first run. the low-per viewing costs offset the scarcity. I could easily see them implementing an all you can watch option. But the math really isn't good for a major theater running initial distribution films.
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Re: A good example of a business missing key economic principles
Of course, there's not much scarcity after the first couple of weeks. Usually when I go to a new movie in the theater I'll wait until it's been out for a few weeks and the room will be practically empty. So from the management's perspective, filling it up for $1/seat is better than leaving it empty at any price.
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Re: Re: A good example of a business missing key economic principles
Its supply and demand. After the first few weeks there is a massive drop in demand. So to cover excess Supply, you drop the price and increase demand (by accessing people who will see the movie in a theater for a lower price). No longer is there large amounts of excess supply, and Scarcity does become a factor again, but not enough to overcome the far lower per viewing costs. (
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Re: A good example of a business missing key economic principles
When you were reading the article, did you notice the part describing how this service isn't unlimited?
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This option made me VERY interested in going.
But this PER-YEAR "contract" is a deal killer. Also, too many other strings, it's just not worth it.
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It seems like the same logic Disneyworld uses in selling cheaper annual passes to Florida residents. You recoup the cost for your passes on the third visit, and they're making money because you're spending money on food, souvenirs and hotels several more times per year.
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Something between gym memberships, people sign up in a fit of excitement and then don't use it much and those who do end up either buying drinks and snacks or going to the cinema with friends who might not otherwise have gone and who will be paying full price for their tickets.
The actual biggest problem with it is that it somewhat disguises from the management the negative effect of the over pricing of the standard tickets.
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UK situation
It´s 14.99£ a month, with a standard ticket being between 7-9£ for a showing, depending on type of movie and time of day. This usually means that 2 movies a month will see you break even. I joined it 4 years ago, and have never really regretted it.
It´s especially nice when you´ve got buddies with it as well, going on a weekend movie marathon, watching 2-4 movies in one day, and generally having a good time.
One thing about this scheme, is that it will change your movie going habits. Previously, I´d see an advert for some movie and think "eh, dont really wanna spend money on that" but with unlimited I think "I guess I can watch that!"
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Re: UK situation
There's two things I think haven't been factored in here. Since it's offered by the company, they have a guaranteed cash stream, whether or not I see a movie. Even if I see loads of movies, unless I take a seat a regular paying customer would have taken, it's not really costing them money, and at least I'm looking at their advertising.
Secondly, I might buy concessions. If that's where the money is, then that's good to them. Of course, I may not, but they still don't lose out there in most cases.
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I'm unclear on the economics
I guess I'm not sure if MoviePass is owned by a group of theathers or not.
If MoviePass only contracts with theaters then I guess the question of profit depends on the contract with the theaters. If MoviePass gets a guaranteed % of the price they charge for the subscription, then it doesn't matter if the subscriber goes to 1 movie or 100 movies. If MoviePass' revenue declines as the subscribers uses the service, then it's doubtful they can profit, but that doesn't sound like a smart way to contract a deal with theaters.
I guess I'm confused because the article focuses on the loss at theathers which only impacts MoviePass if the theaters feel they are losing out on the deal and cancel their contracts with MoviePass.
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These same people, who buy $600 toys that cost less than $200 to make, and then pay for a two year contract of capped service?
MoviePass is going to be very profitable.
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I'll assume that you are including ad viewing and popcorn (and other consumables) here. Very well. I immediately see that increasing cinema attendance will boost revenue from these sources, tickets being just one stream of total revenue. If movie theaters admins were actually smart they'd offer lower prices already and capitalize in these 'concessions'.
That said, how could MoviePass make a profit while encouraging sane usage?
You could offer lower prices for those who chose to attend in less crowded timetables. You can offer lower values for those who like to explore alternative movies (that usually have less attendance). You can offer lower values for those that are willing to walk an extra mile to attend the cinemas that have less attendance. You can offer lower values for those who buy a pre-sale of X combos of popcorn+soda to enjoy during their movies. They can offer lower values for those who agree to receive targeted advertising (based on their movie habits) of DVDs, digital files (DRM-free heh), merchandise of the movies (that would need participation from the studios). Offer good value for those who buy X copies of movies (digital) to be chosen during the year and transferred via close proximity transfer or the intertubes and an even greater value for those who choose to get copies from ALL movies they watch (in a Netflix all-you-can-eat style too). They can offer tiers with limits (ie: 4, 8, 16... movies per month) to avoid 'abuse'.
There are tons of ways of offering a good, profitable product that will generate more revenue to the cinemas. I won't hold my breath for a good offering when the MAFIAA is involved though.
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Tickets
The one change I believe they should make is to scrap the reviewing ban when since they are allowed only one ticket a day then who cares what movie they see or to see again? They can still pose limits during popular movie times.
Avoiding the cinema food is also a good idea when aiming for value and you can always sneak in your own food and drink. It is not like they would ever gain if you choose not to buy from them in the first place.
It could attract new customers but yes people who already visit the cinema are the most likely buyers. The biggest gain they have is word of mouth with these people attracting others to see some movies.
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Who's losing money?
It doesn't cost anything to have an extra person in the audience. It's not like they have to turn the projector up brighter! The cinemas should do all they can to get people through the door - season tickets are a great way to get bigger audiences, and guaranteed income.
With our huge multiplexes, and digital distribution, cinemas can show hundreds of movies a day. And if the cinema starts to struggle with too-large audiences, they can just increase the season ticket cost, and let the market work.
They can explore other options to separate heavy users from casual users, with higher-priced all you can eat, and lower priced allowances, like 3-movies/month.
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MAFIAA won't ever see my wallet so I am pretty much done with Theater going.
I will not be breaking my personal Boycott.
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Moviepass already in U.K.-not about profit
Reality check about cinemas:
THEY DO NOT EARN MONEY ON ANYTHING BUT CONCESSSIONS.
That's why popcorn costs so much.
**MOST** film distributors collect all revenue from ticket sales. They also set the price. Next time you think your cinema charges too much, you know it's Warner Bros, Disney and the like to blame. Pure greed. They actually don't need the cost to be as high as it is. They just like it that high.
In London the average ticket price is anywhere from £12-18 at any cinema. You can pay up to £22-26 at iMax. Sometimes more.
That's about $19+ per film ticket, not considering the concessions prices for people who are students or over 55's.
The mobile phone giant Orange provides Orange Wednesdays here, which allow people with Orange cell phone service a 2-for-1 Weds offer at the cost of a 35p text ticket. Most cinemas participate. This doesn't include 3D films and such.
So yes, the monthly pass does work if you like to see all your new releases. It's especially good because it doesn't bar pass holders from opening night films. I love that you can refer a friend for Cineworld's pass and get a freebie out of it.
You should really be promoting the idea, not denegrating it. People should be able to afford to see films, but the distributors have made it only for the gentry. Passes make it possible for everyone.
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Think about it: The longer a person stays in the theater, the more likely they are to get hungry/thirsty. Smuggled food aside, the only source of grub would be stuff from the concessions stand. Maybe an a particularly snacky movie goer might get more snacks between each movie.
Heck, you could encourage people to buy concessions by making your movie pass double as a reusable coupon. Maybe swipe your movie pass at the concessions stand to knock 5% off the price of snacks and drinks. That'll make people more likely to buy concessions because they think they're getting a deal, which will more than make up for the lower ticket prices.
There is a good idea in here somewhere, it just needs refinement.
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Seems a bit overpriced
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For me, and i know i'm not alone, the movies that come out now are pretty predictable in terms of whether or not i would buy the DVD/digital copy. If it is a film i'm willing to buy, I'm not going to spend nearly the same amount of money to watch it once on a really big screen. In the rare case that I actually go to a theater to watch a movie, there is almost no chance that i will buy the DVD.
Before the internet, I would actually have to wait until a movie was released on DVD but now i can watch it for free, legally, while it is in theaters. Ironically, i buy more movies now than i did before.
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You know, I was actually thinking that this might be worth it, until I read this part. No thanks, they can shove their restricted "free" pass.
How many movies do most theaters get per month anyway?
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