A retail reseller of someone else’s wholesale goods decides to slash the retail price of their goods to $9.99, covering their loss with alternate revenue streams, while still paying the full wholesale amount to the wholesaler. The wholesalers subsequently lose their cool, wholesale, over the idea of their goods being “devalued.” Does this sound familiar?
You might think I’m talking about Amazon.com’s launch of the Kindle, and its loss-leader pricing on best-sellers and new releases that led to the publishers’ and Apple’s illegal conspiracy to implement agency pricing. Except…I’m not. Sometimes, you see ebook parallels in the oddest places.
In this case, it’s MoviePass, an unlimited-monthly-movie subscription service that’s been in existence for a number of years. It sells passes for $50 a month that would allow purchasers to see as many movies as they wanted in participating movie theater chains (with the proviso that they’re limited to one movie per day).
Doesn’t seem like a bad bargain if you see a lot of movies. If theater prices are $15 a movie in your area, you come out ahead if you manage to watch at least four movies a month. According to the Hollywood Reporter, “more than 90 percent of theaters participate in MoviePass, including the three largest circuits, AMC Theatres, Regal Theatres and Cinemark.”
Except…MoviePass just decided to change things up in a big way. The service just announced it’s slashing its monthly price by 80%, to $9.95 per month. The service will continue to pay participating movie theaters the full dollar value of its ticket prices, and will make up the difference by “monetizing the data” it aggregates from its subscribers—at the same time it announced its price drop, it also announced it had sold a majority interest to a couple of analytics firms who want to study moviegoing habits.
MoviePass seems to believe it can make up the loss in what it pays for movie ticket prices by other means. And just as with Amazon and the publishers, at least one major theater chain has gone into panic mode and is scrambling to find a way out of its contract with MoviePass. AMC has announced it is consulting with its attorneys to try to figure out how to quash MoviePass’s scheme.
“AMC believes that holding out to consumers that first-run movies can be watched in theaters at great quantities for a monthly price of $9.95 isn’t doing moviegoers any favors,” the company says. “That price is unsustainable and only sets up consumers for ultimate disappointment down the road.”
You can sort of see where they’re coming from. If someone were able to watch one movie a day all month, that would be anywhere from $300 to $500 worth of movies or more, per person, at the low low rate of $10. That’s a little bit more slanted than Amazon’s more-or-less-breaking-even $9.99 ebook loss leaders.
It brings to mind some of the “if you build it they will come” “underpants gnome” startups of the dot-com era, like Themestream, which threw out fistfuls of money like Mardi Gras beads but somehow forgot to come up with workable business models along the way. It’s hard to blame AMC, which would find itself in the crosshairs of a lot of angry consumers once such a service inevitably collapses, for wanting out. It’s a bit more of a pointed dilemma than publishers’ fears that Amazon was somehow “devaluing” their products.
But rather than Amazon’s loss-leaders, on second glance this seems more on the order of an all-you-can-read service like Scribd, which notably had to pare its all-you-can-read service way back after only 3% of its readers’ voracious habits threatened to read them out of house and home. But there are a few limiting factors in something like MoviePass that will keep that buffet’s “big eaters” from being quite as much of a loss-inducer as one might think.
For one thing, it won’t be as vulnerable as Scribd to voracious media consumers. Even if you weren’t limited to just one a day, you can’t “speed-watch” movies. And going out to a movie involves bestirring yourself from your comfortable abode, going out into the world, and trekking however far away your local movie theater is. I know I probably don’t get my money’s worth out of my Netflix, Hulu, or Amazon Prime subscriptions, which cost about the same amount a MoviePass sub would, and I don’t even have to leave my home for those! (This is also why I expect most of the balkanized streaming services other studios and networks are trying to launch to fail.) And even the most dedicated movie-goer doesn’t have that much time on their hands. Most of us do still have to work for a living, after all.
So all but the most dedicated minority of MoviePass’s subscribers might only manage a dozen or so movies a month, at most, and the vast majority would probably be on the order of 4, 3, 2, or even 1. MoviePass would still be paying out more than it took in, but not that much more—especially if it could monetize selling marketing access to its subscribers, or steal away some of the concession racket that is the way movie theaters currently make most of their money. (The lion’s share of movie ticket prices go directly into the studios’ coffers.)
The funny thing is, AMC’s fears could be a self-fulfilling prophecy. If AMC does manage to pull its 11,000 screens away from MoviePass’s program, it will make MoviePass that much less attractive to subscribers, which could put pressure on the business and cause it to be that much more likely to tank. On the other hand, if the movie theaters themselves were to invest their efforts into backing MoviePass and trying to make it work, who knows what might happen?
Movie theaters’ biggest problem these days is that streaming services are much more attractive to many former theater patrons. Where movie theaters were the best way to get to see a movie right away, and consumers’ only alternative was to wait a few months, leave their house to rent or buy a movie, and then have to watch it on a crappy TV screen anyway, movie theaters’ ecological niche was effectively secure. But TV screens have gotten enough better, and streaming services have started delivering enough movies at such a low price, that it’s becoming more attractive than ever to wait and stay home—and not put money into movie theaters’ concession stands.
And here comes a service offering to make it possible for people to go out to movie theaters for the same monthly price they’d pay to stay at home with Netflix. Why do movie theaters even care about ticket prices when they’re not seeing most of that money anyway? Most of those consumers would end up buying concessions, which is how theaters make their money. No butts in seats means no popcorn in tubs. But if the service fails, there could be even fewer butts in seats.
And so, movie theaters face a sort of prisoner’s dilemma—if they don’t cooperate with the service and cause it to fail, disillusioned consumers will have that much less reason to come out to movie theaters anymore. Even if theaters support it, it could still fail, and still disillusion those consumers. But if it succeeded, maybe it could help movie theaters eke out another few years of relevance.
But it’s not too surprising either. In their way, movie theaters are very conservative. When streaming services or movie studios want to experiment with simultaneously releasing movies theatrically and in streaming, it’s the movie theaters who invariably shoot it down. If they aren’t careful, movie theaters might find sooner or later that while they’ve been turtling up in their shells and playing it safe, the rest of the world has passed them by.
If you found this post worth reading and want to kick in a buck or two to the author, click here.