Is MoviePass the Next Big Thing? Or Just One More Thing.

Netflix put DVD rental stores out of business. Amazon changed how we buy books (and almost everything else). Uber has placed taxi companies on a path to obsolescence. On August 15th, MoviePass, a fledgling movie theater subscription service with 20,000 subscribers, lowered their monthly subscription price from $14.95 to $9.95. Two days later they had 150,000 subscribers and had drawn a panicked response from AMC, the top theater chain in America. Is a seismic shift occurring in the first run movie delivery system as well?

Netflix put DVD rental stores out of business. Amazon changed how we buy books (and almost everything else). Uber has placed taxi companies on a path to obsolescence. On August 15th, MoviePass, a fledgling movie theater subscription service with 20,000 subscribers, lowered their monthly subscription price from $14.95 to $9.95. Two days later they had 150,000 subscribers and had drawn a panicked response from AMC, the top theater chain in America. Is a seismic shift occurring in the first run movie delivery system as well?

Rather than go into a long explanation of what MoviePass is, I’ll link you to its Wikipedia page to fill you in. I’m more interested in whether it makes sense for the movie consumer to subscribe to MoviePass. Here’s the economics of it. At $9.95 a month, the annual cost of a MoviePass card is $119.40. According to AMC, their average ticket cost for the first quarter of 2017 was $9.33. If you see 13 movies annually it would cost you $121.19. So to save money with a MoviePass you would have to typically go to the movies more than 12 times a year. It doesn’t seem like a lot but it actually is. I would consider myself an above average consumer of movies. But when I went back and tallied how often I actually go to the movie theater, here’s what I discovered:

Year # Seen in Theater Avg Cost Total Cost
2017 6  $       9.33  $    55.98
2016 6  $       9.33  $    55.98
2015 6  $       9.33  $    55.98
2014 3  $       9.33  $    27.99
2013 5  $       9.33  $    46.65
2012 11  $       9.33  $  102.63

In the five years before 2017, I would have lost money using MoviePass. I would have to go to the movies more than twice as often as I normally do to make it financially viable.

This is the “gym membership” pricing model. You enthusiastically use your gym membership in the beginning. Over time, though, life gets in the way and you use it less and less even though you continue to pay the same monthly membership fee. In one of the articles I read to prepare for this post, Stacy Spikes, the CEO and co-founder of MoviePass, indicated that 10% of moviegoers buy 50% of the movie tickets sold. According to Spikes, it was those movie theater patrons that they were targeting with this price decrease. I don’t buy it. They wouldn’t have to reduce the price to get those consumers. It is more likely they are targeting the movie fan that thinks that they go to close to a movie a month when actually they don’t.

As consumers of movie and television programming, we are witnessing the splintering of our venues to watch this programming. One other big piece of news that came out over the summer was Disney’s announcement that they will end their arrangement to provide content to Netflix in 2019. Disney intends to launch its own streaming service. Remember that Disney includes the Marvel and Star Wars franchises as well as their stable of Disney classics. Netflix, Amazon, Hulu, HBO, Showtime, Starz and soon Disney have exclusive entertainment that we probably want to see. MoviePass should be viewed as one more subscription service to fit into our entertainment budget if we so choose. But, can we afford it all?

There could be a place for MoviePass in this equation. Here are the totals of all of the movies released in the last 5+ years that I’ve seen:

Year Total # Seen # Seen in Theater % Seen in Theater
2017 9 6 67%
2016 35 6 17%
2015 51 6 12%
2014 44 3 7%
2013 41 5 12%
2012 59 11 19%
Total 239 37 15%

I eventually watch many more of the movies released in a given year on the platforms I subscribe to, whether it be cable, Netflix DVD, or a streaming service. Currently, I subscribe to all of the streaming options, either directly or through cable, mentioned above except for Hulu. I do this to give me enough good movie options to access each week. What if I watched more of the movies I end up watching with subscription services in theaters using MoviePass instead. I might then think of my subscription services as primarily for television entertainment. Since I can only binge watch a show or two at a time, why not limit my cost to the venues I’m watching at the time. If I just finished watching Game of Thrones until the next season in 2019 and now I want to watch Ozark, I can suspend my HBO subscription and reopen my Netflix streaming account. At the same time I could suspend my Showtime and Starz subscriptions too until I get around to watching Billions or Outlander. This would free up the cash for MoviePass and save me a little more as well. My wife Pam thinks that this sounds like a lot of work. The subscription services are banking on you feeling that way as well.

A few years ago, I remember listening to people complain about their cable bills. The common complaint was that we couldn’t pay for just the channels we wanted to watch and not pay for the others. Well, that day gets closer and closer every day as subscription services replace cable. If we don’t carefully manage our options, though, we may end up paying more for the things we “want” to watch then we ever paid for cable. We might think about paying only for what we “want” to watch right now. I think MoviePass could be part of the strategy, or not.

 

Author: Mad Movie Man

I love good movies. In my prior life I worked with predictive models. I've combined my love of movies with my prior experience to create a simple Bayesian probability model to help select movies that you will probably "really like".

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