$9.99, are they out of their mind?
That's the question currently being thrown around at AMC Headquarters in Leawood, Kansas, where executives for the country's largest movie theater chain are ordering their army of lawyers to find some way to pull the company out of its deal with MoviePass. Why? Because MoviePass, a Netflix-for-movie-theaters-like monthly subscription service, just slashed their price from $30 (in smaller markets) and $50 (in bigger markets) to a flat rate of $9.99 country wide.
The service, which works by issuing its users MasterCards which can only be activated in conjunction with the MoviePass cell phone app, still has the same limitations it used to. You still can't use it to see 3D or Imax movies. You can't see more than one movie per day. And once you've used your MoviePass to see a movie you can't later re-use if you want to see the movie again. But there's no cap on the number of movies you can see in a month, now at the ultra low cost of $9.99, which is cheaper than the cost of a single movie ticket in some cities.
The online response has been so overwhelming that the MoviePass site crashed repeatedly throughout the day, no doubt unprepared for the monumental crush of people rushing to cash in on such an amazing deal. However, because this is 2017 no good news could go unspoiled for very long. So, mere hours after MoviePass' announcement came word from AMC (via THR) that, "We are actively working now to determine whether it may be feasible to opt out and not participate in this shaky and unsustainable program."
Sigh.
Just to be clear, neither AMC nor the other major theater chains (Regal, Cinemark, etc.) will lose any money on this deal. MoviePass actually pays them the full price for each ticket purchased by its subscribers. Moreover, AMC shouldn't necessarily be cast as the villain here (even though that's kind of what I've been doing in this article). Way back when MoviePass first started it was AMC who agreed to beta test the service in their theaters. After that, the other chains followed. So, we kind of have them to thank for MoviePass at all, and their reasoning for turning on their old partner actually makes sense because, seriously, $9.99, are they out of their minds?
Here's what an AMC rep told THR:
"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. That price is unsustainable and only sets up consumers for ultimate disappointment down the road."
Translation: This move makes so little fiscal sense it will bankrupt MoviePass but get moviegoers hooked on the idea of only paying ten bucks a month for new movies in the process, which is a nightmare waiting to happen. Just ask the music industry how hard it is to adjust once consumer habits have been permanently altered like that.
Frankly, they're not wrong because if MoviePass is actually paying movie theaters the difference between our ten bucks and the overall value of the tickets we buy in a month how are they not bleeding cash in that deal?
It's a fair question, but it's one which misunderstands what's really happening here: this is all one big experiment. In fact, from the very beginning, MoviePass has been a bit of a wild experiment, an idea cooked up by a former Netflix and Redbox executive (Mitch Lowe) to see if a monthly subscription service for film attendance was actually feasible. That went so well they got 91% of movie theaters in the country to buy in, but they struggled to get anyone other than movie nerds like myself to sign up (I've been a member for nearly 2 years now).
Based on my experience, anyone with a MoviePass is someone who was already going to be seeing at least 4 or 5 movies a month anyway. However, the average American only sees 5 movies a year! MoviePass wants to see if a lower price will entice some of them to change their habits. Bankrolling this new phase of the experiment are Helios and Matheson Analytics, who just bought a majority interest in the company and are said to be interested in studying moviegoing habits. That's why the email I received from MoviePass informing me of the price change included the following language: "This price will be guaranteed for at least the next 12 months."
They're giving it a year with some vague idea that Helios and Matheson will seek to somehow monetize the data they gather over those 12 months. Then, if they've attracted enough new users to at least partially offset their losses they can start the game of "now that you're hooked maybe you won't mind a slight price increase." AMC doesn't want to be part of that experiment, though, and if they find some legal recourse who knows what the other theaters will do.
Obviously, the way in which we consume entertainment is ever-changing, and this new Netflix-like price point for MoviePass recognizes the now oddly-agreed upon rate we're all willing to pay for monthly access to movies. The brick and mortar movie theaters, who have now outlasted record shops, bookstores, and video stores, have shown flexibility in some areas in recent years, but they are also uniformly opposed to any proposals which they see as a challenge to their core business model:
The Napster dude wants to offer premium pay-per-view for first-run movies while they're still in theaters? Fuck that shit.
Sony wants to put out some major movies on VOD the same weekend as their theatrical release? Yeah, that's not happening.
Now, some tech company wants to give away our product for the same monthly cost as a Netflix subscription? Get me Legal on Line 1, stat!
The sad thing is this move on MoviePass' part is exactly the bold, against-the-grain thinking the movie theaters need more of right now. As I wrote last week, since the beginning of August the top four theater chains in North America lost $1.3 billion in value, with AMC, specifically, dropping 27% on the stock market. The reasons are varied, and many in the industry believe it's simply part of a down cycle due to a poor crop of movies. Next summer will be better because it has a group of movies which will be easier to market. However, it could also be that we're finally seeing the culmination of something which has been building for years, namely that the more the movies studios have aimed for international audiences with language neutral action and name-brand entertainment the more they've pushed domestic audiences away and right into the arms of superior (and cheaper) entertainment on TV.
That's not a problem MoviePass can fix. It's not one AMC, Regal or anyone other than the actual people making the movies can fix. However, it's a problem which requires creative strategies to counter ever-declining movie attendance, and what MoviePass just did is either one such creative move or an act of insanity which truly makes no fiscal sense. Personally, though, as someone who used to pay $30 for my MoviePass I welcome the coming price cut on my next billing cycle. With the extra $20 a month maybe I can actually buy an occasional bag of popcorn at the movies because Lord knows movie theater popcorn doesn't come cheap. Now, if only MoviePass could offer a PopcornPass.