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Theater chains are terrified of MoviePass because of subscribers like me

Theater chains are terrified of MoviePass because of subscribers like me


MoviePass is radically changing the value of the theatrical film experience, but what does that mean for consumers and theater owners?

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Gallery Photo: MoviePass subscription movie ticket service hands-on (images)

I see a lot of movies. I moved to the Bay Area from New York nearly five years ago, knowing not a single person living in San Francisco, and I found going to the movies to be a solitary, almost meditative experience. Even as my friend group expanded, I kept up on the cherished cinematic ritual: the exorbitantly priced snacks, the ticket-taking and seat-selection process, the previews, and then the movie itself, with its sense of experiencing something new and unseen. There’s an antiquated sense of sacredness to a movie theater, and a theatrical experience only it can deliver.

Still, that experience isn’t cheap. In San Francisco, seeing two movies a month costs at least $25 — upward of $40 with any type of food. Three movies a month is nearly equivalent to four months of Netflix. MoviePass, the now suspiciously cheap subscription service from Netflix co-founder Mitch Lowe, is pretty much tailor-made for moviegoers like me. And theater chains, particularly AMC, are absolutely not on board.

I signed up in late August, after the steep price drop, and got my MoviePass card in early September. In the past three months, I’ve paid a little under $30 to see 14 films. The flat monthly fee freed up my budget to splurge on concessions, but even if I buy more food, I’m still coming out on top. The average movie in San Francisco costs about $12, nearly 50 percent higher than the national average. So seeing just one film a month with MoviePass, which lets you see one movie per day for $9.95 a month, more than covers the cost of the subscription fee.

In just three months, I’ve seen 14 films in theaters thanks to MoviePass

For me, MoviePass has become a simultaneously dangerous and exhilarating experience. I feel like I have access to a dark secret: perhaps movies aren’t really worth what we’re told they’re worth. What if, instead of paying $12, you could always just pay $2 or $3, bundled into a monthly fee? I cherish the theater experience as an institution. But given the freedom to pay less for it, I can’t help but take the opportunity. It’s like the Napster era, when the sheer ease of music piracy made it tremendously tempting, except that I can enjoy MoviePass with a clean conscience. At least until the company decides it can’t sustain its pricing model, or chains reject the service entirely, or something larger and more systemic changes about the film business.

But MoviePass has fundamentally changed the value I put on movie tickets. This is why it’s so controversial for theater chains. At first blush, it may be difficult to understand why. MoviePass still pays theater chains full price for the tickets it passes on to its own customers. It also restricts users to standard screenings, so no IMAX or 3D, and most theaters don’t support online pre-purchasing, so you have to go in person to buy your ticket. Problem is, AMC and other chains have to worry about MoviePass going belly-up.

From the outside, that seems inevitable since if I see two movies a month in pricey San Francisco, I’m already costing MoviePass money. MoviePass is banking on some subscribers seeing only one movie per month, or none at all. It’s offsetting the higher cost of tickets in expensive urban areas with the lower cost in other parts of the country. It’s taking a loss in order to build a consumer base, and banking on collecting data about those consumers’ habits, and selling it down the road. AMC claims the company is planning to eventually leverage its base against theaters, and try to push movie prices down. But if none of these things happen on the scale the company hopes, MoviePass’ model is unsustainable.

MoviePass iPhone app

And the company is aware of the necessity of providing consistent data and keeping customers locked in. In November, MoviePass changed its terms of service to limit users’ ability to deactivate and reactivate the service at will, so they can’t limit their use to summers and the year-end holiday season. The company also offered an even more discounted rate if viewers were willing to pay upfront for a year.

The company is going through a boom period: MoviePass saw 150,000 new signups in just two days when it dropped its price back in August. But if it does go under, those subscribers will have to return to paying between $10 to $15 for a single ticket. After three months with the service, I don’t think I could do that. MoviePass changes almost everything about the theater experience, when the cost of entry is virtually zero.

Now I idly entertain the idea of seeing a movie every day after work, or when I have time to kill before meeting friends. I’m more willing to consider movies with subpar Rotten Tomatoes scores but otherwise appealing concepts, like The Foreigner and Murder on the Orient Express. I’m also more likely to consider films in genres I typically avoid. Now, nothing really gets in the way of going to the theater except how much free time I have. But once you’ve gotten something for what feels like free, it’s difficult to go back to paying for it. If MoviePass went away, I’d still reserve money and time to see one or two films a month, but I’d be more choosy than I used to be, and more reluctant about paying full price for tickets. I can imagine other subscribers writing off theaters until something similar to MoviePass pops up again — especially with so many other, cheaper entertainment options available.

If MovePass went away, I’d be more choosy than I used to be and more reluctant about paying full price

The same struggle between the subscription model and the single-item model has played out with other entertainment industries lately. Fewer consumers are eager to buy physical CDs in the era of Spotify, or DVD box sets in the age of Netflix. Over the last five years, both physical music and digital download sales have shrunk, while streaming revenue has grown, overtaking physical media for the first time this year. This past summer also marked the moment when Netflix subscriptions surpassed those of all US cable providers combined. The film business and its players up and down the chain remain some of the few entertainment holdouts resisting the transition to “all you can consume” subscription models.

So MoviePass poses a kind of existential threat to theater owners, because its model devalues access to the theater experience. We pay so much money to sit in a theater, and for the right to drink an overpriced soda or eat a $10 tub of popcorn, because theaters have all decided on a ticket price customers must pay for the premium of that big screen and sound system. Theaters keep trying new things — comfy recliners, next-generation surround sound, laser-powered projectors, “4DX” screenings, and restaurant-quality dining options. But in the end, when theaters make money, or Hollywood manages to recoup its ever-growing film budgets, it’s because ticket prices have steadily risen over time. They’ve hit an all-time high in 2017, even as the number of moviegoers has declined.

Beyond conditioning consumers to expect absurdly low price-per-movie metrics, MoviePass takes pricing control out of theaters’ hands. Fewer people will want to see a $22 movie at a 3D IMAX theater when the standard 2D version costs 10 percent of that. By giving consumers a cheaper option — and as with all buffets, it becomes a progressively better value the more you use it — MoviePass is harming how much studios and exhibitors can control their own destiny. The price of a movie ticket, and the stranglehold on streaming and distribution rights, is at the core of the film industry’s livelihood.

MoviePass is harming how much studios and exhibitors can control their own destiny

There is a silver lining in MoviePass’ risky gamble. MoviePass may very well be unsustainable, even if it manages to partner with theaters for discounted tickets or food and drink deals, or if the long-term play to monetize its data bears fruit. That latter business model may need some kinks ironed out, because as it stands today, anybody with the card and mobile app login can use it. So friends and family members can share a MoviePass card just as they do with a Netflix or HBO Go login, spoiling the usage data MoviePass is banking on.

Yet at the end of the day, MoviePass is getting me and thousands of others to see more movies, sometimes regardless of what critics are saying. Movies have become such an overwrought affair these days, involving careful scrutiny over film and theater selection, because of how much tickets cost. Films that seem like required theatrical viewing are rare, given that the trip might cost a group of four upward of $75. It’s tempting to just wait for a new picture to hit Netflix, Amazon, or Redbox.

Yet subscription businesses have proved that, when given choice and freedom, people will consume more. The process of weaning consumers off one form of media consumption and directing them to another does take years. And there are always concerns over how artists and creators are being compensated in all-you-can-consume models, and how ambitious new projects are greenlit over safe franchises. Netflix and Spotify have proven the viability of media subscription models, but those models are evolving rapidly as the industry changes.

Netflix and Spotify have proven the viability of media subscription models

It’s not clear there is a way to build a movie theater subscription service that makes everyone happy. Even at $20 or $30 a month, it doesn’t seem viable so long as the rest of the economic chain of the film industry holds the line. But instead of criticizing MoviePass’ approach, or trying to prevent the service from taking off, the film industry should treat the service’s popularity as a learning experience.

Just as Netflix and other on-demand services have helped revolutionize the culture around media consumption, so could companies like MoviePass — with the right support structures in place, and perhaps a bit of compromising from consumers like me. Cinemark has already taken tentative steps toward creating its own subscription model. It doesn’t look particularly competitive, but it’s a first step. The film industry just needs to figure out how to meet moviegoers halfway.