Hollywood Will Miss MoviePass When It’s Gone

A view of signage at the MoviePass House Park City during Sundance 2018 on January 21, 2018 in Park City, Utah. (Photo by Daniel Boczarski/Getty Images for MoviePass)
Daniel Boczarski/Getty Images for MoviePass

Stock in Helios and Matheson, the company that owns the movie subscription service MoviePass, is now trading at 13 cents per share, which is a 99.99 percent collapse year-to-date.

MoviePass is in real trouble.

First some background…

The MoviePass business model is obviously based on a disruption plan, the same money-losing plan used by Netflix, Amazon, Uber, and Redbox.

What I mean is this…

Netflix is billions in debt. Amazon only started making a profit after more than 15 years in business. Uber still loses billions every year. Redbox only recently stabilized. But investors hung on through all the red ink in the belief Amazon would replace brick and mortar stores, Netflix will eventually replace television networks and cable, Uber will end car ownership in urban areas, and Redbox… well, those no-employees-required kiosks have already put Blockbuster Video out of business.

MoviePass CEO Mitch Lowe (a former executive at two of those disruptors — Netflix and Redbox) believes (or believed) his subscription service would do the same — forever change the American public’s movie-going habits.

On paper, it makes (made) sense. The movie business is in trouble.

Last year, movie-going attendance hit a 25-year low, and what you have now is a business where only one or two studios are gobbling up oversized pieces of the box office pie. Worse still, outside of one genre (horror), only massive gambles in the $250 – $350 million budget range are paying off.

There are many reasons for this. With ticket prices rising, what you have is a public willing to gamble only on sure things, like sequels, franchises, and brands. Even so, as we saw with last year’s attendance crash, fewer and fewer are even willing to make that gamble. And who can blame them? Hollywood makes a lot of really bad movies, a night out at the movies is prohibitively expensive, Hollywood has antagonized Middle America, and we have all kinds of entertainment options at home.

So along comes MoviePass with the following idea: for a monthly fee of $9.95 you can see as many movies as you like. At first, you were allowed to see one movie a day. You could even see the same movie over and over. Basically, if you went to the movies more than once, you were ahead of the game dollar-wise.

To make a big splash, earlier this year MoviePass dropped its monthly fee to $7.95 and, as you might expect, business boomed. More than three million Americans became MoviePass subscribers, including me.

But also, as you might expect, MoviePass went on to lose a ton of money because math is still math.

Since I was paying only $7.95 a month, MoviePass lost money on me on as soon as I bought my first ticket. If I saw a movie a week (about my average in summer), MoviePass lost a fortune. Multiply those losses by three million and you can see the problem.

So how did MoviePass expect to make this work?

For starters, MoviePass bragged about the data it was collecting from customers, which it felt it could sell to Hollywood. That brag could not have come at a worse time — just before the Facebook data scandal broke.

MoviePass could also advertise movies, push its customers to see certain movies (all for a fee to the studios), and even invest in movies like, say, the John Travolta disaster Gotti — which hurt MoviePass in ways beyond its initial investment. Gotti was such a bomb, it hurt the MoviePass claim it could push its own customers to see certain movies.

The company’s biggest mistake, though, was counting on theater chains to eventually see the benefits of a subscription model. What would follow, the assumed, would be discounted pricing and maybe even a piece of the concession. That never happened.

MoviePass should have called me. I would have been happy to inform them that theater chains guard their business model like wild hyenas.

And so, this past week MoviePass all but collapsed.

I saw it happen in real time when I could not get the app to work to see the new Mission: Impossible movie. And you can imagine how happy I was paying out of pocket after I had already paid for a full year’s subscription.

According to numerous reports, though, MoviePass had no choice, The  company had simply run out of money. It could no longer afford to reimburse theaters for our tickets.

As things stand now, MoviePass got a loan (which it now claims it has already paid back) and has again changed the rules. The monthly subscription fee is now back to $9.95 per month. You can still see a new movie every day, but wide release movies like Mission: Impossible, or the upcoming Meg, will not be available to you for a couple of weeks. You cannot see the same movie more than once.

There is also a $7.95 a month plan where you are restricted to seeing only three movies per month.

Obviously, the company’s biggest current problem is the stench of death. Who is going to sign up for a service that could be out of business tomorrow?

This is bad news for everyone. The box office is up ten percent over last year. MoviePass would like to take all the credit for the increase. MoviePass critics want to give it none of the credit.  My guess is that the company deserves some of the credit.

After all, if you are already invested in a subscription, you are going to use it. You are even more likely to take a chance on a movie you would not see otherwise. This is good for the movie business, good for the concession business, and good for both because if the movie stinks the customer is not going to feel as ripped off as they would otherwise.

Come next year, Hollywood and theater owners will probably regret not working with MoviePass to find some way to make it work. Something has to change in the movie business. Something’s got to give.

 

Follow John Nolte on Twitter @NolteNC. Follow his Facebook Page here.

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