MoviePass announced on Dec. 20 that it had surpassed 1 million subscribers
MoviePass, the $10-a-month subscription service allowing moviegoers to see a film a day at cinemas, has been chewed over in Hollywood — seen as both friend and foe.
The haste with which the company hit the million subscriber milestone — announcing on Dec. 20 that it had done so, just four months after lowering the subscription cost to $10 from as much as $50 — suggests consumers see MoviePass’s value.
It took Netflix, of which MoviePass Chief Executive Mitch Lowe was a founding executive and which, of course, began life as a DVDs-by-mail service, more than three years to hit the 1 million subscriber mark.
MoviePass had roughly 20,000 subscribers before the price cut, but demand for the service since has been much higher than Chief Executive Mitch Lowe expected.
However, those in the industry and others following the business are concerned that MoviePass’s model is unsustainable. The question is how a movie-theater subscription company subsidizing its members’ potentially expensive film-going habits can be profitable?
“It’s about the data,” said Ted Farnsworth, chief executive of Helios & Matheson Analytics Inc., which owns a majority stake in MoviePass.
Helios & Matheson shares HMNY, +1.11% have been on a tear since the company took its majority position in August. Shares are up about 102% since that time. The stock has been volatile, too, reaching an intraday high of $38.86 per share in October, but closing Thursday at $6.90 a share.
Short seller Andrew Left warned retail investors in October that Helios & Matheson shares would fall back to $20, and that MoviePass would never be a $1 billion company.
“I’m not worried about it,” Farnsworth told MarketWatch. “He’s a short seller, so he’s got to cover his squeeze. But the bottle will stand on its own.”
Some critics of the MoviePass business are concerned the company won’t be able to make money and will flame out, further hurting already troubled theater chains, or that it will have to raise subscription prices and drive users away
When Helios & Matheson acquired MoviePass, the company also cut the price from as much as $50 a month to $9.95. But it is still shelling out the full price of tickets to studios and movie theaters.
According to the National Association of Theater Owners, the average cost of a single movie ticket was $8.65 in 2016 — and double that figure in some major U.S. cities.
“The deal from our side and why we’re excited is we still get paid the full price of admission. If this succeeds in driving attendance, it will pay for itself,” said Chris Aronson, head of distribution at 20th Century Fox FOXA, +3.65% . “And they’ve made no secret that their goal is to mine data from subscribers. We’d be very interested in that.”
That’s exactly what Farnsworth and MoviePass’s Lowe are banking on.
“Making money putting people in the theater is fine, but also think about the advertising side,” Farnsworth said. “We’re the only company out there that can tell companies exactly who and when people are going to the movies.”
If MoviePass is able to prove that it can drive incremental box-office revenue to studios and cinemas, Lowe said, the company can strike deals to share in the revenue from those sales, as well as from concessions.
That could then lead to studios paying MoviePass to promote films to its users. MoviePass has experimented with this already, and Farnsworth said 18% of users go to movies after prompting by the MoviePass app.
Farnsworth and Lowe said they want to partner with restaurants located near cinemas and possibly even with Uber to get users a ride to the theater. It’s all about capitalizing on a night out at the movies, Farnsworth said.
“It’s so much easier than people think,” Farnsworth said. “There are so many areas for revenue streams. Will we need to raise more capital in the future? Sure. But right now we’re focusing on growing the company and doing deals with companies already out there.”