Slash Film: MoviePass Will No Longer Cover Certain AMC Theatres

MoviePass, are you okay? The very popular subscription-based movie service has been doing really well for itself, raking in the dough while also expanding into acquiring films for distribution. But now there’s a sudden bump in the road: MoviePass is no longer working with certain AMC Theatres, and it appears that this was a decision made by MoviePass, not AMC. Here’s what we know about the outages at certain MoviePass locations.

For a while now, folks have been thinking MoviePass might be too good to be true, and a sudden hiccup in the service may prove this theory correct. Deadline reports that MoviePass is no longer working with certain AMC Theatres – MoviePass will no longer cover tickets at big market AMC theaters like the Empire 25 in New York City, the Universal City Walk, AMC Loews Boston Common and the AMC Century Plaza.

MoviePass CEO Mitch Lowe issued the following statement:

“As of today, you’ll find a small handful of theaters are no longer available on our platform. Our number one goal as a company is to provide an accessible price-point for people to enjoy films the way they’re meant to be seen: on the big screen. Many exhibitors have been receptive to this mission, and we’re excited to keep working with theater chains that are closely aligned with our customer service values. As we continue to strive for mutually-beneficial relationships with theaters, the list of theaters we work with is subject to change. We advise customers to always double check the MoviePass app for the most up-to-date list of participating theaters.”

MoviePass has had some issues in the past. When the service dropped its prices, inspiring an influx of sales, AMC expressed doubts. Yet this move to no longer cover certain AMC Theatres apparently doesn’t come from AMC, but from MoviePass itself, as this Tweet from AMC seems to confirm.

This is all likely due to increased ticket prices. MoviePass stopped working at the AMC City Walk Theater at Universal Studios, Hollywood last year because ticket prices were too high. In other words, there’s only so much money in ticket sales that MoviePass is willing to cover. Per Deadline, the subscription service covers $2 million in weekly ticket sales to AMC.

Meanwhile, MoviePass continues to chart new territory. After surpassing 1.5 million subscribers, MoviePass offered people a chance to win ten 12-month MoviePasses by simply attending a screening of I, Tonya. On top of that, MoviePass recently decided to move into the distribution game by purchasing movies. Just this week, they partnered with The Orchard to purchase American Animals at Sundance.

Wired: HOW DOES MOVIEPASS MAKE MONEY? WE'RE STARTING TO FIND OUT

 MoviePass has pulled support from some AMC theaters, just one of many signs it's finally serious about making money.  PATRICK T. FALLON/BLOOMBERG/GETTY IMAGES

MoviePass has pulled support from some AMC theaters, just one of many signs it's finally serious about making money.

PATRICK T. FALLON/BLOOMBERG/GETTY IMAGES

WHEN MOVIEPASS LAUNCHED last summer, it introduced a seemingly impossible offer: See a movie every single day in theaters, paying only a monthly fee that, in most markets, amounts to less than a single ticket. It worked. Earlier this month, MoviePass hit 1.5 million subscribers, growing much faster than anyone expected, including MoviePass.

But amassing customers was never going to be the hard part. MoviePass now has to show that it can actually, you know, make money. A little less than six months in, it looks as though it just might have an answer—although a fresh spat with AMC shows that not everyone will like it.

Giving It Away

To be absolutely clear: The more subscribers MoviePass signs up, the more money it loses. It pays theaters full price for each ticket, whether a member visits once or 31 times a month. It has to provide for customer service to support those 1.5 million people, many of whom have lobbed valid complaints—MoviePass issues debit cards to each of its members, and initially couldn't keep up with demand—as the service struggled with its rapid expansion. And that’s on top of the usual, unglamorous costs of running any business. (Backends don’t maintain themselves.) If it seems like MoviePass is too good to be true, that’s because right now, it is.

Which is also why its explosive growth hasn’t been an unvarnished good, at least in the short term. “It’s harder in some respects and easier in others,” says MoviePass CEO Mitch Lowe, who cites the company’s customer service falterings as a primary drawback. There’s also the matter of all the cash the company must have run through by now; Helios and Matheson, an analytics company which has a majority stake in MoviePass, continues to put millions toward keeping the company afloat through the outflow. Analyst Brian Kintsligner of Maxim Group recently wrotethat the company had "an estimated seven months of cash" to cover losses incurred by heavy-usage members.

The question, then, might not be whether MoviePass has a long-term plan for success—it's if the company can stick around long enough to see it through.

Read more here

The Verge: MoviePass pulls support from popular AMC theaters

MoviePass and the AMC Theatres chain have never exactly enjoyed a rosy relationship, and the latest step in their conflict came today, as MoviePass pulled support from some of the chain’s most high-profile locations. Deadline reports that the service is no longer supporting ticket purchases at theaters like the AMC Empire 25 in New York, Universal City Walk near Los Angeles, and the AMC Loews Boston Common.

“As of today, you’ll find a small handful of theaters are no longer available on our platform,” MoviePass CEO Mitch Lowe said in a statement. “Our number one goal as a company is to provide an accessible price-point for people to enjoy films the way they’re meant to be seen: on the big screen. Many exhibitors have been receptive to this mission, and we’re excited to keep working with theater chains that are closely aligned with our customer service values.” The statement goes on to clarify that the list of participating theaters is subject to change, and MoviePass customers should consult the mobile app for updates to that list.

AMC and MoviePass have been publicly at odds since the subscription service drastically cut its monthly subscription price in August 2017. (The company previously relied on a tiered model that scaled monthly pricing from $15 to $50 based on region, much like movie ticket prices can vary from one locale to another.) AMC responded by threatening to drop out of MoviePass’ deal, and potentially even file a lawsuit. The chain’s logic has been straightforward, however: mass adoption of a subscription service like MoviePass could effectively change the perceived value of movies, resulting in a situation where theatrical exhibitors wouldn’t be able to charge enough to keep their own businesses afloat. 

“AMC also believes that promising essentially unlimited first-run movie content at a price below $10 per month over time will not provide sufficient revenue to operate quality theaters, nor will it produce enough income to provide filmmakers with sufficient incentive to make great new movies,” the company said in August.

What’s interesting about today’s development is that MoviePass reportedly didn’t notify AMC or its own customers ahead of time. In fact, AMC’s own support account on Twitter wrote earlier today that MoviePass still has not contacted the chain about the development. Given the public rancor between the two companies, it seems likely that MoviePass made the change quietly as a bit of hardball negotiation, hoping customers would become angry with the theater chain and blame it for the problem. On social media, that appears to be exactly what’s happened. But in reality, the tactic could easily backfire on MoviePass, as customers realize they can’t trust the company to consistently provide access to their favorite theaters. Presenting MoviePass access as arbitrary and subject to political maneuvering is hardly a consumer-friendly tactic.

It’s been clear for some time that MoviePass isn’t simply trying to find ways to bring more people into existing movie theaters. The subscription-price reduction came after MoviePass sold a majority stake to the data firm Helios and Matheson Analytics, Inc., and the change has allowed the company to jump from around 20,000 subscribers to 1.5 million subscribers as of January 2018. MoviePass’ ability to track what movies its customers are watching, and where they’re buying tickets, is valuable data for marketers, advertisers, and distributors. And Lowe has said that selling that data is a major way that MoviePass is going to make money. Not having access to AMC — the largest theater chain in both the United States and the entire world — could make achieving that goal more difficult, since it would be clear MoviePass’ data would be incomplete. There are good reasons AMC was the first chain MoviePass signed a deal with, and that importance is likely why MoviePass is being so aggressive around AMC now.

MoviePass is already trying to add revenue streams past its data-driven approach. The company has been heavily promoting movies like I, Tonya and Forever My Girl to its users, clearly as part of a paid promotional package. And before 2018’s Sundance Film Festival, the company announced it had spun up a division that will actually acquire movies, then use a traditional distribution company to get them into theaters. During Sundance, it partnered with distributor The Orchard to purchase North American distribution rights for Bart Layton’s American Animals for $3 million, giving the company the opportunity to create a closed loop with a captive audience: it can own part of a movie that it then promotes to its own customers, driving up the ticket sales that its own subscription service helps generate.

And like most entertainment companies, MoviePass is already looking beyond theatrical exhibition. In November, CEO Mitch Lowe said on CNBC that the company would eventually launch its own streaming service as well. But as MoviePass tries to hardball AMC into going along with its demands, and as it lures in millions of customers by offering increasingly lower ticket prices, it’s important to remember that when something seems too good to be true, it often is. 

MoviePass isn’t trying to help movie theaters; it’s trying to use them to capture data it can sell. It isn’t trying to help people see more movies out of some altruistic bent; it’s hoping to spike attendance in the short term so it can expand the pool of people whose data it’s collecting. And when it doesn’t get the answers it likes from a chain like AMC, it’s willing to cut those theaters out completely, regardless of the harm that does to its customers or reputation. While a $9.95 subscription deal may sound great, it’s really only a good deal if it works consistently, at the theaters where customers want to use it. And as MoviePass’ CEO said, those theaters are subject to change.

Variety: Sundance - MoviePass, The Orchard Buy 'American Animals'

 CREDIT: COURTESY SUNDANCE

CREDIT: COURTESY SUNDANCE

MoviePass Ventures and The Orchard are partnering to buy North American distribution rights to “American Animals,” an art heist drama that premiered at this year’s Sundance Film Festival. The deal was for $3 million and involved a significant P&A commitment, according to a knowledgeable source.

It’s a unique pact, combining the resources of a subscription ticketing service that’s been likened to the Netflix of the exhibition space with the indie studio behind “Cartel Land” and “Hunt for the Wilderpeople.” At the start of the festival, MoviePass announced that it was looking to buy films and was hoping to partner with a more traditional distribution company. It had talked to studios about partnering on a deal to purchase “Blindspotting,” but that film ultimately sold to Lionsgate. MoviePass’ subscriber rolls currently exceed 1.5 million people, so theoretically it has access to data on consumer habits that could help the companies pitch the film to consumers.

American Animals” hit the mountainside festival with a lot of buzz for its colorful plot, kinetic direction by Bart Layton, and the performances of stars-on-the-rise like Evan Peters and Barry Keoghan. The film unfolds in 2004 and follows childhood friends Spencer (Keoghan) and Warren (Peters) as they rebel against their suburban upbringing in a posh corner of Kentucky. The two plot to steal priceless Audubon prints and rare books from Transylvania University’s special collections library. Their exploits rank as one of the most audacious art thefts in recent history. But reality proves to be very different than fantasy, and while they had visions of pulling off a grand caper, Spencer and Warren are eventually forced to grapple with the moral consequences of their criminality.

Reviews for the film were strong. Variety’s Guy Lodge called the picture “wildly entertaining,” and wrote that it works as “a riveting college-boy crime caper that tiggers along on pure movie-movie adrenaline, before U-turning into a sobering reflection on young male privilege and entitlement.”

“American Animals” was co-financed and developed by Film4, which previously backed Layton’s first feature debut “The Imposter,” and “I, Tonya” maker AI Film. It is a Raw production, and was produced by Katherine Butler, Derrin Schlesinger, Dimitri Doganis, and Mary Jane Skalski.

The deal was negotiated by Danielle DiGiacomo, VP of acquisitions for The Orchard. Khalid Itum, VP of business development, Zac Bright, director of business development at MoviePass, represented the subscription service. Vince Holden at AI Film and UTA Independent Film Group represented the filmmakers.

Sierra/Affinity will handle international sales on “American Animals.” Those rights are still available.

Seeking Alpha: The MoviePass Narrative Has Evolved. I Am Long.

Summary

A simple reflective question made me reassess my initially bearish position on the comany - Will it be around in a year?

The company could stand to benefit from a range of revenue verticals, some of which would have a material effect on its financial story.

The risk/reward is skewed to the upside at the current price.

The aftermath of my Helios and Matheson Analytics's (HMNY) MoviePass article; "Can A Flawed Business Model Generate Investor Returns? An Empirical Analysis Of MoviePass" was to be expected. Bulls sought to defend their position, bears theirs, and words like "shill" and "manipulator" got thrown around. However, in the midst of this a simple question made me reassess my entire bearish premise; will MoviePass be around in a year? This was a watershed moment in my opinion towards the company. At face value, it is a very basic question. Bears will either answer no, go short! Or yes, go short! However, when I sought to answer it, I was fully converted to a bull.

I thought it would be prudent to write an article exploring the findings from my answer to this question as I placed an order with my broker to buy a considerable amount of calls. This article will explore how I have come to join the ranks of individuals initially described as being induced with "FOMO induced haze".

Movie Marketing-as-a-service (MMaaS) 

MoviePass should not be thought solely as a movie ticket subscription company. While its subscription offering for moviegoers could potentially break even and become profitable, central to its long-term growth is selling movie marketing-as-a-service.

The current context for movie studios is bleak as year-on-year increases in marketing costs have intertwined with year-on-year decreases in movie theater attendance. This represents a negative return on marketing investment (ROMI). Further, most of this is spent to buy television time (70% or more in most cases), which is a non-targeted form of advertising. Variety states that the "reason the marketing revolution has yet to materialize is that distributors still lack the kind of granular customer profiles" necessary for more "interesting, precise, cheaper, and efficient marketing.”

Read full article here

The Washington Post: The MoviePass deal: For less than $120 a year, you can see 365 movies. Here’s the catch.

MoviePass is a film nerd’s dream. The subscription service allows users to see one movie a day at a theater for a single monthly cost. The service isn’t new, but it’s become popular among a lot more than movie buffs in the past few months.

During its first six years as a company, MoviePass relied on the idea that most of its 20,000 subscribers wouldn’t use the service. It’s the way many gyms make money: Convince users to sign a contract, then hope they’ll never actually show up to use a treadmill.

But when Mitch Lowe, a Netflix co-founder, took over MoviePass as CEO in June 2016, he opted to flip this revenue model on its head.

First, he teamed up with data firm Helios and Matheson Analytics Inc., which bought a controlling interest in the company. Then, in August, he announced a radical overhaul to the company’s pricing model, dropping the cost from around $50 to $9.95 per month.

Instead of hoping subscribers skip out on the movies, Lowe wants MoviePass customers to visit the theater as often as possible. Because the more movies its subscribers see, the more data the company rakes in. And that’s where the real dough is.

“The big money for us was always understanding the consumers habits and the data, because no one’s ever done that,” Ted Farnsworth, CEO of Helios and Matheson, told The Washington Post.

After the pricing change, the service exploded in popularity, adding 150,000 subscribers in two days, Lowe told The Post. Since then, its user base has grown to 1.5 million subscribers. It added 500,000 of those in last month alone. (For comparison’s sake, it took Netflix about four years to reach 1 million subscribers.)

MoviePass is trying to drive customers to movie theaters at a critical time. Movie attendance in 2017 dropped by more than 6 percent from the previous year, according to Box Office Mojo, which noted about 82 million more tickets were sold in 2016 than 2017.

The average movie in America costs $8.97, according to the National Association of Theatre Owners. In cities such as New York and Washington, tickets can run $15 to $20. MoviePass customers would only need to see one or two movies a month to get their money’s worth. According to the Motion Picture Association of America, 11 percent of American and Canadian moviegoers already do just that.

Since MoviePass pays the full price for each ticket, it quickly loses money on many customers.

“They definitely need to generate revenue from ancillary revenue sources,” Eric Wold, an analyst with B. Riley FBR, a financial services company, told The Post. He added that the company will probably raise its prices over time, much like Netflix did, but even then it will still require other income sources.

The company has spoken of seeking of concession revenue from the theaters to which it sends moviegoers, according to Fortune. During the weekend, the company announced that it will be investing in movies.

But Wold — echoing Farnsworth — said data is the key to the company’s potential success.

While most theater chains track its own customers’ habits, Wold said MoviePass is the first service that can track moviegoers across nearly all theaters in America. Those insights could be valuable to the restaurants, bars and even retail outlets situated around movie theaters, according to Wold.

“That data could help local restaurants, or local clothing stores, market to the moviegoers,” he said, pointing out that many theaters are in malls or strip malls. The other businesses occupying that space would probably pay to know when certain demographics will be visiting en masse.

The service also has a direct line to avid moviegoers, which could benefit the studios themselves.

Wold said while average moviegoers are willing to shell out upward of $15 for blockbusters such as “Star Wars,” they might often wait for smaller fare like “Lady Bird” to hit streaming services. Having MoviePass encourages users to see the smaller films that they wouldn’t normally shell the money out for.

“They’ve already shown results from the non-blockbuster films getting an increase in traffic from MoviePass subscribers,” he said. For example, the service accounted for 1.7 percent of ticket purchases on the opening weekend for the comic book blockbuster “Justice League.” But it accounted for 10 percent of ticket sales of the independent film “Three Billboards Outside Ebbing, Missouri,” according to a news release.

Studios have noticed.

“In the short term, we’re already using the data to promote titles on behalf of the studios. Studios are paying us around two dollars per ticket we buy in exchange for us marketing their film,” Lowe said.

But while studios might be pleased, not all the movie theater companies are.

Cinemark, which owns more than 500 theaters nationwide, launched its own truncated version of MoviePass, called Movie Club, in December. For $8.99, moviegoers can see one movie each month at a Cinemark theater and receive a 20 percent discount on concessions, according to a news release. Like MoviePass, Cinemark’s version doesn’t apply to 3-D movies.

AMC Theatres, which has more than 650 locations in the United States that serve around 200 million moviegoers every year, loudly voiced its opposition to MoviePass in August. The company said the service “is not in the best interest of moviegoers, movie theaters and movie studios” in a harsh statement that said it was consulting with attorneys to determine “if or how” it could prevent MoviePass from being used in its theaters.

“From what we can tell, by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month,” the release stated, cheekily adding, “AMC noted that it is not yet known how to turn lead into gold.”

AMC said it fears that MoviePass offers a price point that’s too good to be true and will eventually go belly-up, disappointing moviegoers who grew used to the cheaper pricing.

If MoviePass fails, “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,” Nick Statt wrote in the Verge, adding, “once you’ve gotten something for what feels like free, it’s difficult to go back to paying for it.”

The explosive interest in MoviePass signal that moviegoers are seeking a change, and there’s no indication that it will slow any time soon — unless it proves to be an unsustainable model. AMC declined a request from The Post for comment, but recent remarks from the chain’s CEO Adam Aron hint that the company might be warming to the idea — but still has no plans to share its own revenue.

“We appreciate their business,” Aron said in a November conference call with analysts, according to the Hollywood Reporter. He added, “AMC has absolutely no intention — I repeat, no intention — of sharing any — I repeat, any — of our admissions revenue or our concessions revenue.”

Cheddar: MoviePass Plans To Grab Film Rights

MoviePass announced at Sundance that it will officially get into the film rights business. MoviePass Ventures will acquire film rights and build out their offerings, and they have started scouting at the festival.

Ted Farnsworth is the chairman and CEO of Helios and Matheson, the parent company of MoviePass. He joins Cheddar from Sundance to explain the new initiative.

Farnsworth says this has been the plan since day one. When the announcement was made at Sundance, it immediately became a big buzz. Farnsworth says MoviePass is, "totally disrupting the whole market." MoviePass has already started to bid on some products at Sundance.

When asked if MoviePass intends to increase the price above $10, Farnsworth says he is happy with where it is now. Growth has been strong and there is no advertising, so growth has been completed from word of mouth. Farnsworth explains that MoviePass may look into more premium membership plans, but are keeping the price where it is for now.

MoviePass' focus for now: continue to build their subscription base.

Deadline: Can MoviePass Impact The Indie Film Biz & Survive In The Long Run? CEO Mitch Lowe Explains – Sundance

EXCLUSIVE: Film sales agents at Sundance, think about this: What if a potential buyer could literally guarantee a certain portion of a film’s box office opening weekend?

That’s the pitch from MoviePass, the monthly movie ticket service, which announced their new division MoviePass Ventures on Friday at Sundance, a subsidiary that will co-acquire independent films.

When it comes to film festival acquisitions, co-partnering has become increasingly more common. Amazon Studios, before they independently distributed their own slate, would acquire films with partners like Lionsgate and Roadside Attractions. 30WEST too has become a player in teaming with partners to pick up titles, read Colette with Bleecker Street at this year’s fest for mid-seven figures, and with Neon on I,Tonya out of the Toronto International Film Festival (Also announced during Sundance, 30WEST took a majority stake in Neon).

Over the weekend, Deadline sat down with MoviePass CEO Mitch Lowe who expounded on his plans for MoviePass Ventures at the company’s Sundance mansion in Haber City, Utah. Lowe has had pic co-financing aspirations for sometime and springing it at Sundance was the ripe opportunity.

“We’ve had many meetings with serious distributors who are bringing their lawyers to meetings,” says Lowe about the newfound interest in MoviePass Ventures, “That’s how serious they are.”

While Lowe didn’t get into specifics in regards to whether MovieVentures would look to co-finance entire film slates or team with a specific producer in the indie sphere, he mentions that the ideal partner would be “a distributor who understands content and who understands distribution.” Essentially, MoviePass Ventures would split the minimum guarantee on pic’s acquisition.

“If it’s $4M then we would put up $2M. Then we market the heck out of it and ensure that we sell a ton of tickets to the theatrical opening, and then we share with all the downstream revenue,” says Lowe on one potential MG scenario.

Essentially in the end it’s a means of maximizing a pic’s overall ticket sales and making sure that all “downstream revenue is higher and amplified” adds the CEO.

In recent weeks, MoviePass says that they’ve moved the needle on a number of awards contenders’ ticket sales including Fox Searchlight’s Three Billboards Outside Ebbing, Missouri, A24’s Lady Bird and Neon/30WEST’s I, Tonya. Distributors who have access to ComScore’s Rentrak live ticket sales system are unable to decipher what portion of their hourly business is derived from MoviePass customers. But that’s where MoviePass stops in regards to selling data to them.

Speaking about the struggle that mid-budgeted films have at the box office versus $100M-budgeted event titles, Lowe says, “Exhibitors and studios have not figured out a way to affordably attract an audience to the smaller titles. They have taken the path of putting a ton of money in the brand titles. We see it with our subscribers: They want the better stories, they want to see these mid-sized titles ($25M-$50M); they’re just not marketed properly.”

In recent times, those in the industry have feared that streaming has encroached on the theatrical business, particularly as Netflix champions the immediacy of watching content, and meeting consumers’ demands for it. Then there’s Lowe, a Netflix co-founder, who is taking an opposite approach, and capitalizing on the traditional side of the theatrical business, but via a monthly movie ticket subscription model ala Netflix’s.

 

As such Lowe doesn’t believe streaming is capsizing the theatrical business.

“It’s super-healthy, despite Netflix, Hulu and the fact that theaters have doubled the cost of going to the movies, it’s still an $11 billion business” says the CEO about the domestic theatrical marketplace, “I don’t believe it’s in decline.” His one piece of advice is for exhibition to embrace other big content outside what the majors are peddling, i.e. “they should do binge Thursdays of Game of Thrones,” says Lowe.

Further commenting on the supposed notion that streaming is chomping away at theatrical, Lowe says “It’s wishful thinking. They (Netflix) just don’t get the idea that watching a comedy by yourself is not like the getting-out-of-the-house-experience.”

In regards to MoviePass’ ongoing relationship with exhibition, you could say relations have smoothed. AMC, the largest exhibitor in the world, has changed their attitude: They once tried to block MoviePass, but are now more pragmatic about the ticket service. “In an October earnings call, AMC said they were happy to take our money, but they don’t know how MoviePass is making money. My response is you’re the ones who had to borrow $4.5 billion. So, how are you making money?” specifies Lowe.

While some have criticized MoviePass in that its App is only good for a solo moviegoer, Lowe says 3.0 version will be launching in the near future with ultimate updates that will include options to buy tickets for a friend at a discounted rate as well as the ability for groups to purchase tickets.

 

While it’s a challenge for theater chains to sell studios on a monthly subscription price that won’t cut into the majors’ share of film rentals, MoviePass doesn’t have this headache. As an outsider they can feasibly keep both exhibition and the studios content by paying the full price of a movie ticket. We hear the majors continue to be intrigued by MoviePass and are funneling more money toward the monthly ticket company in marketing dollars. Similar to how Imax can rep 10% or more of a blockbuster film’s opening weekend, if MoviePass can do the same ultimately, the industry will have but no choice but to take them seriously as a catalyst for business.

One cynical major studio chief told Deadline, “If MoviePass ultimately reps 30% of the box office, they’ll go broke doing so.”

What’s Lowe’s response to this?

“They (the studios) have never eaten at a buffet restaurant every night for a month. What they would find by the third or fourth night is that they are not covering their plate with food, but eating more normally. What our customers do is that they go crazy over the movies during the first month, a little bit less in the second, and little bit less in the third, fourth and fifth months. They’re doubling their frequency from what they did before but we’re edging toward a break-even model. On what we pay for a ticket and what we collect in revenue, I think they (the studios) assume everyone in the world has all the time in the world to go to the movies several times a month. In fact, that’s not what happens,” said Lowe about MoviePass’ future financial longevity.

Currently, 30% of all MoviePass subscribers are concentrated in San Francisco, Los Angeles and New York with 70% scattered across the nation.

Says Lowe, “It takes money to build any subscriber base and in the subscription business, you have to invest in the long term.”

Observer: Indies to Benefit From MoviePass’s Plans to Bankroll Film Acquisitions

MoviePass wants a piece of the action. The subscription ticketing service, which charges a $9.95 monthly fee for unlimited theatrical moviegoing, announced at an industry panel on the opening day of the Sundance Film Festival that they are going to bankroll co-acquisitions with other film distributors.

Their new subsidiary, MoviePass Ventures, will be on the prowl at Sundance for product to parse and partners to piggyback. “We’re open for business,” said Ted Farnsworth, CEO of data analytics firm Helios and Matheson Analytics Inc (parent company of MoviePass). He described the strategy as a way to “put skin in the game” alongside established industry vets who know how to book movies into the right multiplexes and shepherd their theatrical runs.

No companies have been announced yet as candidates for the joint releases, but the toe-dipping into distribution is reminiscent of Amazon Studios, which launched in 2015 with strong assurances that the e-commerce giant and streaming powerhouse would partner with established distributors to assure the sanctity of theatrical windows.

Late last year, though, Amazon Studios announced that they were dropping the partnerships and will handle all their own theatrical distribution going forward. Will MoviePass eventually do the same? It’s anybody’s guess, since so much has changed since the service was founded in 2011. Initially, subscriptions were $50. But at that price point, their consumer base hovered around 20,000. Since dropping the price to $9.95 in 2016, subscriptions have exploded to more than 1.5 million.

The company is burning through money, since they guarantee payment of the full ticket price every time one of their subscribers goes to the movies. Now that so many people have been using MoviePass over the past six months, though, the company can honestly lay claim to significant granular data about their customers’ specific viewing habits—a potential gold mine for film distributors.

MoviePass is currently paying for 3 percent of the U.S. box office. Yet they claim to have boosted 10 percent of the indie film theatrical bookings, which explains their pivot to help distribute movies that debut at festivals like Sundance. They’re goosing attendance for the specialty market—why shouldn’t they angle to get a slice of that revenue? Then again, filmgoing audiences has been slowly eroding for years. It’d be great if MoviePass can disrupt the decline. But expect further tweaking on their business model.

L.A. BIZ: MoviePass to invest in movies before it sells cheap tickets to them

MoviePass arrived at the Sundance Film Festival this week not just as seller of cheap movie tickets but as a buyer of the movies themselves.

The New York-based movie theater subscription service has launched MoviePass Ventures, a wholly owned subsidiary that will co-acquire films with distributors.

Although details are scarce, and no distributor partnerships or film acquisitions have been announced, the move provides more insight into how the company plans to make money.

MoviePass relaunched in August with an all-you-can-watch movie subscription plan for just $10 per month. Subscribers can go to one movie per day, every day, with no blackout dates (excluding Imax and 3-D showings) for one flat monthly rate that’s about a buck more than the cost of one average movie ticket — and a lot less for many moviegoers.

Earlier this month, the company announced it had surpassed 1.5 million subscribers.

Screen Shot 2018-01-20 at 1.03.49 PM.png

Meanwhile, MoviePass, which is majority owned by Helios and Matheson Analytics Inc. (NASDAQ: HMNY), reimburses movie theaters for the full price of those tickets and is operating at a loss as it attempts to convince the industry that its service increases moviegoing.

The company said that it accounts for about 3 percent of domestic ticket sales, but that figure goes up to more than 10 percent of a particular title’s domestic box office when MoviePass promotes the movie to its subscribers. The company said it has boosted its share of domestic box office to 10 percent for such films as “The Post,” “Three Billboards Outside of Ebbing, Missouri,” “Call Me by Your Name” and “The Shape of Water.”

And such increases in the theatrical window pay dividends downstream on platforms such as DVD/Blu-ray, digital, streaming, pay TV, network television, airlines and hotels, and foreign sales.

MoviePass will apply these marketing strategies to the films it co-acquires.

“Given the successes we have demonstrated for our distributor partners in ensuring strong box office in the theatrical window, it’s only natural for us to double down and want to play alongside them — and share in the upside,” said CEO Mitch Lowe in a statement.

“We aren’t here at Sundance to compete with distributors, but rather to put skin in the game alongside them and to bring great films to the big screen across the country for our subscribers,” added Helios and Matheson Analytics CEO Ted Farnsworth.

Reuters: BRIEF-Helios And Matheson Analytics Says Co And Moviepass Entered Into Amendment No. 1 To Voting Agreement

* HELIOS AND MATHESON ANALYTICS - ON JAN 16, CO AND MOVIEPASS INC ENTERED INTO AMENDMENT NO. 1 TO VOTING AGREEMENT-SEC FILING 

* HELIOS AND MATHESON ANALYTICS - PURSUANT TO THE AMENDMENT, CEO OF COMPANY TO BE ENTITLED TO DESIGNATE THREE PERSONS TO SERVE ON MOVIEPASS BOARD 

* HELIOS AND MATHESON ANALYTICS - ‍THEODORE FARNSWORTH, COS CEO DESIGNATED HIMSELF & CARL SCHRAMM AS DIRECTORS OF MOVIEPAS 

* HELIOS AND MATHESON ANALYTICS - ‍MITCHELL LOWE, CEO OF MOVIEPASS, DESIGNATED HIMSELF & CHRIS KELLY AS DIRECTORS OF MOVIEPAS Source text - bit.ly/2DsShY5 Further company coverage:

TechCrunch: MoviePass says it will start acquiring movies, too

On the heels of hitting a 1.5 million subscriber milestone and bringing on a new marketing chief, the subscription service for watching movies in theaters, MoviePass, today announced it’s going to start buying movies, too. The company says it will begin to invest in films so it can share in their success beyond the box office, including on other platforms like streaming, DVD, and on-demand.

At present, MoviePass is seeing rapid growth thanks to dramatic cuts to its subscription pricing, rolled out last year.

Essentially, the company is subsidizing the cost of its subscription with the capital it raised from data firm Helios and Matheson Analytics Inc. (HMNY), now its majority owner. The idea is that MoviePass will operate in the red while growing its subscriber base, and then hit some sort of break even point in terms of revenue before the funding runs out. (Or perhaps HMNY is willing to keep piling on more cash until that point arrives.)

HMNY believes it will eventually be able to sell the data and insights gained from a large subscriber base to studios, who could then do targeted marketing for their films to the most active movie-goers.

The model, of course, is risky. And theater owners like AMC have already lashed outagainst the service claiming its low-cost tickets are devaluing the movie-going experience.

But maybe MoviePass just found a sweet spot in terms of what a large number of consumers are willing to pay to actually go to the movies? After all, movie ticket prices have risen over the years, but attendance is hitting record lows. With all the other options to watch movies these days – not to mention the “peak TV” moment ushered in by the streaming era – these “in-the-theater-movies” face tough competition for consumers’ time and money.

Still, MoviePass believes it has the power to boost theater attendance, so it may as well share in the upside of the films to which it sends all of these customers; and that includes when those films start streaming across other platforms beyond the silver screen.

The company today claimed it can boost theater attendance on demand, in fact.

It says it currently buys about 3 percent of the domestic box office, but when it tweaked some things in its app – things it only described as “a series of levers within its app and marketing-based platform” (uh-huh) – it could move the needle even further. It said it did this for The Post, Three Billboards Outside of Ebbing, MissouriCall Me By Your Name and The Shape of Water. MoviePass says it impacted 10 percent of box office performance for these movies.

We should note the company didn’t share specific data that would allow these figures to be fact-checked more thoroughly.

MoviePass is now at Sundance making the pitch that it’s ready to invest in films itself.

It will do so via MoviePass Ventures, a wholly-owned subsidiary founded to co-acquire films with film distributors.

Basically, the idea here is that since it can (maybe!) boost the performance of a movie in the theatrical window, that will impact the movie’s ability to generate revenue downstream – like when the digital version goes on sale, or when it starts streaming.

And MoviePass wants a cut.

“We aren’t here at Sundance to compete with distributors, but rather to put skin in the game alongside them and to bring great films to the big screen across the country for our subscribers,” said Ted Farnsworth, CEO of Helios and Matheson Analytics Inc., in a statement. “We’re open for business. We’re here at Sundance – and SXSW is next.”

Baltimore Sun: MoviePass is roiling the movie theater industry in Baltimore and beyond

 Jed Dietz, founder of the Maryland Film Festival, talks about MoviePass, a card that costs $9.95 a month and allows filmgoers to see one movie every day for that month. (Barbara Haddock Taylor, Baltimore Sun video)

Jed Dietz, founder of the Maryland Film Festival, talks about MoviePass, a card that costs $9.95 a month and allows filmgoers to see one movie every day for that month. (Barbara Haddock Taylor, Baltimore Sun video)

“You only have to see one movie a month” to make it pay for itself, said Bryan Oringher, a Rockville-based basketball scout. “It’s a no-brainer.”

It’s a subscription service so inexpensive it seems to defy economic logic. But MoviePass and its emerging competitors promise to disrupt how people pay for movies — and, possibly, how movie theaters make money. It could offer a solution to the declining attendance that has long threatened the movie industry.

Theater operators and industry analysts wonder how it can make money. MoviePass pays theaters full price for each ticket it buys for its subscribers. They wonder if MoviePass will spoil the public with low prices, or seek a share of concession sales in exchange for luring more customers to theaters.

Seeking Alpha: Why MoviePass Could Become A $10B Company

Summary:

MoviePass has four attractive attributes which serves to nullify most bear arguments.

MoviePass will be worth $10B if they reach 20M subscribers and if given a $500/subscriber valuation.

Bears who only consider the math of the business model as it stands today, either don’t understand what makes a good investment or have ulterior motives.

The most legitimate risk which deserves discussion is that MoviePass trades through a proxy, Helios and Matheson Analytics (HMNY), rather than on it’s own.

There has been much written about MoviePass and it's launch of it's $9.95unlimited subscription plan since August 15th, particularly in regards to it's business and pricing model. The bear thesis has been debated herehere, and most recently here with the discussion surrounding the economics of a $9.95 unlimited plan.

In this article I will present you with four key MoviePass attributes which all-but guarantees it’s success and which renders all debate about pricing and business models completely moot. But before I do that, let’s be clear about why it’s a great folly to try and calculate the profitability of the current business model:

  1. We don’t have the required data: No matter how much research we do, we will never be privy to the numbers required to make an accurate determination of how the economics of the business are doing today. There are just far too many variables involved and in most cases, bears are making assumptions which cannot be relied upon. This deserves a whole separate article on it’s own.
  2. Business models change over time: It’s naïve to believe that today’s business model will not change. As the company achieves critical mass and scale, business and pricing models can rapidly change; often without additional significant capital investment. Can you even think of any tech company that isn’t entirely different today than it was at inception? In short, when we invest in MoviePass, we are not betting on today’s business model. In a moment, I’ll tell you what we are betting on.

Read full article here

MoviePass shaking up the theater industry

When Christiansburg attorney Joseph Simmons first heard about MoviePass, the movie theater subscription service, part of him thought it was a scam.

For $9.95 a month, subscribers could see at least one movie per day in nearly any movie theater. He wondered how that could be financially feasible.

Simmons still bought a subscription to MoviePass a few months ago, believing it worth a chance. He is an avid moviegoer and is the chairman of the board of The Lyric, a nonprofit independent theater in Blacksburg.

“Despite the delay it took to receive my card, I’ve now been using MoviePass for 3-plus months and it has drastically changed my movie going attendance,” Simmons said in an email. “Going to a movie no longer requires me to do financial math on whether I think this movie will be good enough for me to pay $11.00 to $15.00 [a] ticket for. Instead, I just go when I have free time.”

“It’s honestly been an amazing experience and I think I have successfully convinced at least 10 of my best friends to sign up as well,” he said.

Since New York-based MoviePass announced it was reducing its price last summer to $9.95 per month, subscriptions have surged and news about the service has gone viral. On Tuesday, the company reported that it has acquired 1.5 million subscribers, 500,000 of whom joined in less than a month. But business analysts, theater owners and even its most contented customers have serious questions about whether the service can be sustainable with such a low price point.

Here’s how MoviePass works:

Users sign up for an account on the MoviePass website and then download the MoviePass app on their phone. After a few weeks — or months, in some cases — users receive a MoviePass card, which is an actual MasterCard. To see a movie, a subscriber goes to the movie theater, opens the app and clicks “Check In” for their movie choice, desired showtime and theater. The app then automatically puts the correct amount of money to cover the cost of the ticket on the MoviePass MasterCard. Users pay for the movie ticket using the card as they would with any other debit or credit card. The theater gets paid full price, as with any other card.

The subscription is month-to-month. However, if you cancel your subscription you can’t sign up again for nine months.

It’s sort of like Netflix, but for theatrical releases, which makes sense considering that MoviePass CEO Mitch Lowe was a Netflix co-founder and former president of Redbox, both of which were entertainment disrupters in their own right. He took the helm at MoviePass in 2016. The company has been around since 2011, but its monthly subscription used to have a tiered cost model, and users paid up to $50 a month in some cities to see unlimited movies. In August MoviePass announced the new lower price point, and subscribers signed up so fast the company had trouble handling all the new business. Its social media pages are still filled with complaints from customers who have yet to receive the MoviePass cards they ordered or to get customer service to respond to issues.

Those aren’t the only complaints. MoviePass has drawn major ire from movie theater companies, which had their theaters added to the app without any consultation and now have had the service thrust upon them. With the exception of 3D films, every theater and every movie showtime in the Roanoke and New River valleys appears on the MoviePass app.

AMC Theatres, the nation’s largest movie chain with two locations in the Roanoke area, has threatened legal action against MoviePass. After news of the summer price drop, AMC sent out a news release that said MoviePass was “not welcome” and if the company can find a way to opt out, it will. However, because MoviePass is essentially a MasterCard, the theater likely would alienate a lot of customers by declining to accept it.

“In AMC’s view, that price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled,” the release said.

The average movie ticket price in the U.S. was $8.65 in 2016, according to the National Association of Theatre Owners. But in large cities, the price can reach $15, and in Roanoke, most evening movie tickets are more than $10. So MoviePass users can often get their money back by seeing just one or two movies a month. Assuming subscribers go to more than one movie a month, the question of how MoviePass will eventually turn a profit remains unclear. However, the company says it remains confident.

“We believe the data MoviePass collects from these million and a half movie-goers will become an important asset to our partners and the future of the movie industry,” Ted Farnsworth said in a news release. He is CEO of Helios and Matheson Analytics Inc., which holds a majority stake in the company. However, AMC’s CEO, in the company’s third quarter earnings call, said that the theater chain has no intention of sharing any admissions or concessions revenue with MoviePass.

Over the years, movie theater chains have made attempts to enhance a trip to the theater by introducing new seating, better screens and sound systems and more concessions. But the overall process of moviegoing has not really changed much. People still go to the theater, buy a ticket and see the film. If MoviePass attracts millions of users and the data that accompanies them, it could disrupt how people go to the movies. And if it were to fold, would its users be willing to go back to paying full price for movies?

Ian Fortier, executive director of Roanoke’s Grandin Theatre, also has concerns about MoviePass, and the city’s sole independent movie theater declined to accept MoviePass for its first few months. But after more subscribers were showing up to the Grandin wanting to use it, the theater changed its policy.

“We were originally reticent to embrace the MoviePass model because we felt it was unsustainable,” Fortier said. “But being a patron-first movie theater, we wanted to provide it to moviegoers and provide them with the experience they were looking for at the Grandin Theatre.”

He said he hopes the decision will bring more patrons to the Grandin to see its unique movies, which often include smaller independent films that moviegoers cannot find anywhere else in the city. For example, the Grandin was the first theater to land critical darlings like “Lady Bird,” and “The Shape of Water.” And these represent the types of films that many MoviePass users are willing to take a risk on, thanks to their subscription.

Haley Baker, who is from in Roanoke but now lives in Colorado, said now that she subscribes, she is more willing to see flicks outside her normal genre, such as “Three Billboards Outside Ebbing, Missouri.”

“I wouldn’t have wanted to spend $20 to go see that before, but now I’m willing to go because it doesn’t feel like I’m actually spending that money now. I’m definitely more willing to buy concessions,” she said.

Roanoker Chris Saunders also said he doesn’t mind paying for a snack since he uses MoviePass. Saunders was a subscriber before the price dropped and paid $30 a month for it, thinking it was a good deal then. He said he was more selective before he subscribed to MoviePass, but now he sees eight to 10 movies a month.

How MoviePass plays out in the long term, especially regarding profitability, remains unclear, but Farnsworth said in the news release that the lower cost is bringing more people back to the theater, and he believes it will be transformational to the industry.

This could be important as theaters nationally struggled to attract customers in 2017, posting the lowest number of tickets sold in more than 20 years, according to movie tracking site Box Office Mojo and film media reports. This could partially be blamed on a lackluster crop of films, but theaters also increasingly must compete with subscription services like Netflix and Hulu for the public’s entertainment dollars.

Susan Mattingly, executive director at The Lyric, said she has seen quite a few subscribers use MoviePass already but doesn’t have exact figures.

“As for my feelings about the card, I support any program that encourages people to get out and enjoy the shared viewing experience that movie theaters provide,” she said. “Watching movies on the big screen, without interruption or distraction, in the company of community, is a very different experience than seeing it on your couch with your cellphone or device at your elbow.”

Variety: MoviePass Hits 1.5 Million Subscribers

Movie ticketing service MoviePass now has more than 1.5 million paid subscribers, adding 500,000 in less than a month.

The service, which made the announcement on Tuesday, allows subscribers to purchase a single movie ticket per day for a flat monthly subscription fee by using a mobile app. The company, which is majority-owned by Helios and Matheson Analytics, unveiled a pricing plan in August at $9.95 per month. It then offered a limited-time subscription in November of $6.95 a month.

MoviePass is attracting people back to the movie theaters by lowering their cost, which we believe is transformational for the industry,” said Ted Farnsworth, chairman and chief executive officer of Helios and Matheson. “We believe the data MoviePass collects from these million and a half moviegoers will become an important asset to our partners and the future of the movie industry.”

MoviePass pays theaters the full price for a ticket, so it is in essence subsidizing its users’ moviegoing and losing money each time they check out a film. The average movie ticket cost $8.60 through the first three quarters of 2017, but in major cities, such as Los Angeles and New York, tickets often cost more than $10.

AMC, the country’s largest chain, threatened legal actionagainst MoviePass in August and predicted that the company would fail because its business model was not sustainable. There is anxiety among exhibitors that customers will get accustomed to paying a discounted rate for tickets, which will depress prices.

Cinemark launched a MoviePass competitor called Cinemark Movie Club in November that lets customers buy a movie ticket a month for a discount price of $8.99, in addition to 20% off on concessions.

The domestic box office revenues for 2017 trailed last year by 2.3%, thanks to disappointing movie performance in the summer and in October, according to comScore. MoviePass CEO Mitch Lowe suggested that MoviePass could be an antidote for the moviegoing slump.

“Based on the dramatic increase in the number of MoviePass subscribers over such a short period of time, we believe MoviePass will continue to grow its subscriber base significantly,” he said. “We’re giving people a reason to go back to the movie theaters and they’re going in droves. With awards season here, we hope we can make Hollywood and exhibitors very happy by filling seats with eager audiences.”

MoviePass made the announcement made the announcement before the NASDAQ market opening. Stock of Helios and Matheson Analytics rose 3.5% by 24 cents to $7.16 a share.

Forbes: MoviePass Is Now A Movement With 1.5 Million Moviegoing Members

Helios & Matheson (NASDAQ:HMNY) announced this morning that its majority-owned movie ticket subscription service MoviePass added an impressive 500,000 subscribers in just the past 30 days. The company’s total subscriber count now stands at 1.5 million.

MoviePass has been flying on a hockey stick trajectory since it announced in August that it had lowered the price of its movie ticket-a-day service from approximately $40 to $9.95 a month. That’s less than the price of a single ticket in most theaters across the United States, yet the service allows subscribers to attend as many as 31 movies in a given month, with the entire cost paid by MoviePass.

The 500,000 subscriber gain represents a huge acceleration for the booming service. In the six years from its founding in 2011 to Aug. 14, 2017, when it announced its new pricing plan, MoviePass accumulated just 20,000 subscribers. By mid-September it had zoomed past 400,000 — a 20-fold increase — and by late November it had reached one million.

 

 

That implies a current revenue run-rate of at least $180 million a year, and growing fast. But the company’s expenses — which haven’t yet been disclosed in an annual filing — are presumably much higher than that. MoviePass CEO Mitch Lowe has expressed confidence that the service can make a profit from collecting and selling behavioral data about its subscribers, and he told me that he expects that costs will level off as the average subscriber's usage drifts down to attending just one movie per month. Both of those claims have been met with widespread skepticism by analysts and stock market investors.

That skepticism explains HMNY’s modest stock price of just $7.14 per share (it had peaked at $38.86 last October). Today’s announcement of 50 percent subscriber growth in 30 days has barely registered with investors, who pushed the price up by just 3 percent in mid-day trading. Its market cap of $147 million is just 0.8x times imputed annual revenues.

Still, MoviePass wouldn’t be the first online consumer service to grow exponentially without earning a profit, and its prospects are far from bleak. When I interviewed MoviePass CEO Mitch Lowe in September, he told me his target was to reach 2 million subscribers by year-end 2018. At this rate he’ll reach that total in February.

The former Netflix executive and co-founder told me that with scale will come additional revenue opportunities, including possible movie distribution and even financing and production. "When we get to 10 million subscribers,” he told me, we'll be able to generate $7 million in additional box office for an independent film. At that point it makes sense for us to get into the distribution business."

Whether MoviePass can get that far will depend largely on Lowe’s ability to manage the challenges that come his way. So far he has managed to survive an enormous consumer backlash that arose when MoviePass failed to make timely delivery of its membership cards to paying members, and he’s overseen torrid growth despite continuing customer service problems. Still, movie lovers should take advantage of the $9.95/month service while they can. MoviePass and its parent Helios could potentially run out of money before they reach their goals, or they just might have to jack up that low price to a more sustainable level.

Forbes: Subscription Service MoviePass Is Going To Revive Moviegoing -- Or Go Broke Trying

MoviePass is a service that lets subscribers go to the movies as many times as they want for $9.95 a month. The seven-year-old company touts itself as the solution to high ticket prices for consumers and stagnant ticket sales for theater chains. But MoviePass has had a rocky road to its current 1.5 million subscribers. The company took a while to find a price that worked for consumers. When it rolled out the $9.95 service this past August, the company was unprepared for the surge in demand. Meanwhile theater chains remain wary of any incursion on their turf and most still make MoviePass pay full retail price for tickets it distributes to subscribers—meaning it loses money on almost every transaction. In an expensive place like New York City the cost of a movie ticket can be $16. MoviePass is making a bet that by losing money to acquire customers now it will drive so much more traffic to theaters that eventually the chains will have to cut the subscription service in on the increased action--presuming, of course, that MoviePass doesn’t run out of money first.

 MoviePass CEO Mitch Lowe led the company to 1.5 million subscribers.

MoviePass CEO Mitch Lowe led the company to 1.5 million subscribers.

The company was cofounded by Stacy Spikes and Hamet Watt. Since June 2016, however, it has been led by CEO Mitch Lowe, 65, former founding executive at Netflix and COO and President of Redbox. In 2017 Lowe engineered the sale of a majority stake to analytics firm Helios and Matheson Analytics for $27 million. In this interview which has been edited and condensed, Lowe talks about how he plans to make the company profitable and why marketing a subscription movie service is a little like selling health insurance.

Natalie Robehmed: How did you get involved with MoviePass?

Mitch Lowe: I left Redbox in November of 2011. In 2012 a friend introduced me and Mark Randolph, one of the cofounders at Netflix, to the founders of MoviePass. We saw that they were going after this niche audience of heavy moviegoers and they were pricing it as such: $30, $40, $50 a month. We started advising them to look at the people who aren't going as much. They didn't see eye to eye with us, so Mark and I walked away at the beginning of 2013. In January 2016 I was at the Sundance Film Festival at a party at Chris Kelly's house. Chris, who had been Facebook’s first chief privacy officer, had become the major shareholder in MoviePass. Over the next couple of months we kept talking and then finally I invested in June of that year and came in as CEO.

Robehmed: How much had the company raised at the time?

Lowe: Just under $14 million over four or five years.

Robehmed: How many subscribers were there?

Lowe: There were about 23,000. The average price was $35. They had different price points by market: New York was $44.95, Kansas City was $29.95 and then there was a mid market at $34.95. I think 70% of the subscribers were in those higher cost markets.

Robehmed: What did you do when you took over?

Lowe: I wanted to understand a couple of things. One was, were those people who only go to four or five movies a year interested in going more? We found out there are 200 million people that tend to go four to five times a year. Then we researched "What's the correlation between what you charge the customer and how often they go?" At $45, our average customer went to 3.8 movies. At $35 they went to 2.8. At $25 they went to 1.8. And at $14.95 they went to 1.1. There's some seasonality in that, it goes up a little bit in December and down a little bit in February.

For our target audience, which is people under 35, one of the biggest impediments is "I don't know if this movie's worth it." Having a subscription where, if you see a movie and don't like it, you can just walk out, that's really worth money. At $14.95 it was still a big deal, but at $9.95 there wasn't a single person who we interviewed who didn't say, "I'd be crazy not to try this." Every price above that, we lost people.

Robehmed: But at $9.95, you’re losing money even if they only go to one movie a month. Was it hard to find investors willing to bankroll that?

Lowe: I couldn't get anybody to believe. When you do a subscription, especially an all-you-can-eat, the first subscribers you get, about 11% of the total, are going to be in high cost markets and they're going be people who see a lot of movies. It's like health insurance: The first sign ups are the people that are going go to the hospital. You have to weather the storm to get to the profitable subscribers. You've got to get enough breakeven customers to off-set the expensive ones. I think I met 150 different VCs and family funds. Then I ran into Ted Farnsworth who owns this company called Helios and Matheson in May or June 2017. He was the first person to really believe in the $9.95 price point and was willing to come to the table with the money that it would require. Funding a company like this is not a small task. We are going to need $100 million to get up to profitability.

Robehmed: Why did you wait until Helios and Matheson came along to move on the $9.95 price?

Lowe: We didn't have the funds to support it. I wanted to go into this more conservative, so I was ready to do $14.95 to $19.95. And he said, "No. You’ve got to do what the data tells you." I knew then that I had someone who was a big believer and a supporter, and had the ability to help me get the funding for it. We signed the deal on August 15 and that morning launched the service.

Robehmed: How did that go?

Lowe: The first two days we signed up 150,000 subscribers. We were totally unprepared. If you look at the stock purchase agreement between us and Helios and Matheson you'll see there is a bonus clause that if we hit 150,000 in 18 months or 15 months, we'd get $2 million. And we hit it in two days. We were only prepared for about 100,000 subscribers in a month. Our credit cards that we send people have an eight-week turnaround time and we only had one authorized shipper who could ship 50,000 a week. So it took us eight weeks to be able to get a whole new supply.

Robehmed: How many people got mad and canceled?

Lowe: I think 4.2% of people canceled in the first month and that dropped down to 2.2% or so in the second month, and then 1% or something in the third. Our growth has just continued. We're bringing in thousands and thousands every day. And our customers are going to twice as many movies as they went to before. Sixty to seventy percent of our subscribers say, "I wouldn't have gone to the movies if it hadn't been for MoviePass." They tend to like the movie at a higher rate. Sixty to seventy percent say they recommend it. On big titles like Justice League, we bought 1.8% of the national box office, but titles like Lady Bird, we're 10% of the national box office.

Robehmed: Are MoviePass subscribers more interested in independent films?

Lowe: They still see their Star Wars and their big films. But they use MoviePass to go to the smaller films that they previously said, "I'll wait 'til it comes out on Netflix." My real mission here is to create a better way to distribute small films that can't find an audience. When we build this to 10 million subscribers, it will be the perfect way to build opening weekend box office. Our customers have no incremental cost of going. When we recommend a film to them, we're getting anywhere from 7% to 17% of our subscribers going to that film that weekend. Our natural partners are the independent theaters and the independent film makers. If our dream comes true, we'll be having MoviePass exclusives.

Robehmed: What was your revenue for 2017?

Lowe: I can't give you an exact number because now we're part of a small public company, but it's tens of millions.

Robehmed: It’s way more than 2016?

Lowe: We did just under $9 million last year.

Robehmed: How about revenue sharing with the studios or theater owners?

Lowe: As we get bigger and bigger that starts to become material for the studios. So we're demonstrating to four studios and then a bunch of little ones how we can help them be another tool to drive awareness and ticket sales. We actually have one deal already signed. Soon you'll also see an advertising deal. And then there are discounts from the theaters. For example, there's a chain that we have a deal with, where our average cost of a ticket is $7.50. You'll see a growing number of exhibitors signing deals with us. Of course, not the big three. Not for a while anyway.

Robehmed: AMC's been very vocal in its opposition to MoviePass.

Lowe: Not so much anymore. They definitely threatened us. But now they're like, "We're happy to take their money."

Robehmed: Why were they so hostile?

Lowe: This is my third time going through this where the incumbent player freaks out. My whole passion is figuring out business models that get people to consume a lot. In every scenario, the incumbent player should have done that themselves. Then when you do it, their first reaction is, "We've got to protect our current business.” The AMCs of the world have lost touch with their customers.

Yahoo Finance: Moviepass tops 1.5M subscribers

Moviepass - the subscription movie service - announced today that it has hit 1.5 million subscribers. Joining us now with more on Moviepass CEO, Mitch Lowe, and the CEO of its parent company, Helios and Matheson, Ted Farnsworth.