MoviePass has recently decreased its monthly rate to $9.95 per month which generated a lot of buzz online but drove some investors skeptical. At this point, MoviePass is not focused to profit yet but is all geared toward brand awareness and in growing their subscriber base. It is foreseen that the value of MoviePass would be steered mainly to its purchasing power and customer data.
MoviePass in New York
The movie theater subscription service, MoviePass has recently announced their new package which will allow their subscribers to go to the multiplex once a day for a whole year for only $89.95. MoviePass started to attract more subscribers when they lowered their monthly rate back in August. While it may appear that MoviePass is giving away huge discounts from theaters, fact is, these discounts are costing a lot of money for the company. Why do they do it?
MoviePass is attempting to turn these losses into huge profits by selling the subscriber data they have accumulated to advertisers and studios. Helios & Matheson Analytics, the parent company, however denies these allegations. Their adjustments on prices and services though with a limited-time deal suggest that they are expanding and testing the market.
AMC Theaters are now looking at their options and contemplating on taking legal actions against MoviePass stating that the latter is “unsustainable and shaky”. This means that the price drop would eventually frustrate customers. The theater stocks also dropped because of the rate cut move of MoviePass last August. The protests though is seen to be an overkill because MoviePass is fast becoming a potential threat due to the increase in their subscribers.
MoviePass Business Model
The MoviePass business model is made possible by advances in technology. With a subscription model that is attached to a credit card, they are able to gather useful data about their customers movie going habits. This data can prove useful later, but this is not guaranteed. As such, the technology is simply an enabler. What is more important is the business model. At the moment, MoviePass has a broken revenue model. The question still remains. If you are giving away movie tickets for free, how do you plan to make money on the back of that?
The key to the success of MoviePass is its relationship with key partners, the movie theatres. These partners eventually have to agree to sell cheaper tickets to MoviePass customers or sign a revenue sharing deals on concession stand spending. However, when MoviePass first announced they were reducing their subscription price, there were angry responses from its key partner AMC Theatres. In response, MoviePass CEO Mitch Lowe criticized AMC as “the big guy afraid of the little guy offering better value to consumers”.