For those who have never experienced it, MoviePass was a classic example of something that is too good to be true. At first, customers paid $10 per month for a card that they could redeem for one movie ticket per day, with tickets purchased in bulk by MoviePass itself. Considering the average cost of movie tickets is, you guessed it, around $10, this was a bargain. How could MoviePass afford such generosity? Did they have agreements with cinemas? Were they doing business with distributors?
No, they were just losing money. Huge sums of money.
If you used your card to get a ticket that cost MoviePass $16 to buy at the theater, the company lost $6 — and then another $16 every time you bought a ticket after that until the start of the next month, when they would barely lose $6 on the first ticket and so on. As part of a last-ditch effort to make up for the losses by increasing the number of customers incurring those losses, MoviePass further reduced the price of the service. Of course, they lost money on each ticket sold, but they made up for it in volume!
It’s hard to describe this as anything other than a scam, but it’s unclear who got scammed. Cui bono is always the question, and the answer in this case is whatever the Latin for “shrug emoji” is.
One way to think about it was that MoviePass was just mimicking the hottest player in the entertainment industry: Netflix.
Netflix has been, for years, a money-losing beast, racking up subscribers by racking up piles of debt, while giving people an offer that was, honestly, a little too good to be true. For $9.99 a month, they could stream hundreds, if not thousands, of movies and TV shows at any given time in high definition. Netflix’s central idea was, and remains, that people demand a buffet of content and if you get enough of it to stick their snout in the streaming bin, you’ll end up being profitable.
The problem with this theory isn’t that it’s wrong – Netflix has a lot of subscribers and a lot of subscription revenue – so much so that it has drastically devalued the value of any individual artwork, reducing Prestige movies and TV and reality shows to mudd up hashtag-content. Netflix may just be the apotheosis of cable or HBO On Demand or any number of forerunners, but what set it apart was its reach (huge) and cost to customers (low).
Of course, MoviePass and Netflix are based on fundamentally different business models. Netflix pays a flat fee for content it creates and licenses from other studios, rather than paying artists for each stream they generate. MoviePass must pay a unit cost for each ticket its subscribers enjoy.
The MoviePass pattern doesn’t make sense for MoviePass, but it does make sense for theater owners. These companies control their own ticket prices and negotiate with distributors and studios about what airs and where. Subscription services can be a reliable way for them to get butts in seats, and people attached to those butts spend money on concessions. In fact, AMC, Regal, and the Alamo Drafthouse chain have adopted similar plans offering monthly fees for access to everything in theaters. I myself have an Alamo Season Pass: for $19.99 a month, I can see one movie a day if I want. (Whether there are enough theaters worth watching is a separate issue.) If MoviePass failed as a business and is likely to fail again, the company still changed the world of cinema.
Maybe theaters are hoping to serve as some kind of streaming service: charging customers a flat rate that gives you big-screen access to whatever’s playing in theaters during the (unfortunately reduced) theater window, saving you the money and effort of subscribing to a dozen. different services in hopes of catching it all when it hits your screen at home.
But this change can be catastrophic for the world of theaters in the long run. By accepting MoviePass and Netflix’s content model, theater owners are tacitly suggesting to audiences that the theater auditorium is similar to your living room, with the downside that you not only have to drive there, but also pay $20 for popcorn and a soda.
Either what happens in movie theaters is special or it isn’t. Theaters and the entertainment industry at large cannot have it both ways.