How MoviePass Plans To Make Money Despite Cheap Rates
MoviePass has been around since 2011, and early on the subscription service charged between $30 and $50 bucks per month. All that changed a few weeks ago, when CEO Mitch Lowe ultimately decided to lower the cost of monthly subscription for the service to $9.95 a month. It's a cost that seems rather low to be sustainable over the longterm, but recently the CEO explained how the company actually plans to make money despite charging roughly the cost of one movie for a whole month worth of passes. According to Mitch Lowe,
According to the research the company has done in the years leading up to the $9.95 price range, MoviePass found (by combining the company's own info with AMC's Stubs loyalty info) that people's moviegoing habits tends to reflect how much they are paying for the monthly pass. People went 3.8 times per month when they were paying $40 bucks, but would go fewer times when the price was cheaper. So, if people start feeling like going once a month or skipping a month every now and again, in a lot of markets, MoviePass should break even or make a little money on the average subscriber.
In a lot of ways this makes sense. In a totally anecdotal comparison, I'm an avid runner, but I pay for a cheap gym pass so I have an indoor option during the winter months. During the rest of the year, I try to go a few times a month so that I feel like I'm justifying the cost of subscription, but I more routinely spend time outside. If I were paying for a nice $50 gym membership, I might feel differently and might try to get to the gym more, or take classes at the nicer gym, etc. But it's cheap, so I don't.
Still, there are some issues. Breaking even should not be the goal, making money should. And when MoviePass is talking about breaking even, the company is talking about breaking even on the average ticket for a movie in the US, which Forbes says is $9. So, we're not counting markets where movies often cost upwards of $15. Finally, the new, cheap MoviePass is relatively untested. It was only a few short weeks ago that some people hadn't even gotten the passes they had paid for, yet, and some movie theaters, including AMC, are trying to block MoviePass from being used. While Mitch Lowe is submitting that people will use the passes a lot at the beginning and that use will taper off this also hasn't been proven, yet.
Still, the MoviePass head honcho argues that his plan should actually help movie theaters in the long run, noting he provides 'bad movie insurance.' He explained,
Plus, say use does taper off, but people are still going an average of two times a month. If these are matiness that would normally be $5 bucks a pop or later weekday movies that may be cheaper, maybe there's wiggle room to make money, and maybe there's not. Only time will tell if the cheaper MoviePass model will be sustainable, or if prices will need to rise to accommodate use. Will 400,000 people stick with the service if cost is bumped up to $15, $20? These are all concerns that Mitch Lowe will need to figure out, but for now he seems to be spitting a pretty good game.
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