Subscription Commerce

Can Subscription Commerce Revive Floundering Movie Theaters?

In the 1970s, a date night at the movies was a relatively cheap affair. For just an easy $4 and some loose change, moviegoers could have two tickets and practically eat their weight in popcorn. Okay, perhaps a slight exaggeration there. But, fast forward to 2017, and the good old-fashioned movie date is now unequivocally anything but cheap, with couples easily spending more than $30 on tickets, butter held.

Price aside, most Americans shared approximately three channels of mostly commercial-laden free television in the ‘70s. Then, on the periphery of wide consumer adoption, Betamax and VHS were both released mid-decade. Home video and cable TV would go mainstream by the ‘80s, and movie date night suddenly had a run for its money.

The story from there is familiar — satellite dishes, DVDs, cord cutting, streaming — the choices for on-demand home viewing entertainment have exploded exponentially with each new, widely adopted technological advancement. No wonder, then, that fewer people are flocking to movie theaters these days. Between 2012 and 2016 alone, in fact, the number of 18- to 24-year-old frequent moviegoers fell from 8.7 million to 7.2 million, and from 9.9 million to 8 million among the 25-to 30-year-old age bracket, according to the Motion Picture Association of America.

To offset this decline, movie theaters are increasingly taking a page out of Netflix’s early-days subscription playbook to bring back the crowds.

PYMNTS recently caught up with Ted Farnsworth, chairman and CEO of Helios and Matheson, majority stake owner in theater subscription service MoviePass, to discuss the strategy behind introducing subscription commerce into movie going.

Whether it’s Netflix or Spotify, Farnsworth explained, millennials prefer subscription services for their anytime, on-demand access and the seamless experiences they offer. So, if TV and music can be on a subscription model, then why not movies in theaters — with huge screens and viewing experiences devoid of home life distractions?

Giving moviegoing a subscription twist

First founded in 2011, MoviePass now operates under the leadership of Mitch Lowe, who co-founded Netflix and previously served as president of Redbox. Over the years, MoviePass has built off its subscription model by partnering with theaters across the U.S.

The app-based platform allows users to browse nearby theaters and select the movies they want to see. Once a show has been selected, MoviePass credits the user’s linked Movie Pass debit card with the full cost of the ticket. The debit card is then swiped at the theater’s POS to obtain the tickets.

The service first cost its users $49.95 a month for unlimited access to partnering movie theaters across the country, Farnsworth explained. The idea was to turn the average once-a-month moviegoer into a two- or three-times-per-month visitor, driving more business from moviegoers who typically only visited a theater about four times a year.

But, the business experienced growing pains at its original price point. Despite its subscription model, MoviePass’ membership hung around 20,000 registered users for its first few years in existence. Then there were issues with how the model was structured. Guaranteeing seats in a theater used to cost MoviePass nearly $35 per subscriber, which left little room for margin. To top that off, the service’s price point seemingly kept getting in the way of reaching a wider subscriber base.

It wasn’t until August 2017 that the company decided to make a massive cut to its price point, reducing the monthly subscription cost to just $9.95, rejiggering the inner workings of its subscription plan and paying the full cost of tickets to theater owners.

And with that — unlimited movies in theaters for approximately 10 bucks a month — MoviePass and its relatively analog subscription experience went viral.

Expansion on testosterone

Today, MoviePass partners with nearly 91 percent of theaters across the country, making the subscription service accessible to most of the U.S. population. Its partners are some of the largest movie theater chains — including AMC, Regal and Cinemark — as well as an array of independents.

Partnering with the independent theater owners has been a smooth-sailing process, Farnsworth said.

“The ones that really love us are the little independent guys, the ones that have two or three theater chains, because we are putting people in their seats,” he said. “We are paying them the full price and they are making more money on the concessions.”

On average, MoviePass subscribers spend 123 percent more on concessions than a regular moviegoer, since the subscription model makes the negligible ticket cost an afterthought, Farnsworth pointed out. This makes the arrangement even more lucrative for theater owners, considering they make 80 percent of their sales off concessions — especially now with an exploding MoviePass subscriber base, he added.

Within the first week of the August price cut, the service gained more than 150,000 new subscribers, propelling MoviePass-fueled attendance by more than 2,000 percent the following week at certain theater venues, according to Farnsworth. The New York City-based company had surpassed 500,000 subscribers as of late September.

While seeing the subscription model grow so fast is just what the company wanted, the viral growth was unprecedented.

“We got caught off-guard,” Farnsworth said. “The first couple days we had system crashes with over 1 million people trying to download the app or hitting the site.”

Though the company did manage to handle the enormous growth in traffic over the following days, the technical difficulties were not over. As the service experienced the surge of new users, MoviePass was faced with having to quickly issue an enormous number of debit cards.

“You just can’t call Mastercard and say, ‘I need a half a million cards,’” Farnsworth said. “There’s a whole process that you have to go through. It took us a couple weeks to get our heads around the issues and start addressing them.”

The other side of subscription commerce 

Having now caught up with the influx, MoviePass expects its base to grow to 3.5 million subscribers by 2018. Over time, Farnsworth explained, the company sees its growth in subscriber base as a source for improving the company’s bottom line.

Looking at the credit and card and app usage data gives deep behavioral insights into what subscribers are watching — the films themselves, the genres — and the data can be sliced many ways, he said. It’s valuable data for even social media platforms like Facebook and Google that lack in-depth insights into how movie ads on their platform are translating into sales.

“They can tell if you watched a trailer online, but they can’t tell if you actually go to the movies,” Farnsworth said. “As we start to do a joint venture with Facebook and Google, [they] will be able to tell [advertisers], ‘Look, 18 percent of these people went to the movie after they clicked on the trailer.’”

The wealth of data insights subscription services collect, it seems, will not just drive customization of subscription services. It might also take social commerce to a whole new level with interconnectivity between subscription services and social media platforms.

And, with that, going to the movies on a date night could perhaps soon see a full-fledged resurgence, thanks to embracing elements inherent to competing entertainment options.

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About the Index

The PYMNTS.com Subscription Commerce Conversion Index™, a Recurly collaboration, measures frictions in the digital shopping experience for subscription services and products and how they affect the final conversion rates for a merchant. This index analyzes why certain sites are better at converting sales than others, examining several pre-payment factors that generate either friction or sales.

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