- MoviePass rolled out drastic changes this week to restrict usage of the app and control its cash burn.
- It still lost money on me for the month after only one day.
- If MoviePass cannot strike better deals with theatres, it will die.
This past week, MoviePass began to roll out drastic changes to its service after cash-flow problems caused the app to stop working for many users.
MoviePass will raise its price, ban major movies (for at least a few weeks after their openings), and remove certain showtimes, in addition to charging surge pricing, banning repeat viewings of movies, and taking other measures. These updates are meant to slow the company’s cash burn, which has soared to an estimated $US45 million a month.
But here’s a simple problem that MoviePass still hasn’t fixed: It lost money on me for the month after only one day.
On Tuesday evening, I went to see the new indie movie “Eighth Grade” at Regal’s Battery Park location in New York. It was a lovely movie at a lovely theatre. I recommend both. But my ticket was $US17, and MoviePass picked up the tab. There was no surge pricing.
I pay $US9.95 a month currently, meaning that even without other costs, MoviePass lost about $US7 on me for the month in one day just by covering the ticket price. Even with the subscription price increase to $US14.95, it would have still lost money on a single ticket. Granted, I’m in New York, so prices are higher for movies, but you get a sense of why the company is losing $US45 million a month.
This points to a central problem about the business model that MoviePass won’t be able to fix no matter how many restrictions it puts on the app.
When I first interviewed MoviePass CEO Mitch Lowe for a piece back in October, we spoke about how MoviePass had fundamentally changed the way I interacted with movie theatres. With MoviePass, I was much more likely to go during the week or by myself, or take a chance on a non-blockbuster. All of these were things that could boost the movie-theatre business by helping it use its assets more efficiently. It was beneficial, for instance, for Regal to have me come on a Tuesday evening, as I did yesterday, when the theatre was only a quarter full.
A subscription model had the potential to help the movie-theatre business, and MoviePass could have been the one to do it. But it required cooperation from theatres in the form of things like discounted tickets and a cut of concessions. Targeted marketing for studios and investing in indie movies were never going to be enough to offset the losses. The sad fact for MoviePass is that those deals haven’t materialised in the way the company wanted them to.
So MoviePass is caught in the death spiral of paying full price for most tickets. That is a problem that is impossible to fix by restricting usage to the app. Banning the new “Mission: Impossible” movie and cutting the available showtimes will surely cut down on cash burn, but it’s a Band-Aid that won’t fix the business.
Why? Because at its core, it just splits customers into two groups: people for whom MoviePass is a good deal, and people for whom it’s a bad deal. Since MoviePass is still paying full price for the ticket, the “bad deal” customer is paying for the “good deal” one. And for customers who feel as if they’re losing money on MoviePass compared with buying tickets individually, they will just cancel.
MoviePass may be adding value to the movie ecosystem generally – to studios and theatre giants like AMC and Regal – but it can’t reap the rewards itself.
Turning MoviePass into Indie MoviePass can’t save it. It might get some financial breathing room in the few months it takes subscribers to cancel, but once they’re gone, the problems will start all over.
Business Insider Emails & Alerts
Site highlights each day to your inbox.