Netflix co-founder wants to sell subscription to go to the movies

NEW YORK • Almost two decades after helping found Netflix, Mr Mitch Lowe is turning his attention to another start-up trying to change the way people watch movies. He has taken over as chief executive officer at MoviePass, a five-year-old company that offers an all-you-can-watch subscription service for movie theatres.

MoviePass gives subscribers a debit card that allows them to attend as many movies as they want. The service starts at about US$30 (S$40) a month, with higher prices in more expensive cities. The subscription covers 90 per cent of movie theatres in the United States, according to MoviePass.

Still, the experience feels like a bit of a hack in most places, largely because theatres have not completely bought into the idea.

Mr Lowe, 62, acknowledged that he has a lot of work to do to persuade both theatres and movie fans that this is something they should go along with. "We've got a subscription where you can go to the movies at almost any theatre that accepts a debit card, yet people don't really get how great an experience we can make it," he said.

Earlier this year, he took a significant ownership stake in the company and began serving as an adviser, then agreed to take over as CEO. He said that Mr Stacy Spikes, the co-founder and current CEO, will stay with the company.

If Mr Lowe does jump-start MoviePass, it will be a satisfying capstone on a career that has touched on the development of many new business models for watching films. His first foray was an investment in Captain Video, a San Francisco Bay Area movie store chain, in 1982.

During that era, his big innovation was using colour-coded paper clips on the 3-by-5 index cards used to track rentals so the manager would know what day to expect the tapes to be returned.

In the 1990s, he built a company that allowed stores to set up their own websites and became head of the Video Software Dealers Association, the trade group for video stores. There, he met Mr Reed Hastings and Mr Marc Randolph, who were looking to start a DVD-by-mail service called Netflix. He sensed a big idea and pitched himself as the person who could help make it happen. "They were looking for someone who knew the business," he said.

He later became president of video-rental kiosk company Redbox .

One major stumbling block to proving the potential of such a subscription service could be that the idea runs counter to the last decade or so of movie-going habits. Attendance at US movie theatres has declined by 17 per cent since 2002, according to Box Office Mojo.

Theatres have been able to weather the storm by charging people more each time they come to the theatre. Average ticket prices have risen 45 per cent, mostly because theatres focus on upselling people on such features as 3D or IMAX that are hard to replicate in private residences.

Subscription services seem to appeal best for products people consume routinely. Going to the movie theatre is becoming less of a routine for Americans and movie theatres are adjusting accordingly.

To get people comfortable with the idea of subscriptions, MoviePass plans to launch its first major marketing campaign. Mr Lowe wants to expand the company's range of services, with the cheapest subscription coming in at under US$20 a month. He will immediately look to raise a further funding round.

Smoothing the customer experience probably means convincing movie theatres to work more closely with MoviePass. Over the last five years, many theatre owners have been sceptical. "The movie industry has been very resistant to change," said Mr Wade Holden, an analyst at SNL Kagan. "They're trying to draw in more crowds but still keep their traditional ticketing services."

Mr Lowe insists that theatres have nothing to fear. He believes a subscription service will inspire people to visit theatres more regularly. MoviePass does not take a cut of the ticket sales it facilitates. Its business model is similar to the one employed by most fitness clubs - hoping more subscribers will underuse the service than overuse it.

"The theatres will get full price," said Lowe. "We're not asking for a discount or a rebate. When we go into these conversations, that's the first thing they expect us to be asking."

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A version of this article appeared in the print edition of The Straits Times on June 30, 2016, with the headline 'Netflix co-founder wants to sell subscription to go to the movies'. Print Edition | Subscribe