Is MoviePass the ticket to US theatres' survival?

LAS VEGAS • The owners of America's movie theatres are having a few good months, with February's Black Panther making a huge box-office kill and Avengers: Infinity War all-conquering over the weekend.

But that encouraging news conceals a more disruptive set of forces that threatens to undermine the theatres' decades-old business model.

A Netflix-style disruption has come from movie-theatre subscription service MoviePass.

The debate over the service offers a window into how a long-standing industry weighs how radically to change its business strategy to survive in a digital economy.

Digital entertainment options are causing more people to stay at home. The Motion Picture Association of America recently reported that Americans, for the first time, spent more on streaming entertainment than movie tickets last year.

At CinemaCon in Las Vegas, the annual convention of theatre owners, much of the talk centred on incremental changes such as better screens and improved food.

But a more radical solution has come in the form of MoviePass. With the service, people pay US$10 (S$13) a month to see either four or an unlimited number of films, depending on when they signed up.

The company pays the full cost of each ticket to the theatre.

MoviePass has attracted nearly two million subscribers over the last year. But as its executives claim to be sending scores of new customers to theatres, it has prompted worries in the industry about a devaluation of the movie ticket.

"We're a big part of theatres' revenue and very good for their business," Mr Ted Farnsworth, chief executive of MoviePass' parent company Helios and Matheson, said.

"It's too bad they don't see it that way."

Last summer, MoviePass slashed its price to US$10 a month, betting that it would attract many casual consumers - people who will pay but then barely use the service.

Mr Farnsworth estimates that MoviePass will reach five million subscribers by the end of the year.

MoviePass said only 12 per cent are frequent users and that many of the remaining 88 per cent do not go to the theatre often enough to cost the company much money.

"We could be profitable right now if we got rid of the 12 per cent," Mr Farnsworth said. He added that "there are things we can do to limit very heavy use" - alluding to a monthly four-ticket cap implemented last month.

But four monthly tickets still cost MoviePass far more than it gets from a subscriber. The average price of a movie ticket is about US$9 nationwide.

Many theatre owners shake their heads at the model, wondering about the long-term health of a company that needs to attract people passionate enough about movies to buy a monthly subscription, but too lazy to take much advantage of it.

In the meantime, few theatre executives seem certain about what to do in the face of MoviePass' disruption. They veer between embracing it, fighting it and co-opting it.

AMC, the country's biggest theatre firm, has been a critic of the MoviePass business model. It got into a public tussle with the company when MoviePass pulled 10 AMC cinemas off the service in January. AMC has not sought to pursue a subscription model of its own.

But MoviePass going under may not be welcome either. Nearly all theatre owners fear what might happen if the service gains too many subscribers and then collapses, leaving customers unwilling to return to regular prices.

At stake is both an industry and the bedrock American tradition of leaving one's home to spend two hours crying and laughing in the company of strangers.

And without a more massive overhaul, it may be a matter of time before the digital shifts catch up with the industry. "You have a 100-year-old business, a very mature business, and it's going to change," said Mr Paul Yanover, president of movie website Fandango.

"It's just that no one knows how."

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on May 02, 2018, with the headline 'Is MoviePass the ticket to US theatres' survival?'. Print Edition | Subscribe