If these are the final days of MoviePass, there will probably be no one as grateful that the disruptive multiplex subscription service came around than AMC Entertainment (NYSE:AMC). Sure, there's been plenty of discord. The country's leading multiplex operator has called out MoviePass parent Helios and Matheson Analytics (NASDAQ:HMNY) in the past, mocking the financial feasibility for the model while lamenting what it's doing in devaluing the moviegoing experience. MoviePass has fought back, at one point even temporarily blocking access to some of the country's more popular AMC locations.
However, with MoviePass now raising prices and making the service more restrictive as it faces a cash crunch -- just as AMC is launching its own cinema smorgasbord --you have to love where AMC stands here. MoviePass got folks addicted to the local multiplex, and whether it physically falters or prices itself out of the market at this point, it will have served as the perfect gateway to AMC Stubs A-List.
Bait and switch
MoviePass turned heads last summer when Helios and Matheson took a majority stake in the platform and slashed the subscription rate to a mere $9.95 a month. A plan that lets you see a movie a day for less than the price of a single primetime screening in major markets was naturally a hit. MoviePass went from 20,000 members to more than 3 million in less than a year. With MoviePass having to pay retail prices for most of the tickets it was securing and no feasible way to monetize its audience effectively enough to offset the celluloid subsidization, the cash burn has been insane.
The moves announced on Tuesday should help offset some of the sting. MoviePass will bump its price $5 higher at some point in August. MoviePass members will also be blocked from seeing major first-run movies during the first two weeks of wide release. The unpopular surge pricing that has rolled out in recent weeks will continue, and MoviePass expects to generate $4 to $6 in incremental nonsubscription revenue per subscriber every month. In short, it will be roughly doubling the revenue it was previously collecting from its rattled user base.
It's against this backdrop that AMC introduced AMC Stubs A-List in late June. The subscription plan will set subscribers back $19.95 a month -- essentially what the cost of MoviePass is becoming for the average member -- and offers access to three movies a week. MoviePass may seem like the far better deal with access to as many as seven movies a week and availability across all theater chains, but AMC Stubs A-List has some pretty neat perks.
Folks can reserve up to three AMC showings ahead of time, and that includes repeat viewings. MoviePass limits purchases to the same day with physical check-ins required near the actual theaters in most cases, and those members can't see the same film twice. AMC's plan also features Dolby Cinema, IMAX, RealD 3D, and other premium screenings at no additional cost. MoviePass is limited to standard screenings, though it has announced plans for a pricier subscription platform that will offer premium showings.
AMC has to love this. Helios and Matheson claims that MoviePass is accounting for 6% of all domestic movie tickets purchased, a big reason for the industry's box office receipts faring well this year. AMC is collecting retail value on all of the tickets purchased by MoviePass members. More importantly, MoviePass has created an army of 3 million multiplex regulars. AMC is in a win-win situation. If MoviePass survives, AMC will continue to collect incremental revenue on tickets and concessions. If the service folds, there is a built-in audience -- and a larger educated moviegoing base -- for AMC's subscription offering.
The MoviePass model never made financial sense, but along comes AMC with the margin flexibility to make it work since it controls the high-margin snack and drink sales as well as a good chunk of the box office receipts. AMC Stubs A-List would've failed last summer, but it's killing it now because MoviePass came first. AMC is disrupting the disruptor, and that's probably good for a Hollywood ending for AMC in an industry that many figured was fading to black before MoviePass came around.