Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Theaters Won't Need MoviePass Much Longer

By Rich Duprey - Updated Apr 20, 2019 at 7:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Having their own movie ticket subscription services will be easier for theater chains than partnering with a third party.

If MoviePass changed the way movie tickets were sold, competitor Sinemia is changing how movie theaters think about ticket subscription services.

While it still offers its own movie ticket subscription operation, the Sinemia Enterprise platform is helping theater operators launch their own programs to attract moviegoers. Both Studio Movie Grill and National Amusements, the media holding company that owns controlling interests in both CBS and Viacom, as well as Showcase Cinemas, have signed on to have Sinemia build them a white-label subscription service so they needn't deal with the hassle of creating their own.

There just may be a more viable business in getting theaters to run their own programs than in competing against them for sales.

Two young women laughing and sharing popcorn in a movie theater

Image source: Getty Images.

The problem of too much demand

The short history of movie ticket subscription services has not been a stellar one, as moviegoers have seen the terms of their plans altered without warning, sometimes daily.

Much of that was because Helios and Matheson Analytics ( HMNY 0.00% ) launched MoviePass with an unsustainable business model. To staunch the massively mounting losses it was experiencing, MoviePass ended up limiting the movies subscribers could see, the theaters they could be viewed at, and the times they were available. It raised and lowered prices almost at will, reneging on some agreements and backtracking on others.

Yet MoviePass wasn't alone, as Sinemia has also been criticized for its practices after customers were hit with hidden fees for ticket purchases that led it to be described as a "bait-and-switch scheme" in a class-action lawsuit. Even AMC Entertainment ( AMC -4.19% ) found it necessary to change its AMC Stubs A-List offering because it was being utilized too much.

The problem is that if the services were utilized as marketed, the plans would go bankrupt. Sinemia says the modern moviegoer sees on average three movies a month, while the Motion Picture Association of America (MPAA) pegs it at more like four to six movies a year. Because Sinemia and MoviePass pay full price for a ticket they're selling at a discount, their models can only really work if users don't fully utilize their subscriptions.

Changing up the model

That may be why subscription services launched by theater operators themselves are more successful. AMC credited its A-List service for lifting attendance numbers last year and recently noted it had attracted 600,000 subscribers for its range of plans. Cinemark Holdings offers one discounted ticket per month.

The benefit of these in-house plans is the user is limited to seeing a movie only at the offeror's theaters, so the cinema chains are really only discounting their own product. MoviePass and Sinemia allow you to visit many different chains, which is why selling a subscription platform that the theater owners operate might make the most sense.

Even MoviePass thinks that may be the way to go, as it is reportedly working on a so-called "red label" platform that it hopes to sell to theaters. Its sullied history, however, may cause theaters to be leery of signing up on its platform.

Tapping into global movie demand

Sinemia told Business Insider that demand for its theater-run subscription model is huge and global in nature, leading the company to form units to sell the new service in Europe, South America, Africa, and Asia. A theater can either buy an end-to-end solution, or it can choose different "modules" that target a specific needs, such as fraud protection.

Sinemia says the agreements provide recurring streams of revenue because they're multiyear in nature. The revenue is also a lot more stable than the discounted ticket business it continues to maintain.

The value of MoviePass was never as an investment, because it was clear early on that the service was built on an unsustainable business model. Rather, MoviePass changed the way tickets were sold, and Sinemia may be showing that the real future is not for independent subscription companies to hawk tickets, but instead to license their platforms to theaters. That may be MoviePass' ultimate lasting legacy.

Check out the latest earnings call transcripts for companies we cover.    

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Helios and Matheson Analytics Stock Quote
Helios and Matheson Analytics
HMNY
$0.00 (0.00%) $0.00
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$29.01 (-4.19%) $-1.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.