One of the more unlikely entertainment industry stories to bubble up late in the summer season is the rebirth of MoviePass. The disruptive multiplex buffet subscription peaked with 3.2 million subscribers in 2018, but it wasn't sustainable the first time around. It ran out of money in 2019. Now the brand is back under new leadership with a plan to get it right the second time around, but don't bet on success.
The service is expected to launch next week, initially in just select markets. MoviePass opened a no-obligation waitlist on its site on Thursday, but little is known about the benefits of the relaunch beyond the $10, $20, and $30 price points. If it seems unfair to be down about a plan before we've heard the new vision for the brand, but it's not wrong to make assumptions. Let's go over three reasons MoviePass isn't likely to stick around for long this time.
1. MoviePass will never be a win-win-win platform
There are three parties involved in the MoviePass model. Subscribers originally paid $9.95 a month for access to at least one screening from any movie theater every 24 hours. MoviePass itself would grow in popularity. The third party, theater operators, would be on the receiving end for incremental ticket sales.
The best business models are the ones where everybody wins. In the original MoviePass revolution, only subscribers won. They had a great deal. They could see a ton of theatrical releases on the silver screen for just 10 bucks. The average member was seeing four to five movies a month. At peak MoviePass, AMC Entertainment (AMC -7.25%) (APE) said it was collecting an average of more than $12 a ticket for a MoviePass-purchased admission. The value was clearly there for a subscriber, even as MoviePass made members jump through some extra hoops to secure their tickets.
MoviePass naturally didn't fare so well. It was collecting a lot less money from its members than what it was paying theaters for tickets, and that's before we consider the actual costs to run the company beyond the negative gross margin. MoviePass was hoping to make up the difference by selling user data to Hollywood, but how valuable could that data have been? Advertising was another revenue stream, but what do you market to folks paying an average of $2 a movie?
The last hope for MoviePass was to get exhibitors to pick up the slack. MoviePass was putting backsides in seats. Would these multiplex operators be willing to give MoviePass a piece of the action, including high-margin concession stand sales? It never happened, because theater chains loathed MoviePass. It was devaluing the product. The perceived value of a night at the movies was obliterated by MoviePass, and that made it harder to sell tickets to non-MoviePass members.
The entire model was a short fuse, followed by the kaboom of creditors tiring of paying for a young audience's multiplex binge. The new MoviePass will meet a similar fate. People will only sign up if think they will get more screenings out of the plan than they're paying. Popularity and sustainability will never coexist here.
2. Multiplex operators cracked the code
MoviePass wasn't able to make a subscription model work, but the leading chains figured it out. AMC Stubs A-List charges $20 to $22 a month, letting members catch up to three movies a week, including premium formats that weren't included in MoviePass. Cinemark's (CNK -3.19%) Movie Club is $10 a month, but it includes credit for just one non-premium movie a month. It also offers discounts on concessions, and both AMC and Cinemark waive online ticketing fees for its members.
Neither platform is as popular as MoviePass was four summers ago. Cinemark just hit a million members. AMC was closing in on a million before the pandemic hit. However, these are sustainable models. AMC and Cinemark don't need to negotiate with themselves to get a piece of the gate. They're the ones operating the box office. They're the ones shoveling popcorn into buckets.
AMC can make up to 12 movies a month work with A-List. MoviePass can't sustainably offer anything close to that for its midpriced $20 tier without going belly-up. After all, today's creditors won't make the same mistakes as the original MoviePass bag holders.
3. Ticket sales have only deteriorated since MoviePass went away
The number of tickets sold for domestic screenings topped off at nearly 1.6 billion in 2002. Back in 2019, the last full year before the pandemic, just 1.2 billion admissions were purchased. Ticket prices have inched higher over the years, so revenue has held up. However, the trend over the past two decades has been problematic.
Folks have started coming back to the local movie house since the initial industry shutdown in early 2020. This summer got off to a promising start, but things have deteriorated quickly with the growing popularity of streaming services and the narrowing of theatrical exclusivity windows. Quarter-to-date, domestic admissions revenue is the lowest its been in pre-pandemic times since 1998, and that's without adjusting for inflation.
These are challenging times for movie theater stocks, but at least they have levers and monetization channels that aren't available to MoviePass. We'll learn more about the new model soon, but no available pathway leads to a Hollywood ending.