You probably saw this coming. The long embattled theatrical movie subscription service MoviePass blew everyone’s minds on Tuesday with an unbelievably cheap service that would seem to undermine the economics of moviegoing, and now, the largest movie theater chain in America is threatening legal action. AMC Theaters wants to block MoviePass subscribers from using the service in its theaters.
In a statement that feels both predictable and defensive, AMC slammed MoviePass’s new $10-per-month offering. For that impressive price, MoviePass will let subscribers see as many movies as you want, except for IMAX and 3D movies. MoviePass still plans on paying the full ticket price to the theaters through a debit card transaction with Mastercard. The CEO of Helios and Metheson Analytics, which now owns a majority stake in the MoviePass, told Bloomberg that the data collected about viewing habits could eventually be used to serve advertisements or other marketing to users.
But still, as AMC claims in a statement, this is not a good business model.
From what we can tell, by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month.
That’s the predictable part of it. Then comes the defensive part:
In AMC’s view, that price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled.
[The price] over time will not provide sufficient revenue to operate quality theatres nor will it produce enough income to provide film makers with sufficient incentive to make great new movies.
In other words, AMC doesn’t like this new MoviePass deal because it’s going to cheapen the movie-going experience and that will lead to crappier feature films. This idea runs contrary to statements from MoviePass, which argues that the subscription service will sell more tickets—even if MoviePass has to lose some money in the process—and encourage moviegoers to spend more at concessions, where theaters enjoy high profit margins.
Remember, this grand plan is being funded, in part, by selling a majority stake to Helios and Metheson Analytics. MoviePass also hopes to IPO next year, which could bring in more capital, but it certainly looks like MoviePass is betting that it can lose a bunch of money, attract a lot of new customers, and hopefully, sell that sweet data. At best, the economics of this plan are very risky.
AMC actually partnered with MoviePass in 2014 on a theatrical subscription program that started at $30 a month—considerably more expensive than the new bargain basement price point. Needless to say, the cheapening should be alarming to AMC, whose stock price has been decimated this year amidst declining ticket sales. Competing movie chains like Regal, Carmike, and Marcus are also down, but none of these other companies have chimed in on MoviePass’ plans so far.
Who knows what exactly is fueling this AMC-MoviePass feud, although it certainly seems like the theater chain is (rightfully) scared of losing money. But MoviePass chief executive Mitch Lowe, who was also an early executive at Netflix, claims that what’s good for his company is good for the studios and the theater chains. There’s still something a little off about the whole concept of a way-to-cheap unlimited pass saving the movie biz, and Even Lowe admits it.
“[MoviePass] isn’t the solution, but I think for the first time in a while we’ve found a way to increase ticket sales,” Lowe told MarketWatch this week. “It’s a single digit percent increase in a $13 billion business, but it’s one way to combat people saying ‘I’ll just wait for that movie to come out on Netflix.’”
We’ve reached out to both AMC and MoviePass to learn more about their current and past beef. We’ll update this post if we hear back.