Wednesday, December 17, 2014

Movie Theater Subscriptions

The big news coming out of the movie industry today is the pulling of 'The Interview' due to pressure from (potentially) North Korean hackers. While that's a pretty interesting story, I noticed a different article today about the movie industry that got me thinking.

AMC, one of the major theater chains, is testing a subscription plan for effectively, all-you-can-eat moviegoing.

Now a major movie theater chain is trying to step onto the subscription gravy train as it seeks to reverse attendance declines, especially among young moviegoers. Leawood-based AMC Theaters, the No. 2 chain in North America behind Regal Entertainment, has agreed to a pilot partnership with MoviePass, a three-year-old company focused on letting people attend a movie a day for one monthly fee.

“It frankly wouldn’t be smart to ignore the success of subscription in other areas of media,” said Christina Sternberg, senior vice president for corporate strategy at AMC, which operates 4,959 movie screens.

In January, AMC theaters in Boston and Denver will begin working in concert with MoviePass to offer monthly subscription packages for $45 and $35. More cities will be added.

So if you live in one of those select cities, you'll have the opportunity to buy a movie theater subscription and go to as many movies as you want...well, technically you could go to a max of 31 (one per day). But that should still be plenty.

However - I'm going to go ahead and guess that this model really isn't going to work, at least in the way it's structured right now.

I think as currently constructed, the price is way too high and only creates an adverse selection problem.

A monthly bill for $35 isn't exactly small, it's significantly higher than Netflix at <$10 (which to me is the threshold at which point you might forget you have it).

As a result, I think the only people you'll get flocking to it are super-hardcore moviegoers, who likely are already showing up frequently. As an indicator, I love going to the movies (I even saw that ridiculous Denzel movie where he kills all the Russian gangsters in a hardware store), and I would never think $35/month is worth it.

Clearly what AMC is going for is what so many gym chains are able to do - sign people up, and then have them NOT show up to the theater. But I think it's a stretch to be able to persuade someone to sign up for a movie subscription rather than a gym subscription. At least going to the gym has an aspiration attached to it - people think that by signing up for a gym they'll change their behavior and get in better shape. But I don't think anyone aspires to see 5 movies a month outside of maybe an aspiring film critic.

So unless they've got some great promotional pricing or other kinds of offers, I think it'll be hard to suck people in.

Just do the math, even at $35 a month, for you to breakeven on that investment, you'd need to go to at least 3 movies a month (assuming a $12 ticket price). So in order to get some value for your money, you really need to be going to the movies each week (4 movies would bring your ticket price to ~$9 a ticket, which is at least a little bit of a discount)

But do you know anyone who can really go to a movie every week? I'm not sure there are even enough movies to fill that schedule, again, unless you're a critic.

I just don't see someone willingly signing up for such a hefty subscription, particularly when you consider the fact that most movie trips aren't individual (though these subscriptions are). So if you have a subscription, and you're dating someone, you're going to suggest a night at the movies just about every date night. But unless you're dating another movie subscriber, you might not be able to get them on board, as they'll be paying full price (maybe you could buy them popcorn to even things out).

I'm assuming a large part of this pricing must be tied to how the theater chains kick ticket sales back to the movie companies. I'm not sure how they would figure out the internal bookkeeping of these subscription plans (If I'm charged for $35 and see three movies, does my $35 get divided by three across them? If I only see 1, does that movie get a full $35 cut?) Keeping the price per ticket high would ensure that the theater can still kick a lot back to the movie companies while driving more trips and concession purchases -- which is what I'm guessing the rationale is -- I just don't think any casual moviegoer is going to go for it.

If it were me, I'd explore a couple other alternatives. Why wouldn't there be opportunity for a family subscription (or a companion pass type deal like Southwest)? A family subscription that would allow different family configurations (mom+dad, mom+dad+kids) some discounted rate could potentially drive more trips. I'd also give some consideration to a limited seasonal pass. People go to the movies a lot during the summer - so maybe you create some kind of all-you-can-watch package and aim it squarely at the post-holiday/award season but pre-memorial day window.

These are just a couple ideas, but I don't think charging people $35 a month is going to appreciably get more butts in the seats. I just don't think people will pay that much.

No comments: