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I'm confused why Movie Theatres don't actively promote MoviePass to their customers. Isn't MoviePass paying full ticket value to the theatres? They should be o

by ada1981 9y ago

I'm confused why Movie Theatres don't actively promote MoviePass to their customers. Isn't MoviePass paying full ticket value to the theatres? They should be offering people discounts to show their movie pass cards on concessions, and otherwise get people showing up for free subsidized movies while they can. Am I missing something?

Cyph0n 9y ago
As far as I understand, the theaters get little to no revenue on ticket sales. But I guess it would still make sense to advertise since it means more snacks will be sold (on average).
- TylerE 9y ago
  Depends. On a major tent pole release the theater will only be getting ~20% of revenue for the first couple of weeks. Later in the release cycle the split gets much more even
slg 9y ago
You are missing the power the theaters lose to MoviePass. MoviePass is almost assuredly not sustainable in its current business model. It is only a matter of time until they go to the theater chains with data saying X% of your customers are because of us, give us Y% of that revenue or we will direct our subscribers to competing theaters.
- plorntus 9y ago
  Couldn't they just milk it until that happens and then release a more sustainable option? If the theatres say no, what is MoviePass's option? They have no real control there. I'm not claiming to know everything about this, literally just a 23 year old wanting to learn more. How is this different from me (hypothetically) with a ton of money offering to give everyone their weeks groceries for $10 a month for $40 worth of goods and then turning around and saying to the grocery chain pay me $x for this. It just seems completely bizarre, if they could already offer the price they are asking , why wouldn't they do that instead of paying the middleman?
  - slg 9y ago
    Because the unlimited aspect of MoviePass likely changes user behavior. Let's throw together a simplified example scenario. Imagine a user that previously went to the movies 12 times a year paying $10 per ticket. In a world without MoviePass the theater collects $120 from that customer. However with MoviePass that user might now go 15 times a year and the theater collects $150 total from MoviePass. That is an added $30 in revenue for the theater that was created by MoviePass. The theater still comes out ahead of any revenue sharing model with MoviePass that costs them less than $30 per year. Perhaps more importantly they also reduce the risk that the customer's $120-$150 per year ends up going to a different theater across town that is willing to make an agreement with MoviePass.
  - dragonwriter 9y ago
    > Couldn't they just milk it until that happens and then release a more sustainable option? No, because consumers aren't rational value maximizers even if businesses might sometimes approximate that; consumer behavior is strongly shaped by path-dependent expectation setting, and once theaters have let MoviePass model become dominant enough to set pricing expectations, they will catastrophically lose business if that model collapses. Eventually, if they survive, he public might be drawn back, so the industry might survive in some form, but each individual firm in the industry faced serious risk of being wiped out by that. It's much better for them to not encourage MoviePass to consumers and do everything practical to distrsct from it while finding other ways to attract price-conscious customers in a more sustainable way.
- drb91 9y ago
  Sure, but charging more than a couple bucks to see a movie isn’t sustainable either—either way movie theaters are fucked if they try to peg profits to tickets.
cosmie 9y ago
Their concern is the long term consequence, not the short term benefit. > and otherwise get people showing up for free subsidized movies while they can. The issue comes in when the "free subsidized movies" ends, but consumers are left with the expectation that the economics of movie sales can support that model. If MoviePass's business model turns out to be unsustainable and shuts down, all of the consumers that have gotten used to it will suddenly baulk at paying retail rates again. Rates that, while discussed as expensive, were accepted as the status quo prior to MoviePass. The alternative also isn't pleasant for the theater: The economics of MoviePass work out, but now MoviePass has the relationship with the consumer. As it gets more popular, MoviePass gets more market power to dictate discounted rates with your theater, with the implicit threat of blacklisting your theater from MoviePass locations if you don't play ball. While in theory that doesn't hurt the theater, since such a high percentage of box office revenue goes to distributors rather than to the theater, distributors won't take that squeeze either. They'll either shift back to fixed-cost film distribution (which theaters don't like, because it's risky) or start adding in more and more onerous minimum guarantees to contracts to make up the absolute dollar difference. i.e. if your distributor gets 95% of box office revenue, slashing ticket prices from $10 to $5 only costs you $0.25 in revenue but it costs them $4.75. While you can make up your very minimal lost revenue from concessions easily, they can't. They're not going to eat that quietly, no matter how much additional volume you generate.
- ada1981 9y ago
  I'm not so sure this is always the case. If MP tanks, I prob go back to my baseline of maybe 4 movies a year, but it's possible I'd be used to seeing more movies to I'd go more often. I probably wouldn't end up going less than my previous MP viewing. Movies theatres want the popcorn / soda sales so it doesn't matter much how MP negotiates the price, since they don't get much of that anyway.
  - cosmie 9y ago
    > so it doesn't matter much how MP negotiates the price, since they don't get much of that anyway But it does matter. Because there's always the potential for the theater to go from barely getting any ticket revenue to actively losing money for every ticket sold. Concession sales then start subsidizing box office revenue to pay distributors, eating away at your one profit center. Take two scenarios for how distributors, the ones that take most of the ticket revenue, make money: Scenario A, the status quo: 1000 tickets a day x $10/each x 95% of ticket revenue = $9,500/day going to the distributor Scenario B, assuming MP is a raging success, has captured the majority of the movie-going market, and is able to muscle the theater to give it a 50% discount on ticket rates: (200 non-MP tickets x $10/each + 800 tickets x $5/each) * 95% of ticket revenue = $5,700/day in revenue going to the distributor Even though the distributor still keeps the majority of box office revenue by percentage, that's a substantial discount to what they're used to and they're not going to just let the theater pass that loss off to them completely. So now, instead of just 95% of box office sales, they want 95% with a minimum guarantee, or want concession added into the percentage distribution, which could work out to paying substantially out of concession profit if your ticket sales don't hit that minimum (basically moving the risk back onto the theater, which is exactly what theaters so enthusiastically tried to avoid by moving from fixed-fee distribution to percentage-based distribution). While MP would also theoretically increase foot traffic to the theater, and thereby making up the loss in revenue per ticket by a higher quantity of lower revenue tickets being sold, there's only so much unused capacity during peak time already that there's a physical limit to how much additional volume an existing theater can absorb. If MP increased viewership during off-peak times when the theater's are mostly empty (like midday, midweek showings), then it might be beneficial to both the distributor and theater owner. But otherwise, one of those parties tends to come out of it worse than before MP.
raincom 9y ago
Moviepass(MP) does two things: (a) it can bring in people who otherwise would not go to theaters; (b) it can convert regular movie goers (regular customers of movie theaters) as customers of MP. Exhibitors like AMC, Cinemark, etc are happy with (a). They are worried about (b). MP will end up being the majority buyer of tickets sold by exhibitors; when it happens, MP will negotiate hard for tickets. What if MP goes bankrupt after converting a sizeable number of customers of exhibitors into MP's customers? This is why AMC/Cinemark is blocking e-tickets for MP customers; they are also blocking any reward points for MP customers, even though MP pays full price for every ticket since it is paid through master card.
dragonwriter 9y ago
If the model is, as everyone says, unsustainable and money losing, then the more popular it is, the more people will stop going to movies entirely because their price expectations have been reset when the MoviePass model collapses. If it's going to fail, theaters are best off with it having as few users as possible until then.

Cyph0n 9y ago

As far as I understand, the theaters get little to no revenue on ticket sales. But I guess it would still make sense to advertise since it means more snacks will be sold (on average).

TylerE 9y ago
Depends. On a major tent pole release the theater will only be getting ~20% of revenue for the first couple of weeks. Later in the release cycle the split gets much more even

slg 9y ago

You are missing the power the theaters lose to MoviePass. MoviePass is almost assuredly not sustainable in its current business model. It is only a matter of time until they go to the theater chains with data saying X% of your customers are because of us, give us Y% of that revenue or we will direct our subscribers to competing theaters.

plorntus 9y ago
Couldn't they just milk it until that happens and then release a more sustainable option? If the theatres say no, what is MoviePass's option? They have no real control there. I'm not claiming to know everything about this, literally just a 23 year old wanting to learn more. How is this different from me (hypothetically) with a ton of money offering to give everyone their weeks groceries for $10 a month for $40 worth of goods and then turning around and saying to the grocery chain pay me $x for this. It just seems completely bizarre, if they could already offer the price they are asking , why wouldn't they do that instead of paying the middleman?
- slg 9y ago
  Because the unlimited aspect of MoviePass likely changes user behavior. Let's throw together a simplified example scenario. Imagine a user that previously went to the movies 12 times a year paying $10 per ticket. In a world without MoviePass the theater collects $120 from that customer. However with MoviePass that user might now go 15 times a year and the theater collects $150 total from MoviePass. That is an added $30 in revenue for the theater that was created by MoviePass. The theater still comes out ahead of any revenue sharing model with MoviePass that costs them less than $30 per year. Perhaps more importantly they also reduce the risk that the customer's $120-$150 per year ends up going to a different theater across town that is willing to make an agreement with MoviePass.
- dragonwriter 9y ago
  > Couldn't they just milk it until that happens and then release a more sustainable option? No, because consumers aren't rational value maximizers even if businesses might sometimes approximate that; consumer behavior is strongly shaped by path-dependent expectation setting, and once theaters have let MoviePass model become dominant enough to set pricing expectations, they will catastrophically lose business if that model collapses. Eventually, if they survive, he public might be drawn back, so the industry might survive in some form, but each individual firm in the industry faced serious risk of being wiped out by that. It's much better for them to not encourage MoviePass to consumers and do everything practical to distrsct from it while finding other ways to attract price-conscious customers in a more sustainable way.
drb91 9y ago
Sure, but charging more than a couple bucks to see a movie isn’t sustainable either—either way movie theaters are fucked if they try to peg profits to tickets.

cosmie 9y ago

Their concern is the long term consequence, not the short term benefit. > and otherwise get people showing up for free subsidized movies while they can. The issue comes in when the "free subsidized movies" ends, but consumers are left with the expectation that the economics of movie sales can support that model. If MoviePass's business model turns out to be unsustainable and shuts down, all of the consumers that have gotten used to it will suddenly baulk at paying retail rates again. Rates that, while discussed as expensive, were accepted as the status quo prior to MoviePass. The alternative also isn't pleasant for the theater: The economics of MoviePass work out, but now MoviePass has the relationship with the consumer. As it gets more popular, MoviePass gets more market power to dictate discounted rates with your theater, with the implicit threat of blacklisting your theater from MoviePass locations if you don't play ball. While in theory that doesn't hurt the theater, since such a high percentage of box office revenue goes to distributors rather than to the theater, distributors won't take that squeeze either. They'll either shift back to fixed-cost film distribution (which theaters don't like, because it's risky) or start adding in more and more onerous minimum guarantees to contracts to make up the absolute dollar difference. i.e. if your distributor gets 95% of box office revenue, slashing ticket prices from $10 to $5 only costs you $0.25 in revenue but it costs them $4.75. While you can make up your very minimal lost revenue from concessions easily, they can't. They're not going to eat that quietly, no matter how much additional volume you generate.

ada1981 9y ago
I'm not so sure this is always the case. If MP tanks, I prob go back to my baseline of maybe 4 movies a year, but it's possible I'd be used to seeing more movies to I'd go more often. I probably wouldn't end up going less than my previous MP viewing. Movies theatres want the popcorn / soda sales so it doesn't matter much how MP negotiates the price, since they don't get much of that anyway.
- cosmie 9y ago
  > so it doesn't matter much how MP negotiates the price, since they don't get much of that anyway But it does matter. Because there's always the potential for the theater to go from barely getting any ticket revenue to actively losing money for every ticket sold. Concession sales then start subsidizing box office revenue to pay distributors, eating away at your one profit center. Take two scenarios for how distributors, the ones that take most of the ticket revenue, make money: Scenario A, the status quo: 1000 tickets a day x $10/each x 95% of ticket revenue = $9,500/day going to the distributor Scenario B, assuming MP is a raging success, has captured the majority of the movie-going market, and is able to muscle the theater to give it a 50% discount on ticket rates: (200 non-MP tickets x $10/each + 800 tickets x $5/each) * 95% of ticket revenue = $5,700/day in revenue going to the distributor Even though the distributor still keeps the majority of box office revenue by percentage, that's a substantial discount to what they're used to and they're not going to just let the theater pass that loss off to them completely. So now, instead of just 95% of box office sales, they want 95% with a minimum guarantee, or want concession added into the percentage distribution, which could work out to paying substantially out of concession profit if your ticket sales don't hit that minimum (basically moving the risk back onto the theater, which is exactly what theaters so enthusiastically tried to avoid by moving from fixed-fee distribution to percentage-based distribution). While MP would also theoretically increase foot traffic to the theater, and thereby making up the loss in revenue per ticket by a higher quantity of lower revenue tickets being sold, there's only so much unused capacity during peak time already that there's a physical limit to how much additional volume an existing theater can absorb. If MP increased viewership during off-peak times when the theater's are mostly empty (like midday, midweek showings), then it might be beneficial to both the distributor and theater owner. But otherwise, one of those parties tends to come out of it worse than before MP.

raincom 9y ago

Moviepass(MP) does two things: (a) it can bring in people who otherwise would not go to theaters; (b) it can convert regular movie goers (regular customers of movie theaters) as customers of MP. Exhibitors like AMC, Cinemark, etc are happy with (a). They are worried about (b). MP will end up being the majority buyer of tickets sold by exhibitors; when it happens, MP will negotiate hard for tickets. What if MP goes bankrupt after converting a sizeable number of customers of exhibitors into MP's customers? This is why AMC/Cinemark is blocking e-tickets for MP customers; they are also blocking any reward points for MP customers, even though MP pays full price for every ticket since it is paid through master card.

dragonwriter 9y ago

If the model is, as everyone says, unsustainable and money losing, then the more popular it is, the more people will stop going to movies entirely because their price expectations have been reset when the MoviePass model collapses. If it's going to fail, theaters are best off with it having as few users as possible until then.