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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 is
by 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 agoI'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.
- ada1981 9y agoI appreciate the detail and depth here. My intuition is still that the correct move is to enjoy the revenue opportunity. Granted, that is based on a "MoviePass won't last" assumption.
- lancefisher 9y agoI think the end game for Movie Pass is them buying/building their own theaters.
- dragonwriter 9y agoThst seemingly doesn't solve the problem that makes them unsustainable, since; they'd have to buy/establish their own studios to do that.