38 ms·

Robinhood: Millennials “loading up” on MoviePass stock

17 points by listenallyall 8y ago

listenallyall 8y ago
The status quo isn't working for theaters. Last year a 6% drop in admissions and worst summer in 20+ years. Theaters need something to drive demand, especially for off-peak times and non-blockbuster movies where they keep a higher percentage of the ticket price (and all the concession profit). If MoviePass continues to grow subscribers, it will be the biggest driver of demand, and will be able to negotiate discounts from theaters, greatly reducing its average per-ticket cost. http://money.cnn.com/2017/09/05/media/summer-box-office/index.html http://money.cnn.com/2017/09/05/media/summer-box-office/inde...
- nylonstrung 8y ago
  That was from September. Since then it has become one of the most expensive stocks to short and I don't believe the unit economics have improved meaningfully.
- rblatz 8y ago
  From what I understood theaters weren’t exactly raking in massive piles of cash on ticket sales, and really only made money on concessions. So is there really much wiggle room to negotiate ticket prices with theaters?
  - listenallyall 8y ago
    Here's AMC's income statement: http://investor.amctheatres.com/AsReported/Index http://investor.amctheatres.com/AsReported/Index Gross margins on ticket sales were 50% in 2017, so it would appear they do have wiggle room. Concessions are almost pure profit at 84% margin. Sacrificing some lower-margin ticket revenue (shared with studios) to generate growth in higher-margin snack sales (not shared) would seem to be a win for the theaters.
    - gamblor956 8y ago
      True, but ticket sale revenue was more than 2x that of concessions revenue, so they'd be giving up profit. And let's face it: heavy users of MoviePass are also the least likely to be heavy purchasers of concessions.
      - listenallyall 8y ago
        You are assuming every ticket purchased by MoviePass (potentially at a negotiated discount) would have been purchased at full price by the customer. This is not the case, MoviePass definitely increases the number of tickets sold. Would a theater prefer an empty seat and zero revenue, or, say a $6 ticket and a few bucks on popcorn? They already do this for matinees.
        gamblor956 8y ago
        I think we agree that if the alternative was nobody watching, it would be a net benefit to get anyone in the seats...if they bought concessions. However, I think we disagree on whether a person using MoviePass would be more likely to buy concessions. In my experience at my local megaplex (where tickets are $18 for matinee!) MoviePassers usually sneak in their food, even though they just saved $12 (or more) on their ticket and the beer and food is actually reasonably priced for the quantity compared to what you'd get at a nearby restaurant. While the small boost to ticket sales is a net benefit to the theater in the short term, it's clearly a net loss in the long term if they lose concessions revenue because now they're not just sharing the ticket sales with the studios, they're splitting it with a third party. (On average, theaters usually don't make a profit on the ticket sales for the first few weeks a movie is showing--they rely on concessions to make up the shortfall and push them into the black. Theaters only make back their money based solely on ticket sales on long-tail movies that spend a few weeks in the theaters.
        laurex 8y ago
        The company itself says that Movie Pass customers purchase an average of $13 of concessions, about double average movie goers. (Not to defend the general idea of MP as a business). https://www.google.com/amp/s/www.wired.com/story/moviepass-second-act/amp https://www.google.com/amp/s/www.wired.com/story/moviepass-s...
- gamblor956 8y ago
  MoviePass tried to demonstrate its leverage by blocking AMC theaters and certain movies. It didn't work. Instead, they just pissed of their customers and showed AMC that they had no ability to drive customers to AMC. MoviePass should have built upon its success at driving viewers to indie films to target smaller theater chains and movie studios. Instead, it went the VC way and try to artificially scale itself up by buying customers, and is now on the brink of collapse.
  - listenallyall 8y ago
    The geniuses at AMC managed to lose over $480 million last year. They ran just a 2% operating margin ($101M operating profit from $5B+ revenue). They may in fact kill MoviePass by refusing to budge, but they would be shooting themselves in the foot doing so. Who else is generating demand for movie tickets at this scale? According to their own earnings releases, AMC's USA per-screen attendance dropped from over 38,000 admissions per screen in 2016, to 29,808 in 2017. http://investor.amctheatres.com/file/Index?KeyFile=392398945 http://investor.amctheatres.com/file/Index?KeyFile=392398945
    - gamblor956 8y ago
      The geniuses at AMC managed to lose over $480 million last year. You need to learn to read investor reports...The "loss" was entirely driven by tax law changes that changed how they accounted for certain items on their books. "Included in the net loss for the quarter was approximately $310.0 million of tax expense in our U.S. markets related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets." They may in fact kill MoviePass by refusing to budge, but they would be shooting themselves in the foot doing so. Who else is generating demand for movie tickets at this scale? Not MoviePass. Last I checked, the movie studios spent a few hundred million dollars on promoting movies in the US alone. There's no point in bringing in more MoviePass subscribers if they're losing money per ticket due to splitting the revenue 3 ways (i.e., adding MoviePass into the cut) if those viewers don't also buy enough concessions to make up for the lost revenue. So far, it appears they don't. That being said, AMC has a subscription pass coming out (or is already out in some markets) which is like the original MoviePass: a sustainable price that brings in viewers and incentivizes them to purchase concessions (and additional tickets).
- angryasian 8y ago
  This doesn't make sense to me. Theaters are still collecting full price from movie pass. All they have to do is wait out moviepass to go broke and offer their own club deals with concessions deals on their own terms.
- mhermher 8y ago
  Sure, they're driving demand for essentially free movie tickets. I imagine it's not that hard to do, and not necessarily the kind of demand the theaters are interested in. And theaters already offer discounts at off hours to drive demand. Why would they offer it to MoviePass instead of directly to consumers?
  - listenallyall 8y ago
    Because MoviePass can drive incremental demand. Like an unsold hotel room or airline seat, the theater gets zero every time a seat is empty. If MoviePass purchases that ticket at half-price (and maybe the customer buys some popcorn), how does that hurt the theater? Have you been in a theater on a weekday afternoon? Most are ghost towns, even with reduced matinee prices. This suggests that matinee prices, although discounted, are still too high. MoviePass can grow a theater's attendance and revenue without requiring it to lower its window price to the general public. Why wouldn't they be "interested in" that?
angryasian 8y ago
Are these the same millennials that bought snapchat stock at IPO ?
- listenallyall 8y ago
  Could be the ones who bought bitcoins at $3, or $30, or $300.
  - xor1 8y ago
    Those mostly weren't millennials, they were gen X libertarians. The ones that held long enough to make some real money, anyways. I know one millennial who mined a bunch of BTC when it first came out, and then sold all of it when it first hit $20. I also know another millennial who bought a bunch of eth at the IPO, and has held through everything.

17 points by listenallyall 8y ago

The status quo isn't working for theaters. Last year a 6% drop in admissions and worst summer in 20+ years. Theaters need something to drive demand, especially for off-peak times and non-blockbuster movies where they keep a higher percentage of the ticket price (and all the concession profit). If MoviePass continues to grow subscribers, it will be the biggest driver of demand, and will be able to negotiate discounts from theaters, greatly reducing its average per-ticket cost. http://money.cnn.com/2017/09/05/media/summer-box-office/index.html http://money.cnn.com/2017/09/05/media/summer-box-office/inde...

nylonstrung 8y ago
That was from September. Since then it has become one of the most expensive stocks to short and I don't believe the unit economics have improved meaningfully.
rblatz 8y ago
From what I understood theaters weren’t exactly raking in massive piles of cash on ticket sales, and really only made money on concessions. So is there really much wiggle room to negotiate ticket prices with theaters?
- listenallyall 8y ago
  Here's AMC's income statement: http://investor.amctheatres.com/AsReported/Index http://investor.amctheatres.com/AsReported/Index Gross margins on ticket sales were 50% in 2017, so it would appear they do have wiggle room. Concessions are almost pure profit at 84% margin. Sacrificing some lower-margin ticket revenue (shared with studios) to generate growth in higher-margin snack sales (not shared) would seem to be a win for the theaters.
  - gamblor956 8y ago
    True, but ticket sale revenue was more than 2x that of concessions revenue, so they'd be giving up profit. And let's face it: heavy users of MoviePass are also the least likely to be heavy purchasers of concessions.
    - listenallyall 8y ago
      You are assuming every ticket purchased by MoviePass (potentially at a negotiated discount) would have been purchased at full price by the customer. This is not the case, MoviePass definitely increases the number of tickets sold. Would a theater prefer an empty seat and zero revenue, or, say a $6 ticket and a few bucks on popcorn? They already do this for matinees.
      - gamblor956 8y ago
        I think we agree that if the alternative was nobody watching, it would be a net benefit to get anyone in the seats...if they bought concessions. However, I think we disagree on whether a person using MoviePass would be more likely to buy concessions. In my experience at my local megaplex (where tickets are $18 for matinee!) MoviePassers usually sneak in their food, even though they just saved $12 (or more) on their ticket and the beer and food is actually reasonably priced for the quantity compared to what you'd get at a nearby restaurant. While the small boost to ticket sales is a net benefit to the theater in the short term, it's clearly a net loss in the long term if they lose concessions revenue because now they're not just sharing the ticket sales with the studios, they're splitting it with a third party. (On average, theaters usually don't make a profit on the ticket sales for the first few weeks a movie is showing--they rely on concessions to make up the shortfall and push them into the black. Theaters only make back their money based solely on ticket sales on long-tail movies that spend a few weeks in the theaters.
        laurex 8y ago
        The company itself says that Movie Pass customers purchase an average of $13 of concessions, about double average movie goers. (Not to defend the general idea of MP as a business). https://www.google.com/amp/s/www.wired.com/story/moviepass-second-act/amp https://www.google.com/amp/s/www.wired.com/story/moviepass-s...
gamblor956 8y ago
MoviePass tried to demonstrate its leverage by blocking AMC theaters and certain movies. It didn't work. Instead, they just pissed of their customers and showed AMC that they had no ability to drive customers to AMC. MoviePass should have built upon its success at driving viewers to indie films to target smaller theater chains and movie studios. Instead, it went the VC way and try to artificially scale itself up by buying customers, and is now on the brink of collapse.
- listenallyall 8y ago
  The geniuses at AMC managed to lose over $480 million last year. They ran just a 2% operating margin ($101M operating profit from $5B+ revenue). They may in fact kill MoviePass by refusing to budge, but they would be shooting themselves in the foot doing so. Who else is generating demand for movie tickets at this scale? According to their own earnings releases, AMC's USA per-screen attendance dropped from over 38,000 admissions per screen in 2016, to 29,808 in 2017. http://investor.amctheatres.com/file/Index?KeyFile=392398945 http://investor.amctheatres.com/file/Index?KeyFile=392398945
  - gamblor956 8y ago
    The geniuses at AMC managed to lose over $480 million last year. You need to learn to read investor reports...The "loss" was entirely driven by tax law changes that changed how they accounted for certain items on their books. "Included in the net loss for the quarter was approximately $310.0 million of tax expense in our U.S. markets related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets." They may in fact kill MoviePass by refusing to budge, but they would be shooting themselves in the foot doing so. Who else is generating demand for movie tickets at this scale? Not MoviePass. Last I checked, the movie studios spent a few hundred million dollars on promoting movies in the US alone. There's no point in bringing in more MoviePass subscribers if they're losing money per ticket due to splitting the revenue 3 ways (i.e., adding MoviePass into the cut) if those viewers don't also buy enough concessions to make up for the lost revenue. So far, it appears they don't. That being said, AMC has a subscription pass coming out (or is already out in some markets) which is like the original MoviePass: a sustainable price that brings in viewers and incentivizes them to purchase concessions (and additional tickets).
angryasian 8y ago
This doesn't make sense to me. Theaters are still collecting full price from movie pass. All they have to do is wait out moviepass to go broke and offer their own club deals with concessions deals on their own terms.
mhermher 8y ago
Sure, they're driving demand for essentially free movie tickets. I imagine it's not that hard to do, and not necessarily the kind of demand the theaters are interested in. And theaters already offer discounts at off hours to drive demand. Why would they offer it to MoviePass instead of directly to consumers?
- listenallyall 8y ago
  Because MoviePass can drive incremental demand. Like an unsold hotel room or airline seat, the theater gets zero every time a seat is empty. If MoviePass purchases that ticket at half-price (and maybe the customer buys some popcorn), how does that hurt the theater? Have you been in a theater on a weekday afternoon? Most are ghost towns, even with reduced matinee prices. This suggests that matinee prices, although discounted, are still too high. MoviePass can grow a theater's attendance and revenue without requiring it to lower its window price to the general public. Why wouldn't they be "interested in" that?

angryasian 8y ago

Are these the same millennials that bought snapchat stock at IPO ?

listenallyall 8y ago
Could be the ones who bought bitcoins at $3, or $30, or $300.
- xor1 8y ago
  Those mostly weren't millennials, they were gen X libertarians. The ones that held long enough to make some real money, anyways. I know one millennial who mined a bunch of BTC when it first came out, and then sold all of it when it first hit $20. I also know another millennial who bought a bunch of eth at the IPO, and has held through everything.