5 ms·

Nope it would not have worked. You see movie theater owners have to pay the movie owner a per viewer fee. So it is not merely about filling up empty seats. The

Nope it would not have worked. You see movie theater owners have to pay the movie owner a per viewer fee. So it is not merely about filling up empty seats. The entire "filling up empty seats" story relies on the misconception that if you have empty seats there is a zero marginal cost to extra viewers, but that is not the case, movie owners charge per ticket sold. The deal movie pass offered theaters was "if you make a deal with us, we can help you raise revenues at a marginal loss." No sane business person wants that. The point of business is to make money not lose it. Moviepass was always a crazy impossible scheme. The business model was: get famous, get high growth, then we'll figure something out. This is something we rational people do not like to think about, but there are people out there that take bold and reckless actions without thinking much or at all about the consequences, under a belief that it will all work out in the end. You can just look at the political news to confirm that.

Crazometer 8y ago
The marginal cost is likely significantly lower than the ticketed price. I'm sure there is a win-win there somewhere. In Australia tickets are about $20 ea retail. Many of the cinemas have deals regularly offering tickets for around $15. If you are with certain telcos you can get tickets all year round for $13.
- deleted 8y ago
  [deleted]
- hristov 8y ago
  I am not sure your statement about the marginal cost is correct. This is a closely guided secret among studios and exhibitors, but the little anecdotal information that leaks out indicates that for well publicized major releases the studios want pretty much the entirety of the ticket price and the theater can only make money off of concessions. There isn't much room for moviepass in here. Even for movies that are not as well popular and give more margin to exhibitors, it is very hard to see how you can accommodate moviepass and the crazy discounts they give. Lets take a person that sees about 4 movies per month which should be kind of usual for moviepass. That gives about $2.50 per showing. This has to be shared between moviepass, the theater and the movie owner. While before moviepass, only the theater and the movie owner could share $10. I don't see how this does not end up severely impacting the profitability of the theater, the movie owner or both. I really do not see a win-win in the moviepass pricing model.
  - WorldMaker 8y ago
    I don't think it's a closely guarded secret. The movie theater business is a century old textbook example of a marginal cost loss leader for concession sales.
- shriver 8y ago
  That's actually incredibly complex - generally the way the revenue model works is that the Movie company will negotiate a certain percentage that depends on how old the movie is. So in opening weekend 100% of the revenue is probably going to the movie, but 4 weeks in the theater is probably taking 90% of the revenue. So yes, if you can fill those empty seats in the 4 week old showing you can make bank. But MoviePass has no mechanism for increasing sales of 4 week old movies particularly, they're just as likely to canabalize your existing week 1 sales. Now I don't know what the Australian system is like but in the UK we have an insurance company from whom you can get 2-4-1 vouchers every tuesday if you're a subscriber. Well that solves the exact problem you're talking about - it incentivizes people to buy the tickets that don't normally get filled, whilst not providing any discount during premium times.
- cmelbye 8y ago
  > I'm sure there is a win-win there somewhere. $15 popcorn.
  - WorldMaker 8y ago
    Which MoviePass wasn't selling and had no way to sell.
Kagerjay 8y ago
pretty much this, penetrate the market and figure it out later. Except that last part wasn't there. Someone didn't do risk analysis over there
jonwachob91 8y ago
>The deal movie pass offered theaters was "if you make a deal with us, we can help you raise revenues at a marginal loss." No sane business person wants that. The point of business is to make money not lose it. Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamentally sound. The ticket loses would get written off as a Cost of User Acquisition for the high profit concession items. The theater market is just so consolidated that theaters learned they can cut out the middle man, movie pass, and still get the increased movie attendance. Hence, why so many chains started offering their own in-house subscription plan. It's really no different then almost every television content creator starting to cut Netflix/Hulu out by offering their own subscription service.
- deleted 8y ago
  [deleted]
- WorldMaker 8y ago
  > Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamentally sound. The ticket loses would get written off as a Cost of User Acquisition for the high profit concession items. The interesting issue is that the theaters know this, and have already calculated it into ticket prices. This has been the modus operandi for nearly as long as theaters have ever existed. The interesting gall of MoviePass was thinking they had a new angle in a game so much older than them. Movie theaters have already calculated their margins to the knife's edge of marginal costs on tickets versus concession and value add sales, and have done so for nearly a century. Turns out MoviePass didn't actually have a new angle and tried to do what Movie Theaters were already doing, without the benefit of controlling any direct interest in the revenue from the value adds and concession sales. I don't understand how any of the VCs saw that business plan and considered it a good idea. We've known that marginal costs on theater tickets have been a loss leader for nearly a century or so, it's a very well known fact about the industry that is practically an economics 101 lesson in every textbook. The theater market is also this consolidated precisely because of this long, calculated economic model. A lot of the poker game of passing individual theaters between chains is almost entirely because of this game of playing knife's edge marginal costs versus added incentives/interesting concessions for sustained customers in the long term, where even entire individual theaters in a chain may be loss leaders for customer loyalty to other theaters elsewhere in a chain.

Crazometer 8y ago

The marginal cost is likely significantly lower than the ticketed price. I'm sure there is a win-win there somewhere. In Australia tickets are about $20 ea retail. Many of the cinemas have deals regularly offering tickets for around $15. If you are with certain telcos you can get tickets all year round for $13.

deleted 8y ago
[deleted]
hristov 8y ago
I am not sure your statement about the marginal cost is correct. This is a closely guided secret among studios and exhibitors, but the little anecdotal information that leaks out indicates that for well publicized major releases the studios want pretty much the entirety of the ticket price and the theater can only make money off of concessions. There isn't much room for moviepass in here. Even for movies that are not as well popular and give more margin to exhibitors, it is very hard to see how you can accommodate moviepass and the crazy discounts they give. Lets take a person that sees about 4 movies per month which should be kind of usual for moviepass. That gives about $2.50 per showing. This has to be shared between moviepass, the theater and the movie owner. While before moviepass, only the theater and the movie owner could share $10. I don't see how this does not end up severely impacting the profitability of the theater, the movie owner or both. I really do not see a win-win in the moviepass pricing model.
- WorldMaker 8y ago
  I don't think it's a closely guarded secret. The movie theater business is a century old textbook example of a marginal cost loss leader for concession sales.
shriver 8y ago
That's actually incredibly complex - generally the way the revenue model works is that the Movie company will negotiate a certain percentage that depends on how old the movie is. So in opening weekend 100% of the revenue is probably going to the movie, but 4 weeks in the theater is probably taking 90% of the revenue. So yes, if you can fill those empty seats in the 4 week old showing you can make bank. But MoviePass has no mechanism for increasing sales of 4 week old movies particularly, they're just as likely to canabalize your existing week 1 sales. Now I don't know what the Australian system is like but in the UK we have an insurance company from whom you can get 2-4-1 vouchers every tuesday if you're a subscriber. Well that solves the exact problem you're talking about - it incentivizes people to buy the tickets that don't normally get filled, whilst not providing any discount during premium times.
cmelbye 8y ago
> I'm sure there is a win-win there somewhere. $15 popcorn.
- WorldMaker 8y ago
  Which MoviePass wasn't selling and had no way to sell.

Kagerjay 8y ago

pretty much this, penetrate the market and figure it out later. Except that last part wasn't there. Someone didn't do risk analysis over there

jonwachob91 8y ago

>The deal movie pass offered theaters was "if you make a deal with us, we can help you raise revenues at a marginal loss." No sane business person wants that. The point of business is to make money not lose it. Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamentally sound. The ticket loses would get written off as a Cost of User Acquisition for the high profit concession items. The theater market is just so consolidated that theaters learned they can cut out the middle man, movie pass, and still get the increased movie attendance. Hence, why so many chains started offering their own in-house subscription plan. It's really no different then almost every television content creator starting to cut Netflix/Hulu out by offering their own subscription service.

deleted 8y ago
[deleted]
WorldMaker 8y ago
> Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamentally sound. The ticket loses would get written off as a Cost of User Acquisition for the high profit concession items. The interesting issue is that the theaters know this, and have already calculated it into ticket prices. This has been the modus operandi for nearly as long as theaters have ever existed. The interesting gall of MoviePass was thinking they had a new angle in a game so much older than them. Movie theaters have already calculated their margins to the knife's edge of marginal costs on tickets versus concession and value add sales, and have done so for nearly a century. Turns out MoviePass didn't actually have a new angle and tried to do what Movie Theaters were already doing, without the benefit of controlling any direct interest in the revenue from the value adds and concession sales. I don't understand how any of the VCs saw that business plan and considered it a good idea. We've known that marginal costs on theater tickets have been a loss leader for nearly a century or so, it's a very well known fact about the industry that is practically an economics 101 lesson in every textbook. The theater market is also this consolidated precisely because of this long, calculated economic model. A lot of the poker game of passing individual theaters between chains is almost entirely because of this game of playing knife's edge marginal costs versus added incentives/interesting concessions for sustained customers in the long term, where even entire individual theaters in a chain may be loss leaders for customer loyalty to other theaters elsewhere in a chain.