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>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. T

>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
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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.

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.