Today, Explained - This too shall MoviePass

Episode Date: August 9, 2018

MoviePass is changing the way we see movies, but it's going to have to get its act together. Vox’s Alissa Wilkinson explains. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for today Explained comes from Squarespace. Squarespace wants to help you build that website or get that domain you've been dreaming about. You can go to squarespace.com to get started and use the offer code EXPLAINED to get 10% off your first purchase. For the past year, I've been asked the same question over and over by my movie-going friends. Oh my god, do you have MoviePass? MoviePass! It's the way of the future! I do not.

But every time someone half-convinces me to get it, I feel like I hear a bunch of negative things about it in the news. Especially this week. The show may be over for MoviePass. Just about everybody in the industry says it is an unviable economic model. And to some extent that's been proven by the fact that they ran out of money last week. Can you stay in business? Oh yeah.

Alyssa Wilkinson has MoviePass. I do. She writes about the movies for Vox. MoviePass is basically a subscription service where you pay $9.95 a month and you at present get access to unlimited movie tickets, one per day in 2D at major chains and at small indie theaters. And you basically have an app and you have a debit card. What you do is go to the theater, pull up the app on your phone, choose the showtime that you want to see the movie at, and that essentially loads money onto the card that you can then use to swipe it in the machine and pick up your ticket. MoviePass pays the theater the full price of the ticket,

so you have basically paid a subscription fee of $9.95 for a ticket that might have cost you $15 or more if you had gone in with your ordinary bank card. What's the history of this company? How did it get started? So they started all the way back in 2011, but most people didn't hear about them until last summer. Back in 2011, they released a plan in beta where they said for $50 a month, you can get access to all these theaters. And the theaters freaked out. They didn't want this. They didn't know what it was. MoviePass put a halt on it. And eventually they went to this debit card system that still holds now. But the pricing structure has changed a lot over time. It's been anywhere from about $20 to $50, depending on the market you were in. And then last summer, that all changed.

One movie a day for $9.95 a month. Sounds like a deal of a lifetime, right? You can't go wrong with that. They were acquired by a data analytics firm, Helios and Matheson, and they dropped their price down to $9.95. That is an extreme, extreme difference. I mean, really, in most places, that is less than the cost of one movie ticket. What happened when they introduced this $9.95 plan? Suddenly, everybody had heard of MoviePass. Everyone was subscribing, and their subscriber

base grew by literally by millions within a couple of months, all the way up to about 3 million users. MoviePass, it's the way of the future. Which was the goal all along, grow the user base in a huge, huge way so that they could sort of throw their weight around in the market. Did that mean that charging people significantly less than the cover of a movie could make sense as a business model? Well, that's what they were betting on. They had two things in mind. One was to be able to collect people's data and use it in some way that would become profitable to them. So Mitch Lowe, who came to MoviePass from Netflix and now is the CEO at MoviePass, he made some comments at a conference earlier this year about

using data about locations that would benefit the customer based on their buying habits, which is pretty common on the internet. Last week, CEO Mitch Lowe said, we watch how you drive from home to the movies. We watch where you go afterwards. We know all about you. The other thing is that they wanted to find ways to convince studios, producers, and distributors, and theaters to partner with them because they had this large user base that they could move around. We want to send them to our partner theaters, and our subscribers want to take recommendations. They've done different things to show whether or not their base actually changes ticket sales. They have at times blacked out a movie to sort of prove to the studio that actually if MoviePass users can't get the movie through MoviePass, they just won't get it at all.

And the idea is sort of, you know, nice business model you have there. It'd be a shame if anything happened to it. Which movies were they blacking out? The big one was Red Sparrow, the Jennifer Lawrence spy thriller earlier this year. That's why no one saw that movie? I think so. And then at one point, they've been in a dispute with AMC theaters for a long time. They actually had Movie Pass stop working at 10 of the major AMC theaters in the country, including ones in New York, D.C. and L.A. And again, the idea was they would collect some data and maybe AMC would see that actually

MoviePass is a good thing and they should promote them or partner with them. They also had some partnerships over kind of the prestige movie season, Oscar season at the end of the year with movies like Lady Bird and I, Tonya. And they say they managed to drive more theater growers into those theaters. What does that partnership mean? Like, are those movies promoted on the app in some way that's more prominent or something? Yeah, promoted in the app and promoted in emails that they send. The theater still gets paid the cost of the ticket. That's good for the studio. That's good for the producers. The people it's

not potentially good for is MoviePass. Right. So how has their business continued to change since they made this $9.95 a month deal? Over the past year, they've had all kinds of different things they've tried in order to keep growing their customer base. They partnered with Costco last December. They offered an annual plan that you could buy, and they've changed the price on that several times. They partnered with iHeartRadio. People wondered, oh no, is MoviePass going under? MoviePass said, no, no, no, we're not going under.

They went back to their $9.95 per month plan. Then a couple weeks ago, they needed an emergency infusion of $5 million in cash, which should have been staved off by something they had just announced called peak pricing, which was a lot like Uber for movie tickets,

where if a movie was in demand, they would charge you a little more. Then movies just started disappearing from the app. People discovered they couldn't go see Mission Impossible Fallout. Then movies just started disappearing from the app. People discovered they couldn't go see Mission Impossible Fallout because it was grayed out of the app. And it turned out this is because MoviePass was just losing money. Everyone was very upset

about this who went to the theater expecting to use their MoviePass and couldn't. Yikes. And I've personally heard anecdotally from people who said, oh yeah, we just called and canceled immediately. Then they announced that it was going to be $15 a month and that people wouldn't be able to see blockbusters in the first two weeks of release. Then they backtracked on that and said, actually, it's still going to be $9.95 a month.

We're not going to have peak pricing anymore. You can see any movie anytime you want, but you can only see three per month. That plan kicks in, they say, on August 15th. We will see what happens on August 15th. It sounds like they have no idea what they're doing. I mean, I don't think they would say that, but it seems like they're just trying everything possible to keep their subscriber base large

so that they can attract partnerships and sponsorships and also so that they can attract venture capital, which is what they're going to need to keep going. You mentioned that there were some cancellations after people couldn't see Mission Impossible and that prices were going up and whatnot. But are people hanging with MoviePass through all of this tumult? Yeah, a lot of people are kind of waiting to see what happens at this point.

The thing is, at $9.95, I'm still getting a bargain, even if I only see one movie a month, especially in a place like New York. But the average ticket price nationwide is just over $9 right now. And so for most people, it's still a bargain, even if it only works a little bit. It kind of reminds me of T-Mobile. It's like, yeah, I take my money, work half the time, I'm down. Yeah, that's right. I mean, I think if they continue to kind of flail and change their business model every three days,

eventually they're going to see a bleeding of their subscriber base. But at the moment, they've kind of stopped the dam long enough to see if people will stick with them through the end of the year. And the thing is, the movies that come out at the end of the year are the kinds of movies that people with MoviePass want to see anyhow. So they could see an uptick in subscribers if they can look stable or it could all go to seed. So on top of all this hullabaloo with subscription prices and blackouts and all this stuff, I read like a couple of days ago that MoviePass is making a movie with Bruce Willis. What is going on?

Well, this is really baffling for everybody. So they actually announced at Sundance in January that they were going to start distributing movies. And they partnered with another distributor to put this movie out that's called American Animals. How can I tell you if I'm in or I'm out without you telling me the first thing about what I might be in or out of? This would be something dangerous and very exciting. I saw it. It's kind of a slick heist movie, but if you didn't see it, you're not alone. I feel like a lot of people didn't see it.

It's like Red Sparrow. That's right. And then they also distributed the Gotti movie, the John Gotti movie. Oh, no. Yeah, which was a bad gamble on their part, I think. Mr. Gotti, are you the head of the Gambino Prime family? The head of my family. Mrs. Gotti, do you the head of the Gambino crime family? The head of my family. Mrs. Gotti, do you know what your husband does for a living? He provides. It had something like a

0% from critics on Rotten Tomatoes. It's pretty bad. And they started bragging about their 0%, right? Yeah, well, at some point, you know, it becomes enough of a joke that you might be able to get people in the theater because it's so bad. And so now, yes, they are producing a movie with Bruce Willis.

It is unclear why this is happening or whether it really will happen. Again, it's a gamble. And MoviePass is all about gambling on new business models. They're kind of the classic disruptor. They're just a consumer product. And so people are seeing all of the different phases happening right in front of their eyes. This kind of perfectly plays into a joke I saw repeated time and again at the Bruce Willis roast on Comedy Central a couple weeks ago that Bruce Willis will just literally say yes to anything. How the fuck are you a movie star? You're like Elmer Fudd if he hunted band Scripps instead of wascally wabbits.

It sure seems that way. It sounds like you're betting on MoviePass surviving. I think so. I think they'll survive till the end of the year. They may have fixed the problem with this three movie a month plan. On the other hand, they don't make money off of that. So the only way that they're going to keep making money is if that keeps enough subscribers around in order for them to get the much bigger fish of the advertising, the partnerships and the venture capital.

The most interesting thing about MoviePass isn't its business model, it's how it's changing the way we see movies. That's next on Today Explained. I don't personally have a website, but I have a few favorites I could tell you about. One of them is PetitTube.com. That's P-E-T-I-T-T-U-B-E dot com. It's this website that randomly generates YouTube videos that are all under a minute in length. After you watch one, you say whether you enjoyed it or not, and then it serves you up another one. It's a great way to see all the random things people all across the world deem worthy of posting to YouTube,

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to get 10% off your first website or domain purchase. Today, today explained. Today explained. Netflix showed up and then everyone else wanted to put out their own sort of subscription content model. Is that what's happening with MoviePass? Are people coming up to compete with them? Yes, that is happening. So there are some third party companies. One is called Cinema. It's spelled S-I-N-E-M-I-A. A third party competitor that offers, I think, one or two

tickets for $7.95 a month. It's a very small but manageable kind of business model. And then theaters themselves have kind of thought, oh, maybe this subscription model would work. So a lot of indie and arthouse cinemas have had membership programs for a while. And I've seen an increase in the number of theaters that are instituting their membership programs. And then AMC itself announced a program where you pay $20 a month. You get access to three films a week, which is pretty good, actually. And you can go to the mall on the same day if you want. You can go to 3D movies. So there are people trying to kind of hack the model and find ways to make it sustainable, partly because they can see that it works to a degree with MoviePass.

It creates a kind of customer loyalty that they desperately need. And everyone's trying to figure out, what do we do? Do we serve food? Do we ban phones? Do we, you know, have comfier armchairs? Blankets. Blankets, right? 4DX, which is where you can sit in like a rumble chair during an action movie and have water squirted in your face. I have done this. It's really weird. Yeah, me too. Way weird. The business model is sort of broken, basically, and trying to figure out how to compete with other theaters and also get people to come who might otherwise just sit on their couch and wait till the movie comes to Netflix is difficult. One thing, though, that MoviePass has shown

is that people actually will go to the movies if you give them the option. What they don't like is paying $18 for a ticket. I mean, what seems clear here is this is changing the way people see movies. People are down to pay these subscription fees and go see way more movies. Yeah, they're absolutely down for it.

And subscriptions are kind of the wave of the future, especially for millennials who are in their 20s and 30s, trying to kind of budget for your entertainment, knowing that I'm going to pay 20 bucks a month, but I'm not going to have to pay any more than that. That's good. That frees me up to feel like, oh, and maybe I can buy a beer when I go to the theater too, or maybe I can get some popcorn. You know, I'm a millennial, I'm in my 30s, and I have subscriptions for coffee beans, and I have magazine subscriptions, and we all have these subscriptions because they're predictable and they're interesting and they give us variety and they feel freeing.

There's a study conducted by a payments processor called Vantive last year in 2017, and it found that more than 70% of millennials have a product subscription and 89% have some kind of service subscription. They say this is some kind of reaction to being bombarded with an abundance of choice, and it way outpaces Gen Xers and boomers. So MoviePass figured something out. They just haven't gone about it in a totally sustainable way. I think you and I, Alyssa, are both on the older end of the spectrum in the millennial cohort, but I remember working at my previous

job with like a bunch of really young kids. And whenever I'd come in on like a Monday and be like, oh, did you guys see this movie? They'd be like, nah, the last movie I saw was Toy Story 3. They're like all proud of it that they never went to movies. Has that changed now with MoviePass and all these other subscription models? Yeah, it very much has changed. I've talked to a lot of people anecdotally who went to see a movie because they had movie pass. The studies bear that out. I also teach college students and I used to have a problem where I would go into the classroom and say, has anyone seen X movie? And they wouldn't have seen it. But now they've all seen it because they all have movie pass. And to be clear, you teach college kids about movies., you teach college kids about movies.

I do teach college kids about movies. They haven't seen any movies. That's right. But this must mean also that people are seeing more bad movies, right? I do think people are seeing more bad movies, but I think they're also seeing more good movies in the theaters, which is really great for the people who make good movies. The kind of films that don't always get seen are sort of the arthouse films or the indie films that might not have big-name stars on them. You can think of a film like Eighth Grade, for instance, as a really good example of a movie that people might not have gone and seen because they don't know the star, and it seems kind of like you could just rent it.

But now I have MoviePass. I can just go see it, and that benefits the film. And it also, you know, helps theaters to make money off of those films. And that encourages them to carry them in the future. It sounds like this might be good for everyone except MoviePass. Theaters are getting paid, more movies are being seen, and this company can't get its shit together. Yeah, basically. I mean, the theaters are a little worried that if MoviePass goes away, people won't be willing to go back to paying the full price of tickets. But the reality is that maybe they shouldn't. I mean, for a lot of people, what they get in the theater is a subpar experience with someone talking or playing on their phone in front of them. There are no ushers to kind of help keep order. That's why a lot of people stay home. And maybe the $18 or the $15, whatever you're paying is really not worth what you're getting. Yeah. So that argument is

understandable, but might need some tempering. So what movie are you going to go see this weekend, Alyssa? Oh, I've seen everything. No, I'm seeing The Meg tonight, the big shark movie. Oh, Jason Statham. Yes, Jason Statham, as far as I can tell, fights a shark and also a bigger shark. I'm not really clear, but yes, I will be reviewing that film. Bruce Willis must be so pissed that he didn't get the call for that one. Yeah, I mean, Bruce Willis is a prime candidate

to fight a large shark. I guess another MoviePass movie soon after that? Well, we'll see if MoviePass still exists tomorrow. Yeah. Alyssa Wilkinson is a film critic at Vox. I'm Sean Romsferm. This is Today Explained. Scrap everything. Start again. What are we going to do? Make an episode. Oh, no. There's another news alert. Every.

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