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AMC vs. MoviePass

exterior of AMC Empire 25 theater in New York City
photo by Paul Sableman

When a deal seems too good to be true, it probably is. For a movie ticket app that recently unveiled a too-good-to-be-true deal, the question is who will be left with the bill.

MoviePass has been around for more than six years, though very few people had heard of it until recently. The app originally required people to print paper vouchers and offered tiered pricing that represented a good deal only for the most frequent moviegoers, ranging from $30 to $50 per month. Not exactly a value proposition.

All that changed in August, when MoviePass announced a flat, $9.95-per-month price nationwide. At that price, subscribers can see as much as a movie per day, all year, with the exception of 3-D or IMAX screenings. The service works at any theater that accepts debit cards, which makes it an amazingly good deal.

It seems clear that MoviePass’ decision succeeded in one sense: It brought the previously obscure app into the national spotlight. The service had about 20,000 subscribers at the end of 2016; two days after it dropped its prices, it reached the subscriber target it had hoped for by the end of 2018 – more than 150,000 subscribers overall.

Major theater chains are less than thrilled, especially AMC Entertainment. The company issued a press release saying that MoviePass “is not in the best interest of moviegoers, movie theatres and movie studios.” The theater chain’s argument is that MoviePass is setting customers up for disappointment when the service inevitably goes under. AMC fears that customers hooked on cheap movies will just stop going altogether.

At the moment, however, there’s not much that AMC can do about it other than complain. MoviePass users receive a debit card issued by Mastercard, and MoviePass pays the theaters the full price of the tickets requested by its users. AMC can’t block MoviePass users without refusing to accept Mastercard – unthinkable for a national chain. The company has blocked the purchase of e-tickets in Denver and Boston in an attempt to at least make MoviePass less convenient. As SlashFilm noted, however, MoviePass only offers e-ticketing at roughly 6 percent of locations anyway, so losing it clearly won’t be a deal breaker for most customers.

Annoying moviegoers is more likely to make them avoid AMC than convince them to stop using MoviePass, at least for now. If anything, AMC’s high-profile grudge offered MoviePass further publicity in the form of national news coverage. But I’m struck by the question: Why should AMC try to stop MoviePass in the first place?

After all, theater attendance has declined for years in the world of high-definition home theater systems and convenient streaming options. 2017 was an especially rough summer at the box office. And, at least for the time being, MoviePass isn’t asking theaters to do anything in particular; from the theaters’ perspective, they receive the same money via MoviePass that they would if the moviegoer bought their ticket on Fandango, on the theater’s own website or in person at the box office (plus or minus a few service fees). MoviePass reportedly does have deals with a few smaller chains, but AMC isn’t among them.

It’s true that MoviePass’ model does not seem sustainable at this price point. Movie tickets average $8.95 nationwide, and can easily run twice that or more in major metropolitan areas. If you go to more than a handful of movies a year, joining MoviePass under the currently offered terms seems like a no-brainer. Mitch Lowe, MoviePass’ CEO, said, “We’re trying to do the same thing Netflix did for DVD rental and home rental, which is remove the barriers to experiment and try smaller films.” Lowe should know; he was on Netflix’s founding team and formerly served as the head of Redbox.

Will it work? As long as movie tickets cost $15 or more in large markets, probably not. MoviePass executives hope to profit by monetizing user data, but this story will likely play out in weeks or months, not years. Still, it’s hard to see a downside for AMC and its competitors either way. If MoviePass is wrong about its model, the company will go under. People who paid full price for movies before will go back to paying full price, but I doubt many people who subscribed will have a temper tantrum and stop going to theaters altogether. If MoviePass succeeds, AMC will continue to benefit from the extra theatergoers, along with all their extra popcorn, soda and Twizzler purchases.

Whether MoviePass succeeds or fails, AMC has no reason to cast itself as the villain of the story. I’d suggest its leaders just sit back, relax and enjoy the show with the rest of us.

Vice President and Chief Investment Officer Paul Jacobs, of our Atlanta office, is the author of Chapter 20, “Giving Back,” in our firm’s most recent book, The High Achiever’s Guide To Wealth. He also contributed several chapters to the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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