MoviePass is roiling the movie theater industry in Baltimore and beyond

As deals go, MoviePass seems too good to be true: pay $9.95 a month for admission to one movie every day.

“You only have to see one movie a month” to make it pay for itself, said Bryan Oringher, a Rockville-based basketball scout. “It’s a no-brainer.”

It’s a subscription service so inexpensive it seems to defy economic logic. But MoviePass and its emerging competitors promise to disrupt how people pay for movies — and, possibly, how movie theaters make money. It could offer a solution to the declining attendance that has long threatened the movie industry.

Theater operators and industry analysts wonder how it can make money. MoviePass pays theaters full price for each ticket it buys for its subscribers. They wonder if MoviePass will spoil the public with low prices, or seek a share of concession sales in exchange for luring more customers to theaters.

Mitch Lowe, president and CEO of MoviePass, has said the model “completely disrupts the movie industry in the same way that Netflix and Redbox have done in years past.”

Lowe should know. He was a founding executive of Netflix, the movie and television series streaming service that has upended viewing habits, and a former president of RedBox, which rents DVDs from ubiquitous red kiosks, seemingly everywhere, helping drive video rental stores to extinction.

MoviePass did not respond to requests for comment for this story.

Ross Gerber, CEO of the investment management firm Gerber Kawasaki, has looked at industry trends.

“What MoviePass did was to say, ‘Let’s do a subscription model just like streaming,’ ” he said. “Millennials love subscription models. They just do.”

MoviePass once charged as much as $50 per month. In August, it lowered the price to $9.95 a month — and caught fire. It’s now attracted more than 1.5 million users.

The similar service Sinemia, which started in Turkey and came to the United States last year, offers subscriptions for two or three tickets a month at prices ranging from $10.99 to $16.99. Sinemia tickets can be used for 3-D and IMAX movies. MoviePass can be used only for standard movies.

The Cinemark theater chain, which operates cineplexes in Towson and Columbia, countered in December with its own Movie Club, offering subscribers one ticket for $8.99 a month plus 20 percent off concessions and other discounts.

All three offer moviegoers a bargain that threatens to make the old Admit One movie ticket seem antiquated.

“It’s amazing the theaters didn’t think of this,” Gerber said. “The anxiety the exhibitors are feeling in my mind is completely self-created. If you don’t innovate whatever business you’re in, you will be gone.”

The average price of a movie ticket in the United States last year was $8.97, according to the National Association of Theater Owners. In New York and Los Angeles, tickets can cost twice that. Baltimore theaters generally charge from $10 to $16 for most evening shows.

Anthony Sparrow subscribed to MoviePass in November.

“Before, I had to really want to see a movie to go pay full price,” said the Odenton man, a Department of Defense auditor. “But with MoviePass, I'm more willing to go see other movies that I normally wouldn't.”

But economics never offers freebies. Somebody pays. For now, it seems to be MoviePass investors, who are footing the difference between what the company takes in from subscription revenue and what it pays out to buy them movie tickets.

“That's quite a gap, $9.95 a month versus $11.88 a visit,” said Adam M. Aron, CEO of AMC Entertainment, the nation’s largest theater chain, in a November earnings call. “I must point out that's very gracious of them and we appreciate their business, but I think it's also important to make clear that despite claims they've made to the contrary, AMC has absolutely no intention, I repeat no intention, of sharing any, I repeat any, of our admissions revenue or our concessions revenue with MoviePass.”

AMC, which has 11,247 screens and Baltimore-area theaters in Columbia, Owings Mills, Security Square and White Marsh, declined to comment further, said company spokesman Ryan Noonan.

Regal Entertainment Group, another large chain with 7,315 screens and theaters in Abingdon, Gambrills, Hunt Valley, Laurel and Westminster, said it was taking a “wait and see approach” with MoviePass.

Some independent theater operators worry about the power acquired by an independent company that represents many of their patrons.

“We just don’t know where it’s going to go,” said Kathleen Lyon, co-owner of the Charles Theatre and Senator Theatre in Baltimore, which both accept MoviePass. “You’ve got a third party that has intercepted your relationship with your customer.”

Lyon said the two venerable theaters “definitely have a noticeable number of customers who have MoviePass.”

Jed Dietz is founding director of the Maryland Film Festival, which owns and operates the SNF Parkway Theatre on North Avenue. He wondered whether MoviePass will end up being more like a gym membership that people eventually cancel when they realize they’re not using it enough.

“Will they say, ‘I’ve only seen two movies’? In the consumer product world, people do what they do,” Dietz said. “They’re not going to stop going to baseball games just because they have a MoviePass.”

Still, Dietz said he hopes MoviePass will soon add the Parkway — the recently renovated century-old theater — to its list of participants.

“My attitude is anything that helps with movie tickets is good,” he said.

MoviePass’ current economic model does not appear sustainable, Gerber and other analysts said. Many expect the company to seek to monetize the industry clout it has obtained, perhaps by partnering with a studio or theater chain.

The company has suggested it could sell information gleaned about its subscribers’ moviegoing habits to studios or their marketers. Helios and Matheson Analytics, a big data firm that aims to help its customers understand consumer trends, purchased a majority stake in MoviePass last August.

Helios and Matheson CEO Ted Farnsworth said Friday that money from subscriptions will eventually become a smaller part of overall revenues as the company finds ways to monetize data accumulated on users, and enters deals with movie studios.

“Obviously we wouldn't be pouring tens of millions of dollars in it if it wasn't sustainable," he told the Wall Street Journal.

Other early MoviePass investors included True Ventures, AOL Ventures and Chris Kelly, Facebook’s former chief privacy officer.

MoviePass “is probably hoping they can find a friend who will adopt this as a model on a larger level,” Gerber said. “Other than that, the math just doesn’t work. The more people they sign up, the more money they lose.”

That “friend,” Gerber said, could be a theater partner such as AMC or IMAX. He said a deal might be struck in which MoviePass couldn’t be used for new releases but could help theaters fill otherwise empty seats, as Open Table does for restaurants.

“There is a compromise that can be made,” he said.

Some theater operators worry that MoviePass might exact too high a price — perhaps a percentage of revenues from popcorn, drinks and other high-profit concessions, on which theaters make much of their money.

“For now, they are making us whole,” said Lyon, of the Charles and Senator. “Ultimately, something is going to have to give in their model. They’re going to figure out a way to make money and it’s probably going to be on our backs.”

Still, she said, “as a small family business, it’s much harder for us to turn away customers who may have signed up with MoviePass.”

Besides, the industry needs the help. Despite late-year hits such as “Star Wars: The Last Jedi” and "Jumanji: Welcome to the Jungle," the domestic box office fell 2.4 percent to $11.1 billion in 2017.

Gerber said MoviePass arrived as movies are becoming more expensive and high-definition televisions cheaper and better. Theaters have been experimenting with roomier seats and better food options, and subscriptions may be the next wave.

“There is a behavioral change in humans that involves the desire to not leave your couch because there are so many great things on,” Gerber said.

jebarker@baltsun.com

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