Bryan Golerkansky and Ryan Dunner, supervising senior associates at Green Hasson Janks, write:

With the new age of digital streaming and an abundant amount of on-demand content available for  24/7 consumption, many consumers have opted to stay at home on a Friday night binging on television series and movies as opposed to the traditional theater viewing experience.  One attempt to draw moviegoers back into theater seats is the creation of MoviePass, a low-fee subscription-based movie service which allows subscribers to use a mobile application and prepaid card to view one movie per day at participating locations.

Movie theater
Copyright: fergregory / 123RF Stock Photo

MoviePass, founded in 2011, was originally backed by investors such as True Ventures, AOL Ventures and Chris Kelly (former Chief Privacy Officer of Facebook). With an original price hovering around $50 per month, MoviePass initially had difficulties growing their subscriber base. In 2016, MoviePass hired Mitch Lowe as CEO, a previous executive at both Netflix and Redbox. Lowe identified the significant issues and began focusing on the pricing structure of the service. In July of 2016, MoviePass announced alternative subscription plans allowing subscribers to view two, three or unlimited movies per month with the lowest tier starting at $15 per month. Even with the new pricing model, the subscriber base had only reached 20,000 and MoviePass was still searching for a way to appeal to the masses.

In August 2017, analytics firm Helios and Matheson obtained a majority stake in MoviePass and brought a fresh business model to the company. Through their analytics background, they saw the true potential of using MoviePass to follow a platform, similar to Facebook, where the emphasis was on data collection and targeted advertising as opposed to high subscription fees. In the same year, monthly subscription fees for unlimited films were dropped to $9.95 as their priority was to increase the subscriber base. While this new price point has created a surge in new subscribers, it may also cause MoviePass to operate at a loss due to the fact that MoviePass must subsidize the difference between the full ticket price and the amount collected in monthly subscription fees. MoviePass has already anticipated such losses and is focusing on selling its users’ data to create additional revenue streams to offset potential losses. By accessing its users’ mobile files, pictures and offering users the ability to sync with their Facebook profiles, MoviePass will be able to offer major film studios the opportunity to measure the effectiveness of their movie marketing campaigns. To date, movie studios have the ability to promote their films through social media platforms, strategically targeting specific demographics, but do not have the ability to track who, within the targeted demographic, actually viewed the film. Another alternative plan to boost revenue is a potential launch of an online streaming service which was suggested by Lowe in a recent interview with CNBC. Currently the subscriber base is up to 600,000 and growing.

While the amount of subscribers has exponentially grown in 2017, MoviePass still has to overcome multiple challenges to ensure its success for the future. With approximately 90% of U.S. theaters participating in the subscription program, MoviePass is pressured to continue this rapid growth in order to keep exhibitors enticed and increase the overall sales of concessions, the main source of profit for exhibitors. Another reason MoviePass must increase its subscriber base is to obtain valuable user data that can be sold to movie studios in an effort to provide them with the tools to create more effective marketing campaigns at lower costs.

Assuming MoviePass changes the theater-going experience like Netflix transformed the way we consume content, the end result could be a real game changer. The exhibitors would see a spike in both ticket and concession sales, movie studios will receive additional theatrical revenue and actionable data to lower their marketing campaign costs, and ultimately profit participants should expect to share in higher theatrical revenue and lower overall marketing costs.

Will MoviePass be successful in revitalizing the traditional theater viewing experience or will the current shift to anywhere, anytime viewing continue? Only time will tell.

This post was originally published on the Green Hasson Janks Media Clips blog.