AMC Theatres Wants To Block MoviePass And That's Just Plain Stupid

(Welcome to The Soapbox, the space where we get loud, feisty, political, and opinionated about about anything and everything. In this edition: AMC's plan to block MoviePass is utterly moronic.)

Yesterday, some great news came for moviegoers. MoviePass announced that their movie theater ticket subscription service that has flown mostly under the radar since launching in 2011 was looking to increase its customer base in a big way by only charging $9.95 a month, regardless of where you live or how many movies you see using the service.

However, if you frequent AMC Theatres locations, MoviePass might not be beneficial to you for very long. At least if the executives behind the United States' largest chain of movie theaters has their way. Not long after MoviePass announced their new price point and intentions to grow their customer base, AMC Theatres released a scathing statement saying, "AMC is consulting with its attorneys to determine if or how AMC can prevent a subscription program offered by MoviePass from being used at AMC Theatres in the United States."

The long and short of it: AMC Theatres banning MoviePass is stupid. Let's dig in.

The headline of the press release from AMC Theatres simply read that MoviePass was "not welcome here," even though they theater chain can't do anything to stop customers from using MoviePass at their locations until their legal team determines if they're even allowed to do that. Considering the fact that MoviePass is just a third party credit card that pays for the tickets like any other form of payment would, I'm not sure how they're going to ban the service from being used, but we'll find out if it's even possible soon enough.

Part of the reasoning behind AMC Theatres' attempts to block MoviePass from being used comes down to simple math. In their press release, the company lays out their thought process:

"MoviePass announced a change to its "subscription model" that would allow consumers to see up to 365 movies a year for a monthly fee of $9.95. MoviePass envisions paying AMC its full ticket price without discount. The AMC average ticket price for watching a movie at AMC Theatres in the most recent financial quarter was $9.33. From what we can tell, by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month."

AMC Theaters isn't wrong in this deduction. For most users of MoviePass, even seeing a single movie will cover the cost of the subscription, and then MoviePass is essentially losing money. But that's exactly why Helios and Matheson Analytics Inc. bought a majority stake in the company. They're fronting the bill for how much money it's going to cost MoviePass to build their customer base, hopefully by the millions. Then the company plans to use all the data they collect from monitoring their users' activity as a way to figure out how to better market movies to not just their users, but audiences in general.

Some people don't understand how MoviePass will make money that way, but as Gizmodo points out, being in the online ticketing business, which mines similar data that MoviePass hopes to get, has only been good for Fandango, resulting in a 28% rise in sales in 2017. Fandango sells anonymized user data and has a partnership with Facebook to help sell tickets. They've also expanded into selling accompanying merchandise for the movies they're selling tickets for. There are plenty of ways for MoviePass to make money with the data they plan on getting from increasing their customer base.

But AMC Theatres doesn't see a bright future for MoviePass in that regard. Instead, they see the company going in a different direction and forcing the theater chain to sell their movie tickets for less. In their official statement, they also said this:

"AMC believes that holding out to consumers that first run movies can be watched in theatres at great quantities for a monthly price of $9.95 isn't doing moviegoers any favors. In AMC's view, that price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled. AMC also believes that promising essentially unlimited first-run movie content at a price below $10 per month over time will not provide sufficient revenue to operate quality theatres nor will it produce enough income to provide film makers with sufficient incentive to make great new movies. Therefore, AMC will not be able to offer discounts to MoviePass in the future, which seems to be among their aims."

First of all, AMC Theatres couldn't be more wrong when they say a monthly price of $9.95 isn't doing moviegoers any favors. There was so much buzz about MoviePass yesterday due to this new pricepoint that their website was having trouble dealing with the high traffic coming to their site after the news. In reality, AMC Theatres thinks MoviePass is doing moviegoers too much of a favor, and they're worried it's going to dig into their bottom line.

As AMC Theatres says in their statement, MoviePass "only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled." What they're really saying is they're worried that if MoviePass goes under and audiences lose the ability to see as many movies as they want for $9.95 a month, they're not going to be happy when they have to start paying full price for each movie ticket from their own pocket again. That means AMC Theaters will lose all those customers who started heading to movie theaters more because of MoviePass, unless they have a comparable price point for tickets.

Futhermore, they believe that MoviePass will eventually want to buy tickets from AMC Theatres at a discount price after the customer base has grown to a certain level, leaving the chain with less revenue to keep their theaters running or provide incentive to studios to keep making movies that they can play in their theaters. But I don't really see how that's a concern for AMC Theatres.

Movie theaters make very little profit off tickets. On average, roughly 95% of the money from ticket sales goes right back to the distributor in the first two weeks of release. In the weeks following, that number goes down so the movie theater slowly makes a little more money from tickets, but since most movies see audiences dropping the longer a film stays in theaters, it's still not anywhere near the amount of revenue drummed up by high-priced snacks and soft drinks.

Now, if MoviePass can deliver on the idea that their cheap subscription service will increase ticket sales and movie theater attendance, won't AMC Theatres be making more money on concessions from customers who otherwise wouldn't be at the movies nearly as often if they were paying full price for a ticket? The reason MoviePass is in demand is because the ticket prices are too high, so if the ticket price isn't an issue, more customers will come to the movies and end up spending money on concessions, because they have that money in their pocket that they're not spending on tickets. For a family of four, that can be upwards of $50.

Honestly, I don't see what AMC Theatres has to lose here. First of all, MarketWatch points out that while the box office saw a record year in revenue for a second year in a row last year, movie theater admissions were down in 2016 compared to 2015, and that's from the National Association of Theatre Owners. The only reason box office numbers were still up is because of the high ticket prices and which includes movie theater "solutions" to lower attendance that add more expensive tickets for more immersive experiences through D-Box or 4DX seats, or more commonly, IMAX and 3D movies, though as we've seen, the latter is having trouble drumming up interest lately.

Secondly, AMC Theatres and the rest of America's movie theater chains aren't doing so hot at the stock market. Again, MarketWatch points out that in the year to date, shares of AMC Entertainment Inc. have fallen by almost 61%, and IMAX is falling with a 41% drop. Meanwhile, Regal Entertainment Group and Marcus Corp. are down nearly 19% and Cinemark Holdings Inc. is down about 5%. Movie theaters aren't doing well, so why wouldn't you try to boost attendance with a real innovation instead of just offering a seat that shakes or disappointing burger sliders at concessions?

Expanding on the goal of increasing attendance to movie theaters, MoviePass hopes their app "can help studios with marketing films and create an Uber-like experience for cinemas where customers can do everything from the app and don't have to reach for a wallet, making it easier to pay for things like concessions." Why does that sound so threatening to AMC Theatres? Because it's not their idea.

The question is, why doesn't AMC Theatres just have their own subscription service like this? Movie theater chains in places like the United Kingdom have their own programs where their loyal customers pay a fixed dollar amount each month (or even annually) to see unlimited movies at any of a certain chain's movie theater locations.

If AMC Theatres is so worried that a program like this is going to hurt their revenue, then why don't they come up with their own service with a price point that is cost friendly to their customers but still brings in the amount of money from ticket sales that they seemingly desperately need in order to offer their customer such a high quality movie theater experience? They already have their AMC Stubs program, which also has the higher tier annual subscription AMC Stubs Premiere, so why not just create a new arm for that rewards service and create a subscription service of your own? You cut out the middle man and you get all the benefits.

So what the hell are you scared of, AMC Theatres? It's not as if your chain is at the height of movie theater quality right now. One of my local movie theater chains had two silver screens in need of repair for roughly a month. Despite discoloration that resulted from these screens needing to be repaired, you kept playing movies on them and ruined two of my moviegoing experiences.

I'm sure there are similar experiences all over the country that can prove that, despite being the largest theater chain in America, you're far from the best, and there's a reason people aren't coming to your theaters any more. The price they're paying for the quality they're getting isn't worth it. Maybe give MoviePass a chance to increase your attendance and figure out how you can make your customers happier by giving them a moviegoing experience worth remembering, and not because it was unpleasant.

Instead of dictating what you think is good for moviegoers by denying them the opportunity to take advantage of a deal that you didn't think of yourself, why not let the market speak? Right now, it appears audiences want MoviePass, and if you ban the service, all you're going to do is upset the customers who have been frequenting your establishments for years thanks to the presence of the service in its previous form, and any new customers who start coming to theaters because of the new MoviePass subscription model. And you can't afford to lose any more customers.