MoviePass Upends Cinema Tix Economics

By Robert Marich
   Sept 20, 2017-Subscription cinema tickets outfit MoviePass believes it will be profitable even after slashing its monthly price and is preparing for an initial public stock offering, according to a New York Post article by Nicolas Vega. New management cut the price of an unlimited monthly cinema pass for no-commitment membership fee to $9.95 from $40 to $50.
  That $9.95 is about a dollar above a single ticket, but MoviePass claims subs are expected to average just one movie a month; the average ticket price in
USA was $8.65 last year. Though not mentioned in the story, MoviePass probably also expects to generate some revenue from collateral activities like mounting promotions that leverage its subscriber base, which swelled to 400,000 with the price cut.
   However, averaging only one movie per month for an unlimited pass seems fanciful since major studio trade group MPAA says 11% of the U.S./Canada population average more than 12 movie admissions a year. Heavy users can be expected to gravitate to MoviePass.
   So what’s happening? Wall Street loves “scalable” online businesses, which is what MoviePass is. Once its internet infrastructure and consumer marketing is set up, incremental costs for handling new subs are minor (except for their cinema tickets). This reminds me of the curious business wisdom, “sure, we lose money on every sale, but we’ll make it up on volume”—which seems to defy logic. Also, the second largest movie theater chain AMC is opposed to MoviePass, and is planning its own ticket membership initiative, according to the Post.
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