Insiders say MoviePass is both a blessing and a curse to independent movie theaters (HMNY)

moviepass business insider

Though the major multiplexes say they can't stand MoviePass, independently owned movie theaters are willing to play ball.
Chains like Landmark Theatres and Studio Movie Grill have partnered with the app.
However, there are others that just tolerate MoviePass because their audiences use it.

When MoviePass announced a radical change to its business model last summer — offering monthly subscriptions for around $10 a month to see a single movie at a theater, once per day — the major multiplex chains instantly opposed it. AMC Theaters, the biggest chain in the world, even announced that it was consulting its lawyers to find a way to not accept MoviePass.

But for independent theater owners, and theaters run by non-profits, the reaction to MoviePass’ bold new endeavor has been a feeling of cautious optimism.  

Unlike the large chains, arthouse theaters are more willing to take chances to potentially get more people through the turnstiles, as they historically have constantly had to find ways to keep the doors open. This has led to some theater owners fully buying into MoviePass’ popularity, going as far as doing partnerships with the company. However, there are many also keeping an arm’s distance and waiting to see if the company can prove it can overcome its financial woes.

“We don’t promote it, we don’t oppose it, we want to make our customers happy and if they want to use MoviePass then we do it,” Dylan Skolnick, co-director of Cinema Arts Centre, an arthouse in Long Island, told Business Insider.  

cinema arts centre cineam treasures And that’s the same sentiment made by most theaters owners and marketing heads Business Insider spoke to. Theaters are reimbursed the full ticket price from MoviePass for the tickets their customers purchase. Independent theaters are happy to take the money MoviePass is giving them and willing to take the grief from their customers when the MoviePass app doesn't work or there are claims of being overcharged — as long as MoviePass keeps sending the money.

“My only concern is if this company does shut down that the customers who have gotten used to it and love it will go back to how they felt about movie tickets,” said David Huffman, director of marketing for Cleveland Cinemas, which operates 46 screens at 7 locations. “I fear the backlash will be on us.”

But then there’s the concern from some who wonder what happens if MoviePass can sustain itself and gets bigger. Some independently owned theaters offer memberships to theatergoers for discount tickets and other perks. MoviePass now puts a wrinkle in some of those offers.  

“That realization hit me a few weeks ago,” said John Ewing, cofounder and director of the non-profit Cleveland Institute of Art Cinematheque. “I realized the main perk for being a member of ours is to save money on ticket prices and a number of regulars do have MoviePass. So we might be hurt when it comes time for membership renewal. Though I would like to think that these people are in our court enough that they would still support us.”

One option for some of these theaters would be to discontinue using MoviePass, but that comes with its own dilemma — as AMC's lawyers likely learned. Because MoviePass works through MasterCard that means theaters would have to discontinue accepting MasterCard as well.  

“You really don’t have any choice,” Skolnick said. “We already annoy people a little because we don’t accept American Express.”

Finding success in partnering with MoviePass 

Then there are those theaters that have gone into a partnership with MoviePass.

In late March, MoviePass announced it was partnering with one of the country’s largest arthouse chains, Landmark Theatres. MoviePass is now integrated into the ticket system for the chain’s 255 screens in 53 theaters in 27 markets.

MoviePass members who use the service at a Landmark theater receive perks they don’t get at other theaters, like e-ticketing and advanced seat reservations through the app. In return, MoviePass receives a discount on the tickets it has to pay for.

It’s similar to a deal MoviePass has been doing with Studio Movie Grill. The in-theater dining chain that has 314 screens in 30 locations in 9 states agreed to a partnership with MoviePass in 2016, long before the app slashed its price to $9.95 last August.

Studio Movie Grill founder and CEO Brian Schultz has zero regrets. Because his chain was one of the few that partnered with MoviePass before the onslaught of new subscribers, he’s been able to track how it’s helped his company and it's striking.

“We’re seeing more exploration on the smaller indie films but we’re also seeing pretty high attendance on non-peak third and fourth week on the big movies,” Schultz said of MoviePass usage at Studio Movie Grill. “It’s driving us off-peak.”

Schultz said that attendance due to MoviePass for big opening weekends like “Avengers: Infinity War” or “Deadpool 2” was very low due to the high volume of presale orders for those movies. But where he's seen a spike in MoviePass usage is for those same titles when audiences return to see the movie again the following weeks.

studio movie grill cinematreasures The push of MoviePass during those low traffic periods helped Studio Movie Grill score record attendance in 2017.

Schultz did not go into specifics on what his partnership deal with MoviePass entails, only saying that on “incremental attendance” from MoviePass he pays them a fee.

“We don't want to share in the revenue, what we’ve asked exhibitors is to give us the same bulk rate discount they would give anyone who is going to buy $20,000 to $100,000 worth of tickets a month,” said MoviePass CEO Mitch Lowe, who compared what they want to the 20%-25% discount Costco receives for selling AMC tickets in bulk. “The bottom line is it’s really in exchange for us driving a whole bunch of more people to your theater at our cost.”

Lowe said that currently MoviePass has partnered with independent theaters representing 2,000 screens and hopes to get to 5,000 screens by the end of the year.

However, even if MoviePass grows substantially in the coming years — it currently boasts that it accounts for 6% of the domestic box office — people who work in the movie theater space tell Business Insider it would be quite difficult for the company to make a deal where it would get a taste of box-office profits from exhibitors. That's mainly because theaters see so little already.

“The general percentage that the distributor gets is usually between 35% and 40% of the box office, it can be a little higher,” veteran movie booker Jessica Rosner said. “If you're the venue and MoviePass wants a percentage of what’s left? That’s crazy.”

Numerous theaters voiced a concern to Business Insider that MoviePass' next move may be to try and take a percentage of concessions made by theaters (which is the lifeblood of movie theaters). Lowe said currently MoviePass has no plans to propose a partnership where it would receive a percentage of concessions that were driven by MoviePass subscribers.

Despite the ongoing discussion of how a popular service like MoviePass can make money in a business where the pie has been divided so many ways for so many decades, everyone universally agrees that the service is good for theater attendance — which suffered a 25-year low in the US last year.

“The industry needs to have years where we have attendance increases or else we can't be a healthy business,” Schultz said. “We can talk about box office and other things, but we need to drive people through the door. MoviePass could be an important piece of driving that. Studios are trying to innovate, I think exhibitors should try to innovate and I like ideas that drive more people to the box office.”

Have a tip about MoviePass or anything else? Email jguerrasio@businessinsider.com.

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