Sitting onstage during a panel on cinema subscription at the 2018 Geneva Convention, Bernadette McCabe, SVP of exhibition relations and business strategy at MoviePass, reminisced about a transformative year for exhibition. “When I think back to where we were as a company a year ago, the conversation was, ‘Is there a place for subscription?’” she said. “I think we’re standing here today knowing there is definitely a place for subscription in the movie theater industry.”
That sentiment sums up the atmosphere at this year’s edition of the Geneva Convention, the annual convention organized by NATO of Wisconsin and Upper Michigan held in Lake Geneva, Wisconsin. Its centerpiece panel brought together, for the first time, a CEO from a major U.S. circuit (Marcus Theatres’ Rolando Rodriguez) and executives from two of the country’s top third-party subscription providers, MoviePass and Sinemia. The panel’s seniority is a reflection of just how far the subscription conversation has advanced in the United States over the last year.
“We never knew how successful the company was going to be,” said McCabe, talking about MoviePass’s rapid rise at the tail end of 2017. “Like all of you, a year ago I was an outsider also watching the growth, fascinated by it. Certainly, had we ever known how quickly we were going to strike a chord with the moviegoing population, we probably would have done things differently. We probably would have staffed ourselves a little better to prepare for what was coming.”
Subscribers came first. Millions of them. At a rate the company, founded in 2011, had never experienced in any of its previous iterations. What followed was by all measures a wild ride, including dustups with several circuits, a letter of apology to subscribers from its CEO, and an investigation by the New York Attorney General. When MoviePass announced its $9.95 monthly plan in August 2017, subscription was barely on the radar for moviegoers in the United States. Today, despite the growing pains noted above, American moviegoers have access to a rapidly growing variety of subscription programs to choose from. AMC and Cinemark are two of the marquee brands that have launched their own in-house offerings, with Alamo Drafthouse and National Amusements’ Showcase Cinemas preparing similar solutions. MoviePass and Sinemia, the only third-party options to date, continue to refine their service plans—giving moviegoers different options at different price points.
Rifat Oguz, founder and CEO of Sinemia, remembered the initial impact of MoviePass’s $9.95 unlimited offering onstage at Lake Geneva. The company had just recently moved its headquarters to Los Angeles, said Oguz. “All my investors from Silicon Valley called to ask if we were going to do the same. I said, ‘We are looking at our data; we can’t right now, but we’ll see.’ I actually thought it was just a promotion of theirs.”
Many other industry professionals assumed the same. At first glance, the low monthly fee MoviePass charged to see up to one title a day seemed too good to be true. As its subscriber ranks swelled, concern grew from the business community that the model would eventually prove unsustainable. Exhibitors in particular worried that the aggressively low pricing model would misrepresent the value proposition to consumers, creating a false expectation of what a ticket was worth and potentially impacting the entire business in the long term.
“It’s the most critical aspect,” said Marcus’s Rolando Rodriguez, regarding cinema’s value proposition. “We need to be careful and make sure that price-value proposition doesn’t get away from us, because it could be financially disastrous for both the exhibitors and the providers. If they fail, we’re going to be the ones facing customers who are saying, ‘Wow, I used to be able to see 12 movies for that price. Now I can only see two movies for that price!’”
Rodriguez’s remarks echo those made by NATO President & CEO John Fithian at CinemaCon, when commenting on the association’s position on emerging subscription models. “You want to make sure that if an offering develops a huge following, that it’s sustainable,” he said. “Because if it’s not and it goes under, you end up with millions of disappointed customers who complain to us and our members.” Fithian also listed accuracy and respect for data privacy as other important concerns as subscription services continued to gain traction with consumers.
According to McCabe, MoviePass’s vision behind the aggressive pricing structure was based purely on customer acquisition, specifically on the 18- to 34-year-old demographic that has helped establish the concept in many other entertainment and leisure segments. The company’s mission was simply to get moviegoers who logged four to five cinema visits a year to go to the movies eight to ten times. For the most part, it worked. “We had about 85 percent of our users following that behavior,” said McCabe. “But we were seeing that 15 percent of our subscribers were heavy over-users, making it more and more challenging for us. That’s when we had to have a reset of our business and admit that as much as we love the unlimited concept, it’s really challenging to execute when you have some people that are going 10, 15, 30 times a month.”
The reset was a tacit acknowledgment that MoviePass’s $9.95 unlimited offering was indeed unsustainable. Its revised offering maintains the low price, but restricts viewers to three titles each month at select cinemas and specific show times. Competitors like Sinemia and exhibitor-branded solutions have stepped up to fill that gap, finding steady growth of their own. The biggest change in the U.S. cinema subscription conversation over the last year is just that: it is no longer defined by any single player.
“From our perspective, when we ran the model, the amount of traffic and frequency levels were well above the price point and the money that was coming in,” said Rodriguez. Marcus experimented with a subscription program in 2011, before Rodriguez’s tenure. Since then, however, the company has shifted its focus to providing discount days and perks to its loyalty members. Every Tuesday, Marcus locations offer $5 tickets—with a free popcorn included for loyalty program members. Rodriguez believes it’s an effective alternative to subscription, allowing moviegoers to come to the cinema each week without making a monthly commitment. “It’s one day a week, but we’ve created an event around it: moviegoers know that if it’s Tuesday, they need to be at Marcus Theatres.
“I think launching a subscription service on your own is a high-risk situation,” the Marcus executive continued. “It requires a lot of funding, advertising, and work behind it. The question then becomes, will we see the right proposition emerge under a good program that can actually be highly competitive within the market? That doesn’t stop regionals like ourselves that are potentially looking for our own solutions, but when we talk about [third parties]—it’s about which solution really aligns with the needs of the independent exhibitors.”
Malcolm MacMillan, chief marketing officer at Webedia Movies Pro, says he believes the upside of in-house subscription is too good to pass up for exhibitors willing to test the waters. “The key word here is ‘control,’” he said at the Geneva panel. “From our perspective, we work with exhibitors and are focused on helping them sell more tickets. We advocate having full control of your customers’ experience, on your website, on your app, and of the data you’re getting out of on the other side. That’s where the real value is in all of this.” [Webedia Movies Pro is the parent company of Boxoffice Media.]
In-house subscription is evolving at a rapid rate in the United States. The willingness of more exhibitors to test their own model has even inspired Sinemia to expand beyond its initial B2C format. The company launched Sinemia Enterprise ahead of ShowEast 2018, promising to deliver a white-label subscription solution to exhibitors within two weeks of signing. Oguz doesn’t see this move as a pivot for the third-party subscription service. “We think of Sinemia as a fintech company rather than a movie-ticketing company.”
Oguz’s comments in this regard are particularly revealing. Sell it any way you want, but what is subscription, really, beyond a premium tier within a theater’s loyalty program? Being circuit agnostic (like MoviePass) might provide different insights across a number of circuits—but it’s still too early to determine the true value of that data beyond engaging those consumers to come back for another cinema visit. Subscription is evolving in the United States alongside digital ticketing, where established players like Fandango and upstarts like Atom Tickets are themselves innovating in the intersection of fintech and consumer data. The long-term viability of subscription programs in the U.S. might not yet be confirmed—and likely won’t be in the coming months—but the rate in which moviegoers have embraced this new ticketing platform is striking. Whether subscription is a trend or a bubble is beside the point at this stage; e-commerce at the movies is here, and it will only continue revolutionizing the cinema experience in the years to come.