by Daniel Loria and Rebecca Pahle
Jean-Marie Dura remembers it clearly, or at least as clearly as one can remember anything after two decades. The leadership at French cinema circuit UGC were facing a challenge with one of the iconic multiplexes in their circuit, Les Halles, a sprawling 19-screen subterranean complex in the heart of Paris. UGC had invested mightily in refurbishing the site but found that most auditoriums, especially those playing titles other than studio tentpoles, remained largely empty for most show times. Situated within a retail area and steps away from a major transportation hub, foot traffic wasn’t an issue at Les Halles. The problem is familiar to anyone in exhibition: How do you increase moviegoing frequency, how can you direct audiences to watch more diverse titles, how can you optimize attendance in off-peak periods?
UGC began this process by programming specialty titles alongside major studio releases, and made the unorthodox decision to play American films in their native language, subtitled, rather than the traditional versions dubbed into French.
To increase frequency, the circuit introduced the Carte a Place: A customer would essentially buy a card preloaded with five discounted movie tickets, for example, that they could use over a matter of weeks or months. “It worked, but not that much,” recalls Dura, who was part of UGC at the time. “They really wanted to try something different to make more people go more often to the movies.”
The late ’90s saw the expansion of premium cable networks in France, with the growth of CanalPlus through a monthly subscription—similar to the HBO model in the United States. “CanalPlus was growing in subscribers each month, but their market share in terms of TV viewing was basically the same,” remembers Dura. “People were subscribing, but they weren’t watching more TV. The habits didn’t change much over time; people would buy their subscription, see what they wanted to see, and then kind of forget about it.”
Thanks to CanalPlus, French consumers had backed an entertainment platform through subscription—committing to a monthly fee even while their consumption patterns stayed relatively similar. The introduction of mobile phones, charged via monthly fees, further spread subscription culture across the country. UGC saw an opportunity: introducing a cinema subscription as a means of helping their larger multiplexes like Les Halles become more profitable.
There was only one problem, and it was an important one. “We couldn’t figure out how to handle the payments to distributors, how to allocate the percentage of each ticket sold to their movies,” Dura recalls.
The solution was only a EuroStar ride away. In October 1999, the UGC team traveled to London to explore the acquisition of the UK’s Virgin Cinemas, which had launched its own subscription scheme, Megapass, earlier that year.
“The Virgin team came up with a simple and brilliant idea,” says Dura. Virgin’s Megapass plan would attach a notional price to every admission registered by a subscriber. That notional price would reflect the standard reduced price for discount tickets sold in the market—the equivalent of matinee, military, student, or senior citizen pricing in North America.
“That unlocked the whole thing,” says the French executive. “When a subscriber doesn’t go see a movie on any given month, you keep their monthly fee. But whenever that subscriber goes to the cinema, you simply track the titles and allocate the distributor’s share of the ticket price based on that notional price.”
Within a matter of weeks from that meeting in London, Virgin Cinemas had become part of the UGC network of cinemas. Dura and the UGC team returned to France with a clear vision of launching France’s first cinema subscription service. It went live less than six months later. “I remember the exact day,” Dura says, laughing. “March 29, 2000. It coincided with the release of Taxi 2, which was a huge hit at the box office.”
UGC made two important modifications to Virgin’s program. Megapass was available on a monthly basis; subscribers could buy a subscription, go to the movies every day for a month, and cancel their subscriptions. “We identified that as a problem,” says Dura. “If you don’t have a long commitment, you push subscribers to go as many times as they can in a short period of time. We kept the monthly payments but had people commit for one year. We figured some months they’ll go a lot, and some months they won’t go at all. But it was important to spread out that frequency through a series of months.” Secondly, UGC focused on designing subscription cards that would discourage fraudulent overuse of the service. They printed subscribers’ photographs onto the cards themselves, making it harder for people to give or lend their cards to others.
“If we didn’t get the pricing and time commitment right, we could have lost a ton of money very easily and very rapidly,” he says. It’s the sort of risk, if mishandled, that could help put a company out of business. If successful, it can upend the industry altogether.
“Virgin ran into some problems with their Megapass in the UK, the American majors weren’t happy about it, and there was quite a bit of pushback,” Dura continues. “Because of that experience, we decided to keep things quiet in France until we went live. To our surprise, when we launched the scheme in March 2000, it wasn’t the distributors who got upset.”
What followed, it’s fair to say, might have been blown out of proportion.
“Every other exhibitor—small, big, and in-between—was furious. They hit the roof. It was a huge fight”
UGC’s Illimité subscription unleashed a torrential backlash from competing exhibitors. The government launched an investigation into the program’s business practices. Surprised by the negative reaction, UGC announced it would turn away new subscribers in 10 days’ time while honoring existing plans. The circuit’s announcement, according to Dura, had an adverse effect. “It led to a huge rise in subscriptions. We went from something like 16,000 in three months, to 120,000 subscribers before retiring the plan.”
By July of that year, with the investigation finding no proof of illegitimate business practices, UGC had the green light to put its Illimitéprogram back on the market. Within a matter of months, rival French exhibitors introduced their own in-house subscription programs. It was only a matter of time before subscriptions started to pop up in other European markets.
Pathé, for example, found success with subscription programs in three of its top markets: France (Ciné Pass), Switzerland (Pathé Pass), and the Netherlands (Pathé Unlimited). Christian Bräuer, executive director of German art house circuit Yorck Kinogruppe, first encountered Pathé’s subscription program during a trip to the Netherlands 10 years ago. It inspired him to give the concept a try upon his return to Germany.
Yorck’s subscription program, Kinoabo, is uniquely positioned in the German market. It stands out by offering art house aficionados their own subscription program, a contrast to multiplex-friendly plans from leading circuits Cinemaxx and UCI. Kinoabo has helped drive admissions to Yorck’s 39 screens and 15 locations since launching in 2009. According to Bräuer, the program has proven especially popular among younger audiences; 33 percent of new subscribers in 2018 were between the ages of 18 and 29.
Kinoabo shares UGC’s original goal of encouraging audiences to experiment with new titles. Twenty years removed from Illimité’s controversial launch, there’s little doubt that it accomplished its purpose. According to comScore, UGC Ciné Cité Les Halles was the most popular cinema location in the world in terms of admissions in 2017, recording a tally of 3.27 million viewers that year.
UGC kept Virgin’s Megapass program in the UK after acquiring the circuit in late 1999—but went on to sell the UK circuit to Cineworld in 2005. The program went on to be rebranded under Cineworld as “Unlimited.” It was eventually joined by a competing subscription scheme from rival circuit Odeon, aptly named “Limitless.”
The schemes have evolved over the last two decades. Cineworld’s Unlimited members, for example, get upgraded to a premium tier—the Premium Black Unlimited Card—after a year, giving them access to 3-D movies in their subscription. Another similarity between the programs, and one that would be adopted by AMC’s own subscription scheme, is pricing tiers based on geography. That means that a subscription available at all Cineworld and Odeon locations in the UK costs slightly more than one that excludes certain highly trafficked cinemas in London.
It wasn’t the only lesson AMC drew from its British counterparts. AMC launched its own subscription program, A-List, within two years of acquiring Odeon. AMC Chief Marketing Officer Stephen Colanero admits that the Odeon model was an important catalyst for its own efforts. “We talked to them about what they had done and what they were learning,” he told Boxoffice in a 2018 interview. “Fortunately for us, they had just launched it about a year or 18 months prior to our integration. They were very honest and forthcoming about their experiences; it certainly helped us frame what we were embarking on—some of our economic modeling, in terms of how quickly it stabilized, what the activity was for the established members. We felt a little more confident in our research and analytics, based on the experiences that they had.”
A-List offers subscribers access to up to three movies a week; tickets can be reserved in advance and do not roll over. A key component of A-List is its integration into the AMC Stubs loyalty program as a premium tier. A-List subscribers enjoy all the benefits of Stubs’ paid and free tiers. These include free concessions upgrades, $5 for every $50 spent, waived ticketing fees, and access to a priority lane at the box office and concessions. It also grants subscribers access to reserved seats in any of the circuit’s premium auditoriums, including IMAX, RealD 3-D, and Dolby Cinema. As AMC’s Colanero noted in his 2018 conversation with Boxoffice, being an A-List subscriber makes someone “among our best—if not our very best—guests. If that was the case, don’t we want to treat them with all the benefits we would want to give our best guests?”
After five weeks in operation, A-List had 175,000 members; as of late February, approximately eight months after its introduction, that number had jumped to 700,000. “We are considerably outperforming our original model,” said President and CEO Adam Aron in the company’s Q4 2018 earnings call, in spite of the fact that A-List was launched at a price point “more than double the price charged by our competitors.” That price was raised an average of 13 percent in January.
As initially predicted by Aron, moviegoing among A-List members “starts out high in the first week or two of membership, [then] settles down immediately to an average of about 3.3 visits per month,” eventually falling to its current average of 2.8 visits per month. That’s up from the approximately six movies per year A-List members saw on average before joining AMC’s subscription program.
A key benefit to AMC of their subscription program is what Aron terms the “bring-along metric,” referring to the fact that A-List members often bring friends—who pay full price—with them to screenings. Exact figures have not been made available, but Aron estimates that members have “doubl[ed] their bring-along revenue” compared to before they signed up for A-List. The average A-List member has also increased his or her food and beverage spend by approximately 250 percent.
Aron originally told AMC’s investors that 2018 would be “a break-even year for A-List and that A-List would not be accretive until 2020.” He now expects the program to reach that benchmark in 2019, “a full year ahead of schedule.”
AMC’s program was preceded by Cinemark, which in late 2017 became the first major U.S. circuit to launch an in-house scheme. As of late February 2019, Cinemark’s program had grown to more than 560,000 active members, with more than 13 million tickets sold. In the fourth quarter of 2018, tickets sold through Movie Club represented 10 percent of the chain’s box office.
In that time, the cost of the program has not changed: For $8.99 a month, subscribers get one 2-D ticket, plus 20 percent off concessions, a waiving of online fees, discounted companion tickets, and the option to upgrade to premium screening formats for an additional fee. Tickets—termed “credits”—roll over, but they don’t tend to hang around unused for long: Per CEO Mark Zoradi in the chain’s February 2019 earnings report, 75 percent of movie credits had already been redeemed.
Per that same earnings report, Movie Club members go to the movies three times more often than nonmembers. Subscribers also opt for premium formats twice as often as nonmembers. The amount of money spent on concessions by members is roughly the same compared to nonmembers. However, take Movie Club’s 20 percent–off concessions perk into account, and that means “members are buying a larger quantity of items than nonmembers, which is leading to an overall basket size that is on par with non–Movie Club transactions.”
Zoradi also noted that in the future Cinemark will integrate Movie Club into a relaunched free loyalty program. The update will not cause any changes in Movie Club’s structure or pricing but is instead intended to “establish an even higher level of engagement with members through more compelling benefits and rewards that are key to long-term satisfaction.” Approximately half of Cinemark’s current Movie Club subscribers were not members of the chain’s previous loyalty group.
Approximately a year after Movie Club’s launch, Showcase Cinemas introduced its own subscription program, Showcase Subscribe. The program is split into both individual and (more unusual compared to other subscription offerings) group plans, the latter allowing between two and six people to share one account. Either plan can be used together with Showcase’s free loyalty program, StarPass, which offers a 10 percent reward on most purchases.
Mark Malinowski, Showcase’s VP of marketing, notes the company has “seen a positive early reaction to Showcase Subscribe, both with individual-plan and group-plan memberships. It is a steadily growing population of customers who like to see more movies on a more frequent basis.”
The growth of in-house subscription in the U.S. can be partly attributed to the disruptive influence of MoviePass, a pioneer of third-party subscription in the United States. To imply that it’s solely responsible for the trend, however, overshadows the industry’s lengthy history with the concept as outlined above. Even if MoviePass didn’t provide the blueprint for subscription, it did play a crucial role in popularizing the concept among American audiences.
The first iteration of MoviePass dates back to a 2011 beta launch in San Francisco. The company tinkered with different prices over the years—from $20 to $50 a month—in its attempts to drive subscriber growth. The company’s transformation came in 2016 with the addition of former Netflix and Redbox executive Mitch Lowe as chief executive officer. Within a year of that change, the company was acquired by data firm Helios & Matheson. The new ownership implemented an aggressive pricing structure in August 2017, lowering the monthly cost to $9.95 for unlimited movies across most cinemas in the United States. Subscriptions skyrocketed. The company reported 3 million subscriptions by June 2018.
As many in the industry feared, however, the model ultimately proved to be unsustainable. The company encountered cash flow problems and was forced to adjust its terms of service, catching existing subscribers by surprise. What was once an unlimited card that provided a daily admission to a 2-D movie became a largely limited offering by year’s end. The low monthly fee might have helped in customer acquisition, but it also created a false expectation among U.S. consumers—many of whom were new to a cinema subscription program.
As MoviePass began to struggle, Sinemia, a rival third-party service, emerged as an alternative for disillusioned moviegoers. Originally launched in 2014, Sinemia offered subscription schemes in territories like Europe and Australia before entering the North American market. As a privately owned company, Sinemia is not obligated to publicly report its subscriber ranks. That has proven to be a blessing in disguise, as the company has navigated its own share of controversies and consumer backlash, allowing it to make changes to its program without having the public profile of a MoviePass.
To be fair, Sinemia’s most notable change should actually be labeled a “pivot.” In October 2018, the company announced it would be offering custom white-label subscription solutions for exhibitors looking to adopt an in-house model. “Last CinemaCon, while we were having meetings with various exhibitors, we quickly learned that many movie chains were interested in launching their own subscription services, but with a back-end system that allows for ultimate flexibility,” says chief of business development Kevin Hong, describing the origins of Sinemia Enterprise. “This allowed us to quickly partner with more than 10 chains after beginning our white-label program in October.”
Boxoffice parent company Webedia Movies Pro, a leading provider of cinema websites, mobile apps, and ticketing solutions, also sees a bright future in white-label subscription. Webedia helped UK-based Everyman Cinema roll out a three-tiered subscription program that applies to most screenings across its nearly 30 locations. According to Malcolm MacMillan, managing director of Webedia Movies Pro UK, white-label subscription is an ideal solution for exhibitors looking to maximize the potential of their customers’ data. “The key word here is ‘control,’” he said in a September 2018 panel discussion in Lake Geneva, Wisconsin. “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.”
Entering 2019, MoviePass and Sinemia’s B2C programs seem to have taken a back seat to white-label solutions catering to exhibitors looking to adopt in-house solutiona.
Despite its trailblazing influence putting subscription on the map in the United States, MoviePass, and its ultimate fate, has turned into a morbid topic among the American public. The company isn’t giving up, however, and began 2019 by touting new consumer plans in an effort to reinvigorate the brand. Regardless of what the future holds for MoviePass, its impact can be seen among the U.S. exhibitors who adopted in-house models in the wake of its short-lived success. Studio Movie Grill (SMG), one of the earliest supporters of MoviePass and its closest ally in the exhibition community, decided to launch its own in-house subscription program earlier this year. SMG Access Subscription is currently available on an invite-only basis as a premium tier within the circuit’s loyalty program.
SMG founder and CEO Brian Schultz tells Boxoffice the program had gone through a year of testing and extensive guest interviews. “Creating our own service allows us to tailor the experience to our guests’ preferences and reward them for their loyalty,” he says. It’s a telling development in the evolution of subscription in the United States: What is the future of third-party subscription in the market if one of its earliest proponents has implemented its own solution? While SMG’s subscription plan was reportedly in development for a year, the circuit was clearly aware of the circuit’s value through its long-standing allegiance with MoviePass.
Tim League, founder and CEO of Alamo Drafthouse, initially took a more cautious approach—going as far as discussing the concept with European exhibitors at CinemaCon several years back. According to League, Alamo’s plans to launch its own subscription program, Season Pass, were immediately set in motion after MoviePass dropped its price to $9.99 per month in 2017. “When they dropped the price, it became this grand disrupting force in the exhibition industry—a lot of people were calling for its failure. Our team was intrigued by it,” he says. “It’s a lot easier for an exhibitor to turn subscription into a viable business model, especially one like us that has a higher concessions per capita.”
Alamo rolled out Season Pass as a pilot program in mid-2018 at its Yonkers, New York, location. “We have 36 locations and were looking for one that was fairly isolated so we could monitor the effects on one community. Yonkers fit that bill,” says League. “We’ve had it long enough in Yonkers that we’ve seen that increase in frequency followed by a stability period.”
League adds that the Yonkers test run has yielded higher admissions for a wider range of titles from Season Pass subscribers, encompassing Alamo’s eclectic mix of programming.
Season Pass expanded to a second Alamo location—Raleigh, North Carolina—early this year, with plans for additional locations to follow in the coming months. Despite the program’s positive results, League prefers a cautious approach in expanding Season Pass circuit-wide. “We’re trying to avoid launching something and then, three months down the road, increasing the price or changing the program,” he asserts. “We want to find something that works for our customers—and that doesn’t drive us into bankruptcy.”
Alamo’s concerns are well-founded, considering the consumer backlash that unfolded from sudden changes to MoviePass and Sinemia’s programs. The third-party companies have both had to contend with allegations of running bait-and-switch schemes from disgruntled subscribers.
It speaks to the most important lesson Jean-Marie Dura learned with the launch of UGC’s Illimité program at the turn of the decade. “The most important part of this is the customer,” the French executive says. “They need to be happy with it and clearly know what they paid for: what movies they can see, when they can see them, how to claim their ticket. Any subscription plan that doesn’t have that connection with their users is doomed to fail.”
The travails experienced by MoviePass and Sinemia in introducing subscription to the U.S. market is enough to give pause to any new third-party entity entering the arena. That barrier to entry didn’t dissuade Influx—a leading developer of cinema websites, mobile apps, and ticketing solutions—from throwing its hat into the ring. “The model for subscription works, but the way it was introduced in the United States was not right,” says Harish Anand Thilakan, founder and managing director at Influx, who goes by “HAT,” for short.
“As we spoke to mid-range operators in the U.S., we realized there were two reasons why most cinemas didn’t want to do a subscription program. One was that they couldn’t afford it, the other was that they just didn’t have the scale or the reach to do it,” he says. “That was our eureka moment. If we could build our own subscription program that tied in these mid-range exhibitors, collectively they could have 12,000 screens and become the largest exhibition network in America.”
Influx is naming its subscription scheme “Infinity” and plans to make it available to cinemas in May, with a consumer rollout scheduled for the summer. Influx already has experience in developing white-label subscription for cinemas, launching the Unlimited Movie Pass for Dubai’s Reel Cinemas in 2017. Rather than enter the U.S. market with more white-label solutions, Influx is betting that its Infinity program can help revitalize third-party subscription in the world’s biggest cinema market.
“Anybody going into subscription by themselves is going to get burned for the first couple of months, when consumers are most likely to overuse the service,” Thilakan explains. “Why would you want to take that risk by yourself? I think cinemas would rather be part of a larger alliance where your risks are hedged against the collective efforts of a number of different operators.”
The key to Infinity’s success will be support from the exhibition community. “We’re not going to run this program unofficially, with sneaky little cards to try to get people in. This has got to be an official program,” Thilakan emphasizes. The plan is to integrate Infinity within participating exhibitors’ apps and websites, creating a seamless ticket-purchasing experience. Features of the program would be standard across participating cinemas: monthly plans, rollover credits, premium-screening surcharges, discount companion tickets, and concessions vouchers for unused credits. Exhibitors will be able to customize features like inventory allotment, ticket prices, and the implementation of convenience fees per tickets sold.
Although Influx has a global presence, the company plans to limit Infinity’s rollout to the United States. “There aren’t too many other markets where an alliance network model would work,” Thilakan explains. “You need a large enough market, a large enough long tail of cinema players, and a large enough population base going to the movies. The United States is one of maybe four markets in the world that fits that description.”
That hasn’t stopped other entrepreneurs from launching their own third-party subscriptions in new markets. In 2015, Brazilian moviegoers were introduced to PrimePass, an overarching program that consolidates digital entertainment subscriptions like music and video streaming services. The company’s CEO, Juan Balmaceda, decided to add a cinema component to the plan after realizing no one else was doing it in the market. After a successful trial period in São Paulo, PrimePass went nationwide. It transitioned from physical cards to an e-ticketing solution at participating cinemas in 2018.
PrimePass stands out in the global cinema subscription landscape because of the difficult nature of the Brazilian market, one dominated by two major multinational circuits. While difficult, it wasn’t an overwhelming challenge to overcome, says Balmaceda. “It’s not as concentrated as the Mexican market, for example,” notes the CEO. “Yes, there are big chains, but none of them take up more than 30 percent of the market on their own. Moviegoers still have their choice of cinemas throughout the country.”
Although the cinema subscription concept is over 20 years old, exhibitors have only started to scratch the surface of its full potential. There are growing distinctions among the types of programs exhibitors can implement—it’s not simply a choice between opting for an in-house or third-party solution. Movie Heroes, a notable pioneer and innovator of cinema subscription in the United States, is often overlooked in this conversation.
Oakhurst is a small town in central California, about a four-hour drive from the Bay Area. Its population according to the 2010 census was a modest 2,829 people. In 2012, the only movie theater in town closed its doors. The community was crestfallen, leading a group of friends—Matt Sconce, James Nelson, and Keith Walker—to start brainstorming ways to save their local cinema. The plan they hatched was deceptively simple: If they could get everyone in their town to commit to paying $20 a month, the theater could realistically resume operations. Working under the name Movie Heroes, the residents of Oakhurst, California, launched one of the most distinct subscription schemes in the world: a movie theater that operated exclusively on a subscription basis.
“Our idea was simply to find a way to stabilize the theater’s income throughout the year, which was the reason it had gone out of business,” Sconce recalls. “So we built a program, put together our own point-of-sale system, and had a month to sign up 3,000 people to the plan.” Rather than charging subscribers on the spot, the three entrepreneurs told future members they wouldn’t be charged until the theater reopened. Like a Hollywood ending, the town rallied behind the subscription plan—and the theater was saved. But, like UGC and Virgin Cinemas before them, there was one important issue they had to resolve.
“It took us a year to get all the studios onboard,” Sconce admits, laughing.
At the time of launch, Movie Heroes only counted on the support of three studios. Gradually, the small hometown cinema was able to evangelize their approach to subscription—with varying results. The biggest turning point for the company came in June 2018, with the launch of AMC’s Stubs A-List scheme. “A lot of the pushback and restrictions we were facing with distributors, most of it went away when AMC started their subscription program.”
The spread of in-house subscription models has helped an independent like Movie Heroes expand its operations. In the last year, the company added a second cinema to its family and licensed its subscription scheme at two additional locations. As subscription evolves beyond in-house and third-party programs, hybrid offerings like those proposed by Infinity and Movie Heroes might pave the way to more unique avenues of attracting moviegoers.
It harks back to the central challenge that UGC encountered with its Ciné Cite Les Halles location in the ’90s: How do you increase frequency throughout the year and drive audiences to see more diverse titles? As Dura notes, the solution isn’t with a subscription program per se, but by appealing to the audiences who support you the most. “The airline industry perfected this: If you’re a frequent flyer, you get a first-class experience all around. Similarly, we need to take care of our most frequent moviegoers,” he says. “Our best customers are our greatest allies.”