By now, most people have heard of MoviePass and its deal of a movie a day in theaters for the price of $9.95 per month. In fact, there are multiple subreddits dedicated to MoviePass. Even elitist moviegoers forego referencing Rotten Tomatoes for movie recommendations now that MoviePass has made the theater experience financially accessible.
Users of MoviePass ask about limitations of the subscription service from restrictions on theater locations to whether or not users are allowed to see the same movie twice. There are actually few limitations of service which further poses the question, how does MoviePass make money?
Mitch Lowe, CEO of MoviePass, sat down with Senior Correspondent Steve Kovach to discuss the MoviePass business model and the many ways MoviePass turns a profit. Following is a transcript of the video.
Steve Kovach: It's a service that sounds too good to be true. MoviePass, you pay 10 bucks a month, and you can watch pretty much unlimited movies in theaters.
You lose money when I see one movie. How does this business model work out for you in the end?
Mitch Lowe: I always find it interesting that, to get that question, because, you know, Netflix has to borrow billions of dollars a year to stay in business; to create the content, that they don't earn enough money to pay for. If you read the reports about Spotify, they spent two billion dollars more on content than the revenue they generated. And we're no different.
We're building a big subscriber base of film lovers who, over time, we have dozens of ways to make money. For example, marketing on behalf of studios. The film distribution system is completely broken. It's so hard to get a film out in the theater that's not a big blockbuster hit. And there's hundreds of millions of dollars spent marketing those films. We're an incredibly effective partner for those studios. We have people who are coming to our site, you know, four and five times a week where we can sell advertising. And we're on our way to get to break-even on our subscription.
Steve Kovach: So right now, just the subscription part, you're essentially break-even, maybe sometimes a little bit profitable.
Mitch Lowe: We're not there yet. When you do kind of an all-you-can-eat subscription, the first people who join are people in New York, people who go, "Geez, it's a no-brainer. I'm spending $15 on a ticket. This is $10, I'm gonna save money on my first ticket." Or they're the 11% of moviegoers who already go to 18 films a year. Over time, slowly but surely, you start to acquire more of the casual moviegoers. This is why we priced it at $9.95. So where 89% of film-goers, over 200 million people, only see four movies year. And they spend $40 to $60 a year on movie tickets. When they join MoviePass, now they're spending $120. We're increasing their consumption and they'll do it because it's $9.95 and it's an unlimited value for them.
Steve Kovach: So the hope is, it's kind of like the gym membership model, that maybe some of these people won't actually go to as many movies, and they'll, kind of, make up for the people who are going every day. Is that how you're thinking about it?
Mitch Lowe: Not quite. What it ends up is, if you look at the distribution between the casual moviegoer who now is going about 10, 11 times a year. That's roughly what, they're spending $9.95 and they're going a little bit less than one a month. They're kind of breaking even on it. And we add all these other values, like special screenings that are only for MoviePass subscribers. We're going to bring back some of the classics into the big screen that, you know, people haven't seen on the big screen ever, that will be exclusive for MoviePass subscribers.
Steve Kovach: So you're big pitch, is we have well over two million subscribers now, we should easily get to five by the end of the year, it's just going to grow from there. We're going to juice those numbers a little bit by offering these deals once every few weeks. Then you go to marketers and say, what can we do, how can we work with you? How can you pay us to access these people?
Mitch Lowe: Exactly, and our subscribers are so thrilled with the value they are getting, that they're very open to recommendations.