First, the monthly subscription is just $9.95 per month. Since the average movie price is just shy of this amount, a customer who sees two or more movies per month comes out ahead. MoviePass reimburses theaters at face value, meaning that they lose money if customers view more than one movie per month. The plan was to generate additional revenue through targeted advertisements, but this does not appear to have filled the gap.
Second, the type of customer who would take advantage of this deal is likely to be an enthusiast who views well over one movie per month. That is, adverse selection may be severe. One investor quipped:
"I'm saving $70 a month going to the movies and losing thousands investing in the company that's letting me do that," lamented Mr. D'Ariano.
The end result is that the parent company has lost a lot of market value, "... MoviePass lost $98.3 million on $48.6 million of revenue in the quarter ended March 31 ..." Ouch!
MoviePass is continuing to lose money in August 2018. I saw the advertisement in June and calculated that it is a great deal. After using the pass once, I essentially got my money back. I knew seeing just one more movie that month would be a benefit to me. So I referred my friends through the app, and each of the got one free month of MoviePass. Weeks later, Moviepass began to do something about the money they were losing as more and more people caught on to the deal. Now MoviePass only offers limited movie titles that subscribers can see each week (at this time, none of which I want to see). Now it is not as appealing to myself, so I cancelled my subscription(in cancelling, they told me I cannot subscribe again for 9 months! I'm not willing to hang in there while they figure this out). In the spirit of competition, AMC has offered their "Stubs A List" program for $19.95/month to see 3 movies at their AMC theaters in one weekend. Needless to say, I have switched to their plan. Let's see if they fare any better than MoviePass.
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