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How does MoviePass plan to save the theatre industry?
For US$9.95 a month, subscribers can see one non-premium film a day - less than the cost of a single ticket in most major American cities

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Saturday, May 19, 2018 – Page R8

Depending on whom you ask, MoviePass is either destroying the movie-going experience, or saving it.

Last month, the New Yorkbased subscription service - which applies the all-you-canwatch approach of Netflix to movie theatres - was the hot, and dreaded, topic of conversation at CinemaCon, the annual convention held by the U.S. National Association of Theatre Owners (NATO) in Las Vegas.

North America's three largest theatre chains (AMC, Regal and Cinemark) were quick to dismiss MoviePass's business model, while Canada's Cineplex also expressed doubts. ("Every day at CinemaCon, I was hearing about what seemed to be a change in policy," Cineplex chief executive Ellis Jacob told The Globe and Mail. "There is no way they can replicate anything we have.") Yet, other players remain optimistic, hopeful the company might be the one millennial-friendly lure left to reel in audiences who have fled the theatrical experience for the comfort of at-home streaming.

Most discussion revolves around MoviePass's seemingly too-good-to-be-true conceit: For US$9.95 a month, subscribers can see one non-premium movie (i.e., no IMAX or 3-D) a day - or less than the cost of a single ticket in most major American cities.

MoviePass pays theatres the full price of each admission, meaning the company is reliant on a gymlike business model where more people pay for the service than use it.

MoviePass has been operating since 2011, but last summer saw its profile dramatically rise after slashing its monthly cost - its user base rising from 20,000 people in August to about two million today. And the company aims to grow at an exponential rate - if it can keep its skeptics at bay and its business model afloat.

Just a day before MoviePass's parent company, Helios and Matheson (which also recently acquired Moviefone), announced in a U.S. Securities and Exchange Commission filing that it had only US$15.5-million in cash - and that it was spending US$21.7-million on average each month over the past seven - MoviePass CEO Mitch Lowe spoke with The Globe and Mail about the company's future, its plans to save independent film and whether it may come to Canada.

You were at CinemaCon in Las Vegas last month to talk with exhibitors - what was the reception like?

Everyone was very positive. Exhibitors started out skeptical, reading all the press that said we were going out of business, but at the end, they said, "Send us a contract."

What changed their skepticism?

There's a belief out there that we want a piece of the concessions.

I've made it clear that we don't want to take any of your concession stand revenue - we only want the same discount you'd give anyone who came up and offered to buy $50,000 worth of tickets. In exchange for that, we'll together create a much better experience for our subscribers, we'll promote your theatre like crazy, and help you understand what movies are working. It's a pretty simple equation, and everybody thought we wanted, say, $4 from every ticket and 30 per cent from concession sales. But that's not accurate.

What kind of share are you looking for from admission sales?

An average of 20 per cent on the face value of a ticket they'd charge.

Can you say who these partners are that said they'd sign up?

No, but you'll see the names rolling out over the next three or four weeks.

AMC, for one, has made it very clear they have no intention of working with you. AMC CEO Adam Aron said MoviePass was "hemorrhaging money."

We don't need AMC or Regal or any of those guys. We're buying a million tickets-plus a month at their theatres, and increasing their business. They're happy taking our money. ... I think this is a political thing. I think the majors would probably like to have their own subscription business, and they're going to do a lot better if we're not competing with them.

The New York Times recently quoted a survey saying that 32 per cent of your own subscribers don't believe your service will last.

That's what they said about us when I was at Redbox renting movies for $1 a night. But we were able to make it work with technology, reducing overhead and running a lean machine. No one is worried about Spotify, even though they paid more for royalties than they earned in revenue.

No one worries about Netflix borrowing a billion and a half dollars.

We have incredibly supportive investors willing to fund us all the way, as long as we grow dramatically.

Where do you hope to see the service in two years' time?

We'll have more than 10 million subscribers, and we'll be buying 30 per cent of all the tickets in the United States. And we'll be getting more people to see the smaller independent films. We have the ability to de-risk the independent film market. It's the same way as in my early days at Netflix when we were sending DVDs by mail.

Using the subscription model, we got more people watching things they never would have rented from Blockbuster: documentaries, foreign films, independent cinema. We can add value to the theatrical run by generating income profits that run downstream: exclusive screenings and visits by filmmakers to markets all over the country that are exclusive to MoviePass subscribers.

We have the new heist film American Animals premiering on May 29, and only MoviePass subscribers will be able to go. We're going to do the same with Gotti, and have [star] John Travolta attend red-carpet screenings exclusively for MoviePass subscribers, in markets where you'd normally never have the opportunity to see a screening like that.

One thing mentioned by NATO at CinemaCon was concern about the collection of MoviePass's data and the privacy of theatre guests.

Well, the No. 1 thing is we never sell data. We use our understanding of what kinds of films people enjoy to generate revenue in marketing partnerships. Whether it's selling advertising on the site, or having ad partnerships with studios, that's how we'll become valuable. Unlike anyone else, we can close the loop in which ad or promotion a customer saw that resulted in them buying a ticket.

We're not selling the data, we're only using it in a way that gives subscribers more relevant and valuable information.

But there is a line in a recent Hollywood Reporter feature that says, "Helios and Matheson also will sell data it collects on MoviePass users," which concerned NATO.

I don't know where in the world they got that from. We have said over and over again that we never intend to sell our data. ... My theory is that NATO is dominated by the big three theatres and their agendas. And, therefore, whatever you hear from [NATO president] John Fithian is not just the facts, but what outcomes they want to see happen.

Do you have plans to come to Canada?

Canada is a different animal in that it's dominated by Cineplex.

In markets like Canada and Mexico, maybe there's an opportunity to white-label [partner with a company to support one product that's made by one firm, and sold by another] with the dominant player. But our service works when there's not a 60- or 80-percent market share by one owner or brand. It works because customers like choice, and they can decide, maybe I'll go to the AMC today, but tomorrow I'll go to my little art-house local. I'd love to work with Cineplex, but they should probably just do it on their own.

This interview has been condensed and edited.

Associated Graphic

MoviePass chief executive Mitch Lowe envisions the subscription service will have more than 10 million subscribers and will be buying 30 per cent of all movie tickets in the United States in two years' time.


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