If you have not already known, there is a subscription based program for movie buffs called MoviePass. MoviePass just released an offer which allows moviegoers to go to the movies, for just $9.95/month. Subscribers are allowed to watch at most one movie per a day, just as long as the movie is in 2D, and the subscriber is watching the movie for the first time. This is a great way for frequent moviegoers to save a ton of money on movie tickets.
Since MoviePass undercuts movie ticket sale prices to almost nil, AMC Theaters (AMC) just released a statement a few days ago, threatening to discontinue MoviePass in their theaters. At first glance, we can all see why AMC is doing this. After all, if AMC cannot sell their tickets at “retail” prices, their profit margins will suffer, which makes it seem like AMC will be getting the short end of the stick.
If you have been following AMC Theaters’ stock…I know I haven’t…you would notice that AMC shares reached a peak at the end of December 2016 and has been tanking ever since. In fact, AMC has tanked a whopping 62% since its peak in late 2016. Reasons for poor stock performance is due to lower attendance in their theaters due to a comparatively less attractive movie line-up in 2017 (vs. 2016), and a larger availability of substitute content offered by streaming services, such as Netflix, Hulu, and Amazon Online. On top of less than stellar attendance, AMC announced a bleak outlook for the company’s foreseeable financial future. This is just really bad news for the theater chain, and it seems like a continuation on this path will lead the company to bankruptcy sooner, or later. And if they are lucky, they might be acquired by a competing theater chain or by a private equity firm or by the Chinese, for all we may know.
MoviePass is actually a good opportunity for AMC. As most people know, movie theaters do not make their money on ticket sales. Most ticket sales go back to the film studios, either by way licensing rental fees, or by way of ticket sale “kick-backs”, in which the studios are entitled a percentage of ticket sales for their movies. After all is said and done, theaters usually do not really net anything from selling tickets. Of course, the bulk of their profits come from concession sales.
Part of the reason why AMC was suffering from a decline in sales and profits was because of the decreasing number of patrons attending their theaters. Less patronage = less concession sales. Less concession sales = lower profits. MoviePass is a way for AMC to get their customer levels up. At $9.95/month for movie tickets, moviegoers will undoubtedly go to the movies at every chance they get, leading to higher concession sales. There is always a risk that some people may just buy a movie ticket and not purchase any concessions. But, we have to understand that AMC is already heading towards a downward spiral of decreasing attendance, and things do not seem to be getting better. In fact, they are getting worse. Truth be told, they really do not have much to lose by choosing to do something different, even if it may seem counterintuitive on the surface level.
AMC, Take a Closer Look…
AMC must also keep in mind that other theater chains, such as Regal and Cinemark are accepting MoviePass. So if AMC refuses to accept MoviePass as a service, moviegoers will be more inclined to take their business to the competing chains, leaving AMC further in the dust. If AMC wants to remain competitive in their industry, they will have to adopt. Either go where the trend is going, or come up with a different innovative strategy. They don’t seem to have anything innovative at the moment, so it would behoove them to, at least, take a closer look at the MoviePass deal.
Also published on Medium.