1.5 Million Members & Counting: MoviePass Proves Subscription Loyalty Isn't Just Disrupting Retail
Over the last few years, we’ve seen a big shift in how consumers interact with brands. Competition is ever-increasing, and loyalty is decreasing.
That’s why many brands are concentrating their efforts on customer loyalty. But the traditional, transaction-based loyalty models of the past aren’t working anymore.
Today, customers are looking for more than just points and coupons. They want real value and they’re willing to pay for it.
That’s why subscription loyalty, or Premium Loyalty, is on the rise.
Brands like Amazon, Restoration Hardware, and GNC are launching these programs based on what their customers are demanding. But retail isn’t the only industry that’s being affected by the subscription model.
Just like Amazon has disrupted retail, MoviePass is making big waves in the movie theater industry with their subscription program. With 1.5 million members and quickly growing, they’re demonstrating the power of the subscription model, even outside of traditional retail and wholesale clubs.
Retail customers are also movie theater customers. Therefore, the problem that faces movie theater chains is the same problem plaguing all consumer-facing industries: There’s just no loyalty anymore.
Despite rising ticket prices, the US box office hit a three-year low in 2017.
The CEO of MoviePass, Mitch Lowe, compares this directly to retail. He thinks that theaters blaming the content itself for the decline is a failure to identify the change in customer needs.
He argues that the current system isn’t working and something new needs to be tried.
Last year, MoviePass sold a majority stake to Helios and Matheson, a big data company. Their CEO, Ted Farnsworth, knows that members are not theater-loyal. Their testing shows that members are happy to drive past a closer theater to get to a theater that accepts MoviePass.
For $9.95 per month, MoviePass members can see one movie per day at most theaters. That’s less than the price of a single ticket in many cities.
And back in November, they ran a $6.95 promotion to get members in the door. Allowing consumers to try out a subscription program before buying is a fantastic way to demonstrate its value. Amazon does the same thing with Prime trials during Prime Day.
There are a few caveats to the program, like the inability to purchase tickets online or use their membership for 3D or Imax movies. But for the most part, the membership pays for itself quickly.
To offer the membership, MoviePass pays full price to the theaters for the tickets. Lowe acknowledges that his company is subsidizing ticket buyers and will lose money in the process.
However, now that Helios and Matheson Analytics is in the picture, they can draw valuable data from MoviePass members.
The company doesn’t currently plan to sell the data, but it can still be used to target movie promotions via the app or email.
In the future, Lowe and Farnsworth believe the real value in MoviePass is the ability to influence member behavior through in-app, email, and social media marketing.
The hope is that theaters and studios will cut MoviePass in on additional profits. Studios themselves also make natural allies. It's already started proving itself.
While 3 percent of all domestic box office gets purchased through MoviePass, the number jumps to 10 percent when MoviePass pushes a product, according to the company’s own tracking. This has already led to significant revenue.
As membership continues to grow, the lift will get bigger. That should be enough to attract even the big studios.
Theaters could also benefit by increased concession sales and could pay MoviePass back a percentage of sales or with advertising.
Although MoviePass wants to build a new ecosystem and share in the downstream revenue, AMC has already stated they have no plans to share in that revenue. They’ve openly expressed negativity towards the program.
In fact, they threatened legal action against MoviePass last year. They predicted that the company would fail because its business model was not sustainable. They also fear that it will set up customers for disappointment if it doesn’t work long-term.
Lowe, who is a co-founder of Netflix, compared AMC’s reaction to studios and video rental chains when they offered DVD and streaming movie subscriptions services.
He equates the situation to Blockbuster and Netflix. The big guy is afraid of the little guy offering better value to its customers.
While AMC and the theaters can’t block MoviePass, the service’s long-term outlook depends at least in part on big chains sharing the wealth.
MoviePass could see a future in which it partners not just with movie theaters and studios, but with restaurants and other categories that might benefit from the member data it collects.
If certain theater chains don’t start cutting MoviePass in, then they could simply be excluded from the app, which would drive members to partner theaters. It’s not a huge deal now, but if the subscribers keep growing at this rate, the balance could shift quickly.
It’s still early to tell how the story will unfold, but MoviePass is demonstrating how powerful companies become when they’re willing to break the mold based on what their customers want.
With subscription programs on the rise, brands outside of retail also need to think outside of the norm.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.