Netflix Co-founder Plans to Disrupt Cinema
Has The Curtain Finally Closed On Traditional Cinema?
We already know that on demand move streaming is a kick in the teeth for established cinema companies. It’s hardly surprising that consumers don’t want to travel to cinemas and buy expensive tickets when they can create a similar experience at home for a fraction of the price. Everywhere you look, subscription model businesses are forcing incumbents to think differently about their industries. US cinema subscription provider Moviepass has taken this approach for six years, and it’s done it well. But this month, to the dismay of cinema chains worldwide, the company revealed that it would drop its monthly subscription rate from $50 to just $9.95.
Subscription strikes again
The sudden plummet in subscription prices probably has something to do with a change in leadership. Earlier this year, founder and CEO Stacy Spikes was replaced with Mitch Lowe. Lowe certainly has a reputation for shaking things up in the entertainment industry as co-founder of Netflix and his online movie rental company Redbox contributed heavily to the fall of Blockbuster. Now it appears he’s set his sights on disrupting cinema companies too. Once users subscribe to Moviepass, they receive a personal debit card. They then pick a film and a venue, and Moviepass adds the price to the card. The money can only be used for one specific film at one specific cinema, and works exactly the same way as a standard debit card. By using card payments, Moviepass has craftily disabled cinemas from blocking the transactions. When this cost $50, it wasn’t as massive a threat to cinema chains because only die hard film fans would pay. Now, with a far lower price, Moviepass’s success relies entirely on a mass influx of customers (particularly millennials) to turn subscription into the new normal. With 150,000 new members signed up in the first two days of the price drop, plus an expected 2.5 million subscribers by 2018, perhaps they’re on to something. Despite the ease of streaming films at home, consumers do still enjoy the experience of going to the cinema. If they can buy a monthly pass for the same price as one ticket, then it’s a no brainer. Even so, the concept perhaps still sounds a little sketchy. Moviepass is going to suffer some considerable initial losses, and hopes to make its money from a profit share in the ecosystem surrounding cinema trips, like dinner, drinks and shopping.
Will subscription kill traditional cinema?
Encouraging people to go to the cinema is surely a good thing for cinema companies, right? Even if they aren’t buying tickets, cinemas can still benefit from the sale of concessions – in other words, the popcorn, sweets, drinks and snacks that seem necessary to the full enjoyment of a film. In fact, concessions can make up 40 per cent of a cinema’s profits. Even so, while Moviepass’s new venture may will increase the number of cinema goers, what it will also do is take control away from cinemas themselves. By lowering the price of access, you inevitably change the demographic of film watchers. These new, budget conscious patrons may be less inclined to pay $5 for a box of popcorn. They will also impact the success of advertising. Moviepass is only the first company to offer such a cheap subscription price, too. Their competitors are likely to offer competing services, and drag even more power away from movie theatres themselves. So, regardless of how many extra hotdogs they sell, cinema companies are not happy about Moviepass’s controversial move. AMC, the US’s largest cinema chain, has gone as far as threatening legal action. Cinema companies could well band together and appeal against supercheap subscriptions. If these efforts fail, cinema chains will have little choice but to reduce ticket prices or offer concessions deals that are only available with tickets bought directly from them.
By slashing subscription prices, Moviepass has taken a massive risk. . . but this strategy has worked incredibly well for others before them, however which is exactly what Moviepass wants to do for cinema, and if its new membership numbers are anything to go by it might just succeed. Nonetheless, cinema giants won’t go down without a fight. Not everyone is going to suddenly abandon the established cinema protocol, either. These loyal, long standing patrons will help the traditional model to tick along for a while. Ironically, though, Moviepass and similar businesses rely on the continuation of cinema companies. Killing cinema is entirely not in their interests. So, instead of rolling the credits on established movie theatres, perhaps we’re sitting down to watch Cinema: The Sequel. Pass the popcorn?
Are you a disruptor using a subscription model? Has your business or industry been disrupted by subscription? Would you be willing to pay a cinema subscription charge? How might traditional cinemas react? Comment below with your thoughts.