Movie-a-Day deal overwhelmed with orders

When MoviePass told theatergoers they could see as many films as they wanted for less than 10 bucks a month, critics cautioned the deal was too good to be true. Turns out, the naysayers were at least partially right.

The movie service was inundated with sign-ups since cutting the price from $30, forcing some customers to wait almost a month before their passes arrive in the mail. About 150,000 people signed on in the first two days following the Aug. 15 announcement, and the site had boosted subscriptions to 400,000 as of Tuesday.

“My god, I was beginning to doubt @moviepass was legit, but look what I got in the mail today,” tweeted one user from Minnesota, happily displaying his all-you-can-watch card. MoviePass, addressing the blunder head on, retweeted the post.

MoviePass Chief Executive Officer Mitch Lowe, a co-founder of Netflix Inc., admits he “totally underestimated demand.” With a staff of just nine people, the company “was nowhere near prepared,” he said in an interview. It has since boosted the team to 35 to deal with the backlog.

The offer, which shocked some industry watchers when it was unveiled, is opposed by AMC Entertainment Holdings Inc., the world’s largest theater operator. It comes at a time when Hollywood is grappling with collapsing DVD sales and a stagnating box office, while studios wrangle over new distribution models with no obvious successes so far. As the U.S. summer movie season draws to a close, it’ll go down as one of the worst in a decade.

Botched Rollout

MoviePass customers who signed up in mid-August for the subscription will get their account cards by Sept. 10, the service says on its website. The company aims to acquire at least 2.5 million additional paying subscribers in the next year and retain 2.1 million of those, assuming it receives at least $10 million in additional funding from its new owners, according to regulatory filings. It was founded in 2011, sold a majority stake to Helios & Matheson Analytics Inc. in August and is shooting for an initial public offering next year.

With less than a month since the rollout, some bugs are still being worked through. Just eight days into the new offer, MoviePass announced a delay of two to three weeks in delivering the cards. Some theaters allowed users to enter with e-tickets, but that led to the service being activated for some customers even if they couldn’t use it, fueling complaints when renewal requests were sent. To add to the struggles, a glitch temporarily brought down the company’s computer network, leading to longer delays, while an internet-only customer-service system caused a revolt among some subscribers.

“It has definitely not been good for customers or our reputation,” Lowe said, but “I think we’ll be up to speed in a month.”

‘Wacky’ Deal

Hiccups aside, the head of 20th Century Fox’s movie studio has other reasons for calling the offer “wacky.”

“It does concern me, this idea of commoditizing film prices and the film experience,” Stacey Snider, CEO of 20th Century Fox Film, said at a Bank of America conference on Sept. 7. AMC Chief Financial Officer Craig Ramsey said at the same conference that subscription services are an “important opportunity,” referring to the successful U.K. subscription service run by its business there. But they need “to be approached sensibly and priced right,” he said.

At a Goldman Sachs conference Wednesday, Ramsey said AMC would pursue its own subscription service but the MoviePass price of $10 was unsustainable.

It’s not hard to see why MoviePass’s offer has the industry up in arms. MoviePass charges subscribers $9.95 a month, less than the price of a single movie ticket in some cities, and in exchange foots the bill for every film they attend during the period. The company plans to earn money by aggregating data on moviegoers’ habits, advertising and merchandise sold through its platform, and possibly a share of profits when subscribers splurge on in-theater popcorn and treats. Customers spend on average 123 percent more on concessions when their tickets are free, Lowe said.

“I think it’s positive for the industry,” said Eric Wold, an analyst at B. Riley & Co. The most visible opposition has come from AMC. “The exhibitors I have spoken with are very happy.”

Studio Movie Grill, a chain with in-theater dining in nine states, is one of the operators that’s jumped on board. The pair-up with MoviePass means customers can book tickets online without needing a credit card.

“It has huge benefits, especially in slower times for film,” said Studio Movie Grill CEO Brian Schultz. “People are apt to try all different kinds of films.”

Some 75 percent of subscribers are value-conscious millennials and a subscription encourages consumption of smaller, lesser-known films. That’s one reason Ted Farnsworth, CEO of Helios & Matheson Analytics, sees the service catching on. About 1 percent of all domestic ticket sales and 8 percent of e-ticketing for “It,” the blockbuster movie based on a Stephen King novel that hit theaters over the weekend, originated with MoviePass holders, he said.

He’s aiming for an IPO of MoviePass sometime by the end of the second quarter of 2018.

“We were the No. 1 consumer story in the world,” Farnsworth said.

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Movie-a-Day deal overwhelmed with orders