MoviePass dropped its price, but amasses data

MoviePass is a film nerd’s dream. The subscription service allows users to see one movie a day at a theater for a single monthly cost. The service isn’t new, but it has become popular among a lot more than movie buffs in the past few months.

During its first six years as a company, MoviePass relied on the idea that most of its 20,000 subscribers wouldn’t use the service. It’s the way many gyms make money: Convince users to sign a contract and then hope they’ll never actually show up to use a treadmill.

But when Mitch Lowe, a Netflix co-founder, took over MoviePass as CEO in June 2016, he opted to flip this revenue model on its head.

First, he teamed up with data firm Helios and Matheson Analytics, which bought a controlling interest in the company. Then, in August, he announced a radical overhaul to the pricing model, dropping the monthly cost from around $50 to $9.95.

Instead of hoping subscribers skip out on the movies, Lowe wants MoviePass customers to visit the theater as often as possible. The more movies its subscribers see, the more data the company rakes in. And that’s where the real dough is.

“The big money for us was always understanding the consumers’ habits and the data, because no one’s ever done that,” said Ted Farnsworth, CEO of Helios and Matheson.

After the pricing change, the service exploded in popularity, adding 150,000 subscribers in two days. Since then, its user base has grown to 1.5 million subscribers. (For comparison’s sake, it took Netflix about four years to reach 1 million subscribers.)

MoviePass is trying to drive customers to movie theaters at a critical time. Movie attendance in 2017 dropped by more than 6 percent from the previous year, according to Box Office Mojo.

The average movie in America costs $8.97, according to the Nation al Association of Theatre Owners. In cities such as New York and Washington, tickets can run $15 to $20. MoviePass customers need to see only one or two movies a month to get their money’s worth.

Since MoviePass pays the full price for each ticket, it quickly loses money on many customers.

“They definitely need to generate revenue from ancillary revenue sources,” said Eric Wold, an analyst with B. Riley FBR, a financial services company. He said the company will probably raise prices over time, as Netflix did, but even then it will require other income sources.

The company has spoken of seeking of concession revenue from the theaters to which it sends moviegoers, according to Fortune. But Wold, echoing Farnsworth, said data is the key to the company’s potential success.

Wold said MoviePass is the first service that can track moviegoers across nearly all theaters in America.

“That data could help local restaurants, or local clothing stores, market to the moviegoers,” he said, pointing out that many theaters are in malls or strip malls. Other nearby businesses probably would pay to know when certain demographics will be visiting en masse.