The Dramatic Fall of MoviePass: Debt and AMC Stubs A-List

It is that time of the year again: summer! A time to enjoy, travel, and watch new summer blockbusters. The summer season is usually the hottest for theaters, but the summer of 2017 turned out to be the worst in box office results since 2001. As a result, a new movie ticketing concept emerged last year that has generated much enthusiasm in the past few months.

Called MoviePass, this company has altered the movie industry by its groundbreaking subscription service that entitles members to watch a movie per day for the cost of $10 per month. Since the movie ticket prices in most states surpass $10, many people are getting more than their money's worth by watching just one movie. As of June of 2018, MoviePass had 3 million subscribers and believes it will attain its goal of 5 million by the year's end. However, MoviePass's service benefits more than just its subscribers. MoviePass has rejuvenated the movie industry. People have a greater incentive to watch movies. That includes the less popular movies, void from many fans due to worse reviews and less advertising. As a result of MoviePass's service, the smaller film studios benefit from the larger audience coming to watch their films. Additionally, movie theaters such as AMC have profited from the increase in ticket sales as MoviePass pays for the full price of each movie ticket purchased by the consumer. But there is an economic flaw in this model: if MoviePass is paying for the tickets, is the company losing money?

There is a popular economic acronym called “TANSTAAFL”, standing for “There Ain’t No Such Thing As A Free Lunch” that clearly describes the predicament MoviePass is in. This acronym, in other words, emphasizes that one can’t get something for nothing. While the consumer is getting to watch free movies, there is a cost involved. The movie ticket isn’t free; MoviePass is paying full price to the theaters for that ticket. So whenever you watch one movie (with a ticket price generally greater than $10), MoviePass immediately loses money (since its subscription fee is $10 per month). And as more people subscribe to MoviePass's service, the company will be forced to burn through more cash. Based by this, it sounds as if MoviePass can only earn money if the subscriber doesn’t watch any movies. As of now, that is correct; its only remotely effective medium through which it generates revenue is the subscription fee. However, it has attempted other methods to raise more cash such that it doesn't become bankrupt. For example, they introduced surge pricing, allowing the company to charge the consumer a few extra dollars for wanting to watch movies of popularity or high demand. Any Marvel or Star Wars movie will fall under this category (except probably Solo: A Star Wars Story). Additionally, MoviePass took a stake in some movies such as American Animals and Gotti; however, this proved to be unsuccessful as Gotti performed terribly in the box office and even received a 0% Rotten Tomatoes rating. So how will MoviePass continue to exist as it is struggling against a rapidly diminishing cash pile?