Yahoo Finance Theaters Won't Need MoviePass Much Longer
If MoviePass changed the way movie tickets were sold, competitor Sinemia is changing how movie theaters think about ticket subscription services.
While it still offers its own movie ticket subscription operation, the Sinemia Enterprise platform is helping theater operators launch their own programs to attract moviegoers. Both Studio Movie Grill and National Amusements, the media holding company that owns controlling interests in both CBS and Viacom, as well as Showcase Cinemas, have signed on to have Sinemia build them a white-label subscription service so they needn't deal with the hassle of creating their own.
There just may be a more viable business in getting theaters to run their own programs than in competing against them for sales.
Image source: Getty Images.
The problem of too much demand
The short history of movie ticket subscription services has not been a stellar one, as moviegoers have seen the terms of their plans altered without warning, sometimes daily.
Much of that was because Helios and Matheson Analytics (NASDAQ: HMNY) launched MoviePass with an unsustainable business model. To staunch the massively mounting losses it was experiencing, MoviePass ended up limiting the movies subscribers could see, the theaters they could be viewed at, and the times they were available. It raised and lowered prices almost at will, reneging on some agreements and backtracking on others.
Yet MoviePass wasn't alone, as Sinemia has also been criticized for its practices after customers were hit with hidden fees for ticket purchases that led it to be described as a "bait-and-switch scheme" in a class-action lawsuit. Even AMC Entertainment (NYSE: AMC) found it necessary to change its AMC Stubs A-List offering because it was being utilized too much.
The problem is that if the services were utilized as marketed, the plans would go bankrupt. Sinemia says the modern moviegoer sees on average three movies a month, while the Motion Picture Association of America (MPAA) pegs it at more like four to six movies a year. Because Sinemia and MoviePass pay full price for a ticket they're selling at a discount, their models can only really work if users don't fully utilize their subscriptions.
Changing up the model
That may be why subscription services launched by theater operators themselves are more successful. AMC credited its A-List service for lifting attendance numbers last year and recently noted it had attracted 600,000 subscribers for its range of plans. Cinemark Holdings offers one discounted ticket per month.
The benefit of these in-house plans is the user is limited to seeing a movie only at the offeror's theaters, so the cinema chains are really only discounting their own product. MoviePass and Sinemia allow you to visit many different chains, which is why selling a subscription platform that the theater owners operate might make the most sense.
Even MoviePass thinks that may be the way to go, as it is reportedly working on a so-called "red label" platform that it hopes to sell to theaters. Its sullied history, however, may cause theaters to be leery of signing up on its platform.
Tapping into global movie demand
Sinemia told Business Insider that demand for its theater-run subscription model is huge and global in nature, leading the company to form units to sell the new service in Europe, South America, Africa, and Asia. A theater can either buy an end-to-end solution, or it can choose different "modules" that target a specific needs, such as fraud protection.
Sinemia says the agreements provide recurring streams of revenue because they're multiyear in nature. The revenue is also a lot more stable than the discounted ticket business it continues to maintain.
The value of MoviePass was never as an investment, because it was clear early on that the service was built on an unsustainable business model. Rather, MoviePass changed the way tickets were sold, and Sinemia may be showing that the real future is not for independent subscription companies to hawk tickets, but instead to license their platforms to theaters. That may be MoviePass' ultimate lasting legacy.
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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool is short shares of CBS. The Motley Fool has a disclosure policy.
