AMC Theatres is threatening legal action against MoviePass, a subscription-based service for cinema-goers, hours after the company announced it will allow customers to see a movie a day for less than $10 a month.
In a statement, the world’s largest exhibitor dismissed MoviePass as “a small fringe player” and said that its model “is not in the best interest of moviegoers, movie theatres and movie studios.”
AMC’s stock has been hit hard in recent weeks after it released disappointing quarterly earnings and lowered its projections for 2017. The summer box office is in a slump and a stream of film flops have dragged down exhibition stocks. Shares of AMC took a beating again on Tuesday following MoviePass’ pricing announcement — the company’s stock ended the day down 2.57% at $13.25.
MoviePass didn’t just unveil a new pricing plan on Tuesday. It also announced that had sold a majority stake to Helios and Matheson Analytics Inc., a publicly traded data firm, for an undisclosed price.
Since it was founded in 2011, MoviePass has roiled exhibitors, who have engaged in legal action at various points to try to stop its development.
In an interview with Variety, MoviePass CEO Mitch Lowe said the deal has yet to close, but expressed concern that AMC’s stance could hurt his business.
“I’m not worried about it killing the sale,” he said. “What I’m worried about is it confusing customers and making them believe they can’t use this service at AMC theaters.”
MoviePass is using the capital injection from the sale to fund an overhaul to its pricing model. It will now enable customers to see a movie a day in a theater for a $9.95 monthly fee, far less than the cost of a ticket in many major markets.
MoviePass re-sells the tickets to customers and purchases them at full price using a MasterCard debit card. It claims it boosts attendance by 111% and that its customers buy more concessions. But exhibitors have preferred to bolster their own loyalty programs instead of aligning themselves with the service. For instance, AMC has invested heavily in growing its Stubs rewards program.
In the statement, AMC said it is consulting with its attorneys to determine if or how it can prevent a subscription program offered by MoviePass from being used at its locations. It questioned the longterm viability of MoviePass’ model, noting that the average ticket price for watching a movie at AMC Theatres in the most recent financial quarter was $9.33.
“From what we can tell, by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month,” AMC’s statement reads.
Lowe acknowledges that his company is subsidizing ticket buyers and will lose money in the process. However, he believes that MoviePass will be able to prove its value to movie theaters and studios, and that in the future they will cut the company in on their additional profits. Theater owners could also either pay MoviePass back with advertising or give them a percentage of the concessions sales.
“There must be some way to make us whole,” said Lowe. “We know we have to prove the value we deliver and, at that point in time, where we’re delivering value to studios and theaters, we can work together with them in a constructive manner so that everybody makes more money.”
At one point, AMC and MoviePass had worked in concert with each other. In 2015, the companies partnered on a pilot program in select markets. Ironically, MoviePass uses data from that initiative to support its claims that it bolsters concessions sales and attendance. In the ensuing years, AMC has gone from ally to foe. On Tuesday, it was withering in its dismissal of MoviePass’ ambitions.
In the statement, it said “that it is not yet known how to turn lead into gold,” adding, “In AMC’s view, that price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled.”
The company said that reducing pricing to accommodate the MoviePass model would negatively impact the customer experience and would leave them unable to “operate quality theaters.” It went on to suggest that the MoviePass model would have a chilling effect on the creative community by cutting them out of the income they receive from movie theaters.
“While AMC is not opposed to subscription programs generally, the one envisioned by MoviePass is not one AMC can embrace,” the company’s statement reads. “We are actively working now to determine whether it may be feasible to opt out and not participate in this shaky and unsustainable program.”
Lowe, a co-founder of Netflix and the former head of Redbox, compared AMC’s reaction to the blowback those home entertainment companies received from movie studios and video rental chains when they offered DVDs by mail or via kiosks.
“This is so much like Blockbuster was when we rolled out Netflix or Redbox,” said Lowe. “It’s the big guy being afraid of the little guy offering better value to consumers.”