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MoviePass Announces New Pricing While Promising to Win Back Customers’ Trust

MoviePass has read your enraged tweets. It has fielded your angry calls. And, yes, it has seen those memes that showed images of its offices engulfed in flames. Despite becoming a trending topic for all the wrong reasons, the company that once planned to be the Netflix of moviegoing believes it can win back the trust of its customers after a bumpy year that’s led to a wave of articles predicting its imminent demise.

“We have a lot to prove to all our constituents,” said Mitch Lowe, MoviePass’s chairman in an interview on Monday at Variety‘s New York headquarters. “We don’t just have to prove ourselves to our members, we also have to prove ourselves to the investment community, our employees, and our partners. We believe we’re doing everything that we possibly can to deliver a great service and we’re in the process of fixing all the things that went wrong.”

As part of that effort a chastened MoviePass is unveiling a new series of monthly plans, the prices of which will vary depending on geography. In the middle of the country and in less urbanized areas where movie tickets are cheaper these plans begin at $9.95 per month. The cheapest option gives customers the chance to see three movies per month at some point during their theatrical run. That plan has been christened “select.” The most expensive plan, dubbed “red carpet,” starts at $19.95 a month and allows users to see any three movies of their choosing at any time and in enhanced formats, such as IMAX and 3D. The last tier, known as “all access,” lets people see any three movies per month, at any time during their theatrical run. However, they must be in 2D. In pricier markets, such as Los Angeles and New York City, it’s more expensive. Costs range from $14.95 for the “select” plan to $24.95 for the “red carpet” package.

MoviePass maintains that the new tiered pricing will enable the company to be “break even” on the tickets its customers buy, allowing it to put its fiscal house in order. That’s critical because MoviePass’s finances are a mess and its troubles are almost Biblical in their intensity. Its parent company, the data firm Helios & Matheson, reported $6.2 million in cash on hand and approximately $23.3 million on deposit held by credit-card processors during its most recent fiscal quarter. At the same time, it reported losses of $137.2 million while warning that it might not have the money needed to run operations and could be unable to obtain additional financing. As its troubles mount, Helios has essentially become a penny stock and will likely be delisted from the Nasdaq. If that weren’t enough, the company is also the subject of a fraud investigation by New York Attorney General Barbara Underwood into allegations that it misled investors.

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Lowe and MoviePass executive V.P. Khalid Itum declined to address the investigation, referring Variety to a previous statement in which MoviePass denied the claims and maintained its “public disclosures have been complete, timely and truthful.” Regardless of how that inquiry plays out, the MoviePass executives did not deny that there’s a lot of skepticism that they will be able to right the ship.

It’s certainly a more humble company than the one that upended the exhibition business in August 2017 when MoviePass unveiled a low-cost plan that enabled customers to see a movie-a-day for $9.99 a month. Back then, Lowe and Helios & Matheson chief Ted Farnsworth were riding high. They boasted that they would be able to grow their subscriber base to the point where major theater chains such as AMC and Regal would have no choice but to offer them discounts. That didn’t happen, and instead MoviePass was stuck subsidizing the moviegoing of its sprawling customer base, digging themselves deeper into a hole as its membership rolls grew to some 3 million people.

“Things went too fast,” said Lowe. “People always used to tell me that fast growth can be as bad as slow growth, and I never believed them until now.”

As MoviePass scrambled to pay its bills, it kept changing the terms of its service — limiting customers to movies that had only been in theaters for weeks or charging them processing fees. Often, customers complained that there were service outages that prevented them from buying tickets altogether. Itum argues that MoviePass is essentially a startup and it was trying things out as it went along to see what worked and what didn’t.

“We’re a technology company and technology companies test, test, test, iterate, and then when they’re done with all that they do it all over again,” he said.

Customers were less forgiving. Lowe declined to say how many subscribers MoviePass currently has, but he said it has lost customers from its high of 3 million. The company insists it has learned from the experience.

“Expectations weren’t met,” said Rodes Ponzer, MoviePass’s head of marketing. “The creative memes and the consumer vitriol, we understand it. We told customers it was unlimited and we didn’t meet their expectations. Now we’re going to set their expectations properly.”

The company also failed to enlist much industry goodwill. Some studios, such as Fox, used it to market movies, but others steered clear because they were wary of upsetting theater chains. While a few theaters, such as Studio Movie Grill and Landmark, signed partnerships, the majority viewed MoviePass as a competitor that threatened to devalue the moviegoing experience by offering steep discounts. They were particularly incensed by the company’s suggestion that it could eventually be cut in on a cut of concessions. The bulk of movie theaters’ profits come from popcorn and soda sales.

“They were worried we were literally going to steal their butter,” said Itum.

Even as MoviePass’s business model failed to add up, Lowe and Farnsworth kept insisting that the data it collected on customers would be so valuable that it could sell it to entertainment companies. That pitch got a little less enticing after reports broke last year that Facebook had enabled Cambridge Analytica to harvest the personal information of its users and deploy it for political campaigns without their knowledge. That bombshell triggered a larger debate over data mining and raised questions about what MoviePass intended to do with the information it collected on its customers. Moreover, it never really translated into additional sources of revenue. In MoviePass’s most recent quarterly filing, just $1.6 million of the $81.3 million that the company reported in revenues came from marketing and promotional services. The bulk was attributable to subscriptions — a sign that MoviePass had not diversified its revenue streams.

Some major changes taking place for the past two months. Itum has worked out the new pricing model and he’s also taken over day-to-day operations from Lowe, who will instead work on the company’s strategic direction with Farnsworth. His goal is to not only find a more sustainable price point for the monthly subscriptions, but also to forge new relationships with studios and exhibitors. Itum wants Hollywood and the country’s theater chains to see MoviePass as a platform they can use to drive attendance on week nights and other slow periods, as well as to use the service to highlight movies that are more indie in spirit than the typical Avengers spinoff or Star Wars sequel. He did not elaborate on how those programs would be monetized.

At the same time, Lowe is working to spin off MoviePass from Helios & Matheson. He said that Helios will continue to own an equity stake in the new company, but did not reveal if the new entity would be publicly traded or privately held. As those plans are being hatched, Lowe said MoviePass has opted not to take on any more funding from Helios.

“We know this is going to take a long time, but from a financial standpoint, from a team standpoint, we’re committed to taking the long-haul marathon approach,” he said. “Our big goal over the last few months was to not put a drain on Helios’ funding.”

One thing the company will not do is rebrand. Despite getting a drubbing on Twitter and Reddit, the MoviePass name is here to stay.

“MoviePass can be a great name again by doing the hard work of being very transparent and open and not only apologizing, but fixing the product,” said Itum. “It’s a name that rolls off the tongue. People know it and they want to like it. If the experience is great, they will again.”

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