Customer Engagement

US: Can loyalty save the movie box office?

Can loyalty save the movie box office?The US box office just suffered its worst performance in years as Hollywood’s usual summer diet of superhero flicks, sequels and remakes failed to entice the couch potatoes at home binge-watching Rick and Morty and Stranger Things to put down the plate pizza rolls and brave the multiplex. To capture market share and retain loyal moviegoers, theater chains have long managed their own proprietary loyalty programs. And yet, with the box office doldrums seemingly unshakeable, what reward could turn the tide? Enter a startup that aims to entice loyalty film fans with a fee-based membership program offering all-you-can watch binging at your local theater. Sounds great – so why are theater chains fighting it?

By Rick Ferguson

Didn’t make it to your local multiplex to catch Johnny Depp’s Pirates of the Caribbean: Dead Men Tell No Tales, Michael Bay’s Transformers: The Last Knight, or Tom Cruise’s The Mummy? Don’t worry – no one else did either. The resounding lack of interest in Hollywood’s summer movie slate resulted in the worst summer box office haul in a decade – at $3.7 billion, the take is down 14 percent from last year, according to figures from Box Office Mojo, and the final weekend of August 2017 resulted in the worst single week at the box office in 16 years. The box office slump has likewise seen theater chain stocks get beaten like circus monkeys; AMC Entertainment Holdings, the worst-hit, has lost 45 percent of its valuation this year.

There’s no shortage of blame to go around: the theater chains blame Hollywood for producing bad movies no one wants to see, while the movie studios blame everything from Netflix to movie-review site Rotten Tomatoes to the often-poor theater chain experience for the slump. While the film business is notoriously streaky, just one Wonder Woman or It away from recovery, there is now little margin for error in the film business. What, if anything, can be done to turn the tide?

One way to do so is to consolidate the spend and increase the frequency of movie fans – those hardy souls who still enjoy the communal experience of watching movies on the big screen. Theater chains have long experimented with customer loyalty programs to reward frequent movie-goers, and all of them are variations on a theme – go to the movies, swipe your card at the kiosk, and earn free popcorn and sodas as a reward for your loyalty. To reverse their flagging fortunes, some chains have even doubled down on loyalty – AMC, for example, recently revamped their Stubs program to include both basic and premium levels, and saw their membership triple.

Now a three-year-old startup aims to build a membership program that allows movie fans unlimited access to theaters for a monthly subscription fee. Launched in 2014 as a partnership with AMC, MoviePass allows unlimited access to AMC theaters for moviegoers willing to pay around $40 per month. The pilot program, launched as an 18-month test in Boston and Denver, yielded impressive results, according to statistics courtesy of Vulture: “The findings? Viewers went to the movies 100 percent more thanks to MoviePass. And perhaps even more meaningfully for the bottom line, popcorn sales shot up by a whopping 123 percent.”

Those were great numbers, and the success of that pilot now sees MoviePass accepted at 90 percent of movie theaters around the country. The hefty monthly fee, however, kept the subscriber base low – until earlier this year, when MoviePass lowered the monthly fee from $40 to $10 a month. Suddenly those elusive Millennials – who enjoy paying subscription fees for everything – flocked to the service, which has now grown to over 300,000 subscribers.

The problem? MoviePass pays roughly full freight for the movie tickets it passes on to its subscribers – and no one can figure out how the company can make money buying movie tickets and selling them at a loss if a subscriber sees more than one film a month. The price drop also enraged original partner AMC, which issued a feverishly angry press release in response. Money quote from AMC:

“AMC Theatres announced today its concern that an announcement by a small fringe player in the reselling of movie tickets is not in the best interest of moviegoers, movie theatres and movie studios. Accordingly, AMC is consulting with its attorneys to determine if or how AMC can prevent a subscription program offered by MoviePass from being used at AMC Theatres in the United States.”

Two questions arise from this development. First, what, besides shortly declaring insolvency, is MoviePass’s business model? It’s one thing to offer $10 per month as a promotional price to drive membership growth; it’s quite another to expect members to stay if the company later jacks up the price. According to insiders, the company’s real play may be the data it collects on movie-goers. Money quote from Vulture:

“The service’s bigger play, of course, is Big Data: the accumulation of detailed user profiles indicating moviegoers’ locations, genre preferences, their go-to multiplex, frequency of attendance, and even snacking habits. Last month, the company sold a 51 percent stake to the firm Helios and Matheson Analytics — whose home page actually roars in all-caps 50-point font, ‘WE ARE BIG DATA’ — for $27 million.”

And MoviePass CEO Mitch Lowe envisions the program evolving into an entertainment-themed loyalty coalition built around a payment app:

“We want to create a whole, ‘Go to this bar, go to this restaurant, get discounts. Use your MoviePass card to pay for everything. And get a bill at the end of the month.’ You walk out of the movie theater, we can offer you a digital soundtrack to that film, right when you’re emotionally charged. Or offer you a copy of the film when it comes out.”

That’s not an improbable vision – so why doesn’t AMC support it? The reason may be that the company, and its theater-chain rivals, is in denial about the changing nature of the movie business. Other than the occasional blockbuster, most movies play to empty seats – so why not fill them full of MoviePass subscribers? AMC seems to think it’s still in the business of selling movie tickets, when it’s really in the business of selling entertainment experiences to its customers. Just as the music business had to adapt to the death of album and CD sales in favor of streaming and concert revenue, so too may the movie business one day adapt entirely to the subscription model – the films essentially given away as loss leaders by theaters who then upsell movie-goers with concession sales, VIP seats, and other perks.

The only problem with this model? Theaters would have to give a cut of that revenue to the studios that make the films, or they won’t keep making them. Adapting to the changing film industry landscape may require unprecedented cooperation and revenue-sharing amongst theater chains, films studios, and companies like MoviePass. That’s a tall order – to thrive in the age of the customer, however, the film industry will have to rise to the challenge.

Rick Ferguson is Editor in Chief of the Wise Marketer Group and is a Certified Loyalty Marketing Professional (CLMP).

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