On Easter Sunday, as children hunted for brightly colored eggs, adults crowded into stately churches, and 20-somethings celebrated yet another excuse to brunch, I nestled into a large beige recliner at the Studio Movie Grill in Marietta, Georgia. I’d made a 30-minute trip through Atlanta traffic to see the kind of film—Ready Player One—that I’d typically stream on Netflix on an especially boring Sunday afternoon. But I chose to spend this sacred day at the movies because Ready Player One was free. Well, “free.”
I was in that theater by the grace of MoviePass, the movie subscription service that allows customers to watch lots and lots of films in theaters at shockingly low prices. I can’t tell you the exact number of movies or the precise price point because MoviePass’s business model seems to change with the phases of the moon. Sometimes the service costs $29.95 for three months and you can watch four movies per month. Sometimes it costs $7.95 per month (if you’re willing to pay for a year upfront) and you can watch one movie every day. When I signed up in late March, it was $6.95 per month (again, paying for a year upfront) for a movie per day. But as I write this in early May, the service is available for what its executives consider the “standard” price, which propelled it from 20,000 users to more than 2 million in just half a year: $9.95 per month for a movie per day.
If it sounds too good to be true, I have a Netflix subscription (and an Amazon Prime delivery, and an Uber ride, and a Blue Apron meal) to sell you. Plenty of super-popular, highly disruptive digital services operate at a massive loss. Sometimes those losses are subsidized by venture capital, negated by more profitable business lines, or simply ignored thanks to creative bookkeeping. MoviePass is just the latest rewrite of a well-worn script in the tech sector: Fake it till you have a huge number of loyal customers, then you’ve made it.
But there are still big questions about whether MoviePass can survive the “fake it” phase. Right now the company says it is buying 7 percent of all movie tickets in the United States, and it is paying full price for the vast majority of those tickets (often in expensive markets such as New York and Los Angeles). That has led to huge losses for Helios and Matheson, the analytics company that acquired MoviePass in August. In April 2018, the company’s independent auditor said they had “substantial doubt” that it can keep operating under its current model. And beyond questions about the core business model, there’s the volatile stock price, the dubious statements about user privacy, and the simple fact that the biggest movie chain in America wants this company to fail.
MoviePass might be the best (legal) deal in the history of entertainment. It also might collapse under the weight of its own success. Like Netflix before it, the company wants to build a large user base with a cheap, customer-friendly service, then use that base as leverage to bend a skeptical Hollywood establishment to its will. It’s a long con worthy of Lost (no longer streaming on Netflix as of January), but it’s tough to pull off. “I liken it to flying an airplane and repairing an engine that goes out while in midair and at the same time your tail wing has a big crack in it,” says Mitch Lowe, the company’s CEO (and a former Netflix executive). “We’re happy to fix things as we grow and can’t stop.”
My con was much more humble: I decided to use MoviePass throughout April to wring as much value out of it as I possibly could, watching enough films (and playing around with other moneymaking schemes) to see Avengers: Infinity War for less than a dollar. It was an arduous task that involved eating lots of popcorn, skipping meetings to watch movies during work hours, and seeing a man’s bare testicles get squeezed on-screen while sitting next to my mom.
Is MoviePass really the future of film or a sleight of financial trickery that won’t last? Easter proved the perfect time to start unpacking this question—it also happened to be April Fools’ Day.
Ready Player One
Studio Movie Grill, 5:45 p.m.
Scamming the movie theater is a teenage rite of passage. We’ve all turned one movie ticket into an impromptu double feature or sneaked our snacks in rather than buying concessions. I was thinking about these extremely low-stakes crimes (is sneaking in gummy bears a crime?) as I approached the box office attendant, cellphone in hand. I’d read that some theaters refused to accept MoviePass and wondered, briefly, if the FBI might be investigating the overlap between MoviePass and serial movie-hoppers. But the attendant simply asked for my six-digit MoviePass code, then printed me a Ready Player One ticket valued at $11.40 (select theaters like Studio Movie Grill let you pay using the app, but most require a debit card that MoviePass mails to customers).
MoviePass wasn’t originally built for a person like me, a fairly stereotypical moviegoer who can go months without a trip to the theater. The service, devised by entrepreneurs Stacy Spikes and Hamet Watt, launched in San Francisco in 2011 at $50 per month. It immediately became the ire of theater owners, who were not keen on the idea of an outside company changing people’s moviegoing habits without their input. “I just don’t want third parties setting our ticket prices,” said Ted Mundorff, chief executive of Landmark Theatres, the chain co-owned by Dallas Mavericks owner Mark Cuban. “We want to run our own business.”
MoviePass rolled out nationally in 2012, and introduced plans as cheap as $25 per month in certain markets. But the average moviegoer sees approximately five films per year; there’s no way that crowd was about to start spending $300 per year on movies. After an initial dustup over MoviePass’s disruptive potential, the company faded into obscurity, amassing only about 20,000 customers.
Lowe succeeded Spikes as CEO in 2016, determined to transform MoviePass from a niche product for film buffs into the next Netflix. He had the credentials to pull off the transformation. Lowe was a founding executive at the DVD-by-mail service, serving as vice president of business development and strategic alliances and bringing on Ted Sarandos, the eventual mastermind of Netflix’s foray into original content. Later he served as the president of Redbox, increasing its annual rentals to nearly 700 million. “I learned how important momentum is,” he says of his earlier gigs. “Growing your user base, growing your employee pool, growing your investor base, keeping all of those going in parallel is really important.”
Lowe’s plan was simple: Lower MoviePass’s price to $15 per month and find an investor willing to subsidize the money-losing business model. But then he met Ted Farnsworth, CEO of Helios and Matheson Analytics. Farnsworth was a serial entrepreneur (past ventures include a ’90s psychic hotline and a variety of penny stocks) who had just taken over a company that peddled in the nebulous world of “Big Data.” He had an even bolder idea. “My theory was if you did $9.95, it would become viral, it would take off,” Farnsworth says. “The American consumer was already programmed in the mind [to think] $9.95 unlimited is a great deal.”
On August 15, 2017, Helios and Matheson announced that it had acquired MoviePass and was lowering the monthly subscription price to $10 per month to see one movie per day. As part of the terms of the deal, Lowe had guaranteed MoviePass a $2 million bonus from Helios and Matheson if it could attain 150,000 subscribers within 18 months. The company reached the goal in two days. “We were definitely overwhelmed by demand,” Lowe says. “Consumers loved it much more than I had expected.”
There’s plenty for people to love about MoviePass. As I was washed away in the technicolor swirl of Ready Player One (favorite moment: catching the Jurassic Park T. rex in the race for the first key), I realized everything that made the movie enjoyable had to do with the spectacle of the silver screen. It would have been a lesser experience streaming on my living room television or my laptop a year and half from now. Thanks to MoviePass, I’d be able to have that big-screen experience whenever I wanted.
Midtown Art Cinema, 1:15 p.m.
I’d already seen Black Panther the week after it debuted, and the only movie I can ever recall seeing in theaters twice was Star Wars: The Force Awakens. But for “free,” why not relive the brutal fight scene where Killmonger usurps T’Challa and count the appearances of my guy from the River Tribe with the green lip plate (13)? MoviePass customers saw Black Panther more than 1 million times, and it’s easy to imagine many of them were repeat viewers. In an online survey of The Ringer’s audience, 47 percent of respondents said they had seen the same movie multiple times because of MoviePass.
At my screening, there were fewer than 10 people in the theater, but at least one of them, Paul Beck, was a fellow MoviePass user. The 28-year-old told me he saw only about four movies per year in theaters, typically with family members around holidays. But now, with MoviePass and some free time between his gigs as a cheerleading choreographer, he was planning to go twice per week. “With me and my friends, going to the movies isn’t something we do because it’s not very social,” Beck says. “It’s something that I like to do by myself during the day when all my friends are at work.”
If Beck follows through with his intense moviegoing regimen, he’ll be a drag on MoviePass’s bottom line. Lowe wants casual moviegoers like Beck to increase their activity to about 10 movies annually. He’s also betting that even if Beck plans to see two movies every week, he’ll eventually tire out and begin using the service less. The sweet spot for MoviePass is a customer base that averages about one movie per month so that the company breaks even on its core subscription offering.
Right now users are averaging 2.8 movies in their first month with the service and tapering off to about 1.2 movies in the fourth month, according to Farnsworth. That broadly lines up with The Ringer’s internal survey, in which 58.5 percent of respondents said they see three movies or fewer per month. However, 60 percent of respondents said their MoviePass usage stayed about the same every month. Only 18 percent said their trips to the theater decreased over time.
For MoviePass’s business to work, customers have to treat it a bit like a gym membership, eagerly signing up and gradually losing interest. The trouble is, watching movies is way more fun than going to the gym—especially during the summer blockbuster season that Infinity War just kicked off. “People maybe enroll [at the gym] because they’re feeling a little guilty and want to get in shape after Christmas. Then they stop using it,” says Patrick Corcoran, the chief communications officer for the National Association of Theatre Owners, an industry lobbying group. “With [MoviePass], you’re doing a similar thing and hoping people won’t actually go see things they like doing. So that makes it difficult.”
The Death of Stalin
Midtown Art Cinema, 4:30 p.m.
I decided to see The Death of Stalin primarily because I knew it involved the creator of Veep and Steve Buscemi. I have a friend who also enjoys Veep and various Buscemi-related content, so I dragged her along with me. She didn’t have MoviePass, and we ended up buying beers and snacks to go along with the movie. Midtown Art Cinema landed about $30 in revenue from our outing that they probably wouldn’t have gotten in a MoviePass-less world.
Why, then, are some theaters so anxious about the company’s very existence? MoviePass and AMC, the United States’ largest theater chain, have been feuding ever since the subscription service slashed its price. AMC tried (and failed) to ban MoviePass from being used at its theaters last August. MoviePass then blocked some AMC theaters from being available on its app in January to prove that customers would simply go to another nearby theater rather than buy a full-price AMC ticket. At CinemaCon, the annual convention of the theater industry, the president of the National Association of Theatre Owners said exhibitors don’t need to be saved by subscription services. No one seems to be exactly happy about a company that is paying them for millions of movie tickets every month.
“The theater owners are scared because they don’t know where this goes,” says Matthew Belloni, editorial director at The Hollywood Reporter. “This cheapens the experience to the effect that it’s essentially free. … That’s what they don’t want. They want the value of the moviegoing experience to be considered high.”
Some chains have come around to MoviePass’s vision. The parent company of Midtown Arts Cinema, Landmark Theatres, inked a deal with MoviePass granting the service discounted tickets in exchange for better promotion within the MoviePass app. About two dozen other independent cinema companies have agreed to similar deals. But the country’s three theater-chain giants—AMC, Regal, and Cinemark—continue to force MoviePass to pay full freight.
MoviePass is happy to make them suffer for it. Stunts like blacking out certain AMC locations (including Times Square’s AMC Empire 25, the busiest movie theater in America) are meant to show exhibitors that if they don’t come to their senses about the subscription future, they’ll pay a financial price. “Out of those big three, one of them is going to cut us a deal, and whoever the first one is is going to get the best deal for sure,” Farnsworth says.
“They all wish they had done this themselves,” Lowe says. “They know that we’re able to get people to go from Theater A to Theater B, from Movie A to Movie B. And we’ll expect some small portion of the incremental profits they generate. It’s kind of like how United Airlines or Marriott Hotels wishes that Expedia and Orbitz and Travelocity didn’t exist. … That’s who we are—we are the Orbitz of the movie theater business.”
Not everyone sees it that way. “One of the hallmarks of this business is that it’s built on trust and relationships,” says Corcoran, from the theater industry lobbying group. “If you’re sort of being extorted into a position, that tends to diminish the amount of trust you have in the company that’s doing that. Whether that’s what [MoviePass] is doing or not is going to be up to individual theater companies to make their decision.”
Isle of Dogs
UA Tara Cinemas 4, 7:45 p.m.
Outside Atlanta’s Tara Cinemas, I ran into my first technical problem. I was trying to use my MoviePass debit card for the first time to no avail. Since the card was supposed to be automatically activated when I saw Ready Player One, it should have been a seamless process; I select Isle of Dogs on the MoviePass app, $14.42 is magically beamed to my MoviePass card, and I swipe said card at the box office. But I kept getting an error message saying the card hadn’t been activated, and there was no discernible way to activate it within the app.
I braced for the worst. MoviePass has notoriously poor customer service, earning an F rating from the Better Business Bureau and more than 1,500 online complaints (Netflix has an A+ rating and fewer than 500 complaints). Multiple people claimed that their debit cards took months to arrive, if they arrived at all. Others said the company had charged them for a year’s subscription when the official website said they would be paying for a single month. Getting help when a problem arose proved near impossible for some. “Despite dozens of messages on [Facebook], dozens of emails, and numerous phone calls I never once managed to get customer service to reply to me,” reads one negative review from April. “As far as I am concerned they may as well be a scam.”
Lowe acknowledges that MoviePass’s customer service hasn’t been up to par, though he believes the internet creates a skewed impression that the service is full of aggrieved users. “If you just look at social media, you’d go, ‘Boy, what a disaster,’” he says. “But if you talk to 100 people who are MoviePass subscribers, you’ll find 70 of them absolutely love it, and you’ll find six of them who are upset.” In early March, the company hired TaskUs, a customer service outsourcing company operating out of the Philippines that has worked with Uber and Tinder.
Personally, my technical MoviePass experience was mostly positive. The company says it will take up to two weeks for your debit card to arrive in the mail, and many people online complain of longer waits, but mine came in eight days. And that evening outside the Tara, when I called the customer service number on the back of the MoviePass card, a woman named Amanda was able to get my card activated within five minutes. I haven’t had any trouble with it since.
A Quiet Place
Midtown Art Cinema, 8:15 p.m.
MoviePass remains a ramshackle operation relative to its now-massive size, but that fact can help unscrupulous customers as much as it hurts them. People have been known to use their MoviePass cards to buy popcorn, rack up rewards points at theater chains, and purchase tickets they scalp to other people. A company that’s having a hard time mailing out debit cards is also going to have a hard time tracking fraud.
I wanted to see, theoretically, if MoviePass has any protocols in place to figure out when users are trying to game their system. So I sent an email out to a bunch of my friends asking who, theoretically, might want to buy a movie ticket from me for $7.50. “I’m not a narc and you won’t go to jail,” I assured them.
Multiple friends were eager to participate, and I briefly imagined building a small fortune by scalping tickets on a daily basis. But that would require a lot of driving, standing shiftily outside the theater, and haggling with strangers. It sounded like too much work for the value of a Big Mac combo, so I decided to run the hustle just once, to see whether the company would somehow catch on to the scheme.
After buying a ticket to A Quiet Place at Midtown Arts Cinema on a Saturday night, I sat down on a bench to pretend I was waiting on someone, while the cashier who sold me the ticket paid absolutely no attention to me. Then, with a forced air of casualness, I sauntered outside, out of the sight of the same cashier who had already forgotten my existence. I posted up, as non-shiftily as possible, behind a huge stone pillar that was out of sight of the theater lobby. I thought about buying some cigarettes so I could take a long drag of one and flick it away as my friends approached and asked, “You got the goods?”
But my friends did not ask “You got the goods?” Instead, we made some small talk to avoid arousing suspicion, and then when the coast was clear (the coast was never not clear), I stealthily slid my A Quiet Place ticket into my friend’s hand. The Movie Police, if such a thing exists, didn’t have a clue. Later, I’d request $7.50 from my friend on Venmo with the comment line “[REDACTED].” As for MoviePass? The company was never the wiser (until I wrote about it on a national website).
A Quiet Place
Midtown Art Cinema, 1:30 p.m.
I actually did want to see A Quiet Place, though, so I returned four days later to the same theater (a different friend who was also a MoviePass user sneaked in some beers, increasing my “Wanted” level with the Movie Police). I’m not a big fan (read: deeply afraid) of horror movies, but I enjoyed this one, which scared me most because of how much it reminded me of a video game escort mission.
By this time, I had fed MoviePass a fair amount of information about myself. The company knew my name, my home address, and my credit card information. The company knew which genres of movies I liked and which theaters I frequented. The company suspected that I loved A Quiet Place enough to see it twice (fools!). But I still don’t know exactly what the company plans to do with all this data. MoviePass doesn’t really know either.
Advertising will be a key revenue driver for the company, and it’s especially important in making the fuzzy math surrounding its ticket-buying scheme translate into a profitable business. Right now studios pay the company to send users push notifications and emails promoting certain movies, or to receive prime placement within the MoviePass app. Lady Bird and I, Tonya are among the films that have been boosted in this way.
MoviePass wants to go much further with its targeting in the future. Data is the currency that users are paying, in addition to the 10 bucks a month, to make MoviePass viable. “It’s no different than Facebook or Google,” Farnsworth said at the time of the acquisition. “The more we understand our fans, the more we can target them.”
Executives love to talk about a “night at the movies” concept, through which MoviePass would send customers sponsored promotions for bars and restaurants near the theater. Such functionality would likely require location tracking, a topic that caused controversy back in March when Lowe said, “We watch how you drive from home to the movies. We watch where you go afterwards, and so we know the movies you watch.” In later interviews, he said the statement was “inaccurate” and “joking around.” MoviePass quickly disabled its app’s ability to passively track users’ movements. But some type of location tracking is likely still part of the company’s road map. “We will in the future someday, but it will be with new policies,” Farnsworth says.
I interviewed about half a dozen MoviePass users for this story, and no one was particularly concerned about how MoviePass might leverage their data, even in the wake of the privacy scandal involving Facebook and Cambridge Analytica. “I don’t think they’re going to be collecting any personal information,” says 33-year-old Mostafa Allatar after the Isle of Dogs screening. “They’re not like Facebook or something, collecting my private messages. So it doesn’t really bother me.”
The company has other strategies for making money. It’s begun acquiring films directly through its subsidiary, MoviePass Ventures, including American Animals after a premiere at the Sundance Film Festival in January and the delayed John Travolta vehicle Gotti in April. The company also recently acquired the showtimes listing service Moviefone in a deal valued at up to $23 million, which it plans to use as part of its film marketing strategy. “Selling advertising to the studios, getting money back from the theaters, pushing people into the theaters—there’s a ton of other revenue streams that come with this,” Farnsworth says.
Midtown Arts Cinema, 1:10 p.m.
Because I’m so lazy that I procrastinated on watching movies for free, I found myself in a predicament on April 20. I needed to see another movie but had only a two-hour window during the day when I had time, leaving me with three options. Amy Schumer’s I Feel Pretty looked like a “start watching halfway in on Comedy Central” type of film, and I didn’t want to view it outside its appropriate environment. Joaquin Phoenix’s You Were Never Really Here had a high Rotten Tomatoes score, but also appeared to be about a guy murdering people with a hammer, which seemed like too much negativity for a Friday. So I settled on Jon Hamm’s Beirut, which looked like surface-level escapism spit-shined with a serious veneer. Since I’ve spent the past three or so years coming very close to rewatching Blood Diamond, I decided this would do.
I gained no insights about MoviePass’s business this day, but I did appreciate that Jon Hamm’s character in this movie drank about as much as Don Draper.
New Vision Chantilly 13 (Montgomery, Ala.), 6:50 p.m.
By the time I was watching Blockers in my hometown of Montgomery, Alabama, with my mother sitting right beside me, I realized I was not built to be a film buff. I’d run out of movies I wanted to see after A Quiet Place but felt compelled to keep driving down my theoretical Avengers ticket price. On a visit home, when I told my mom I was going to see a movie about parents who get confused about their teenage kids’ sexually suggestive emoji, she was immediately game.
Blockers is also a movie made to be caught on Comedy Central while folding laundry, except it probably would have to be aired after midnight. We made it through John Cena butt-chugging and middle-aged people having sex on a couch just fine, but when character actor Ike Barinholtz got his bare testicles squeezed—and the camera did an up-close flash of them like an early-2000s gross-out internet meme—I felt an embarrassment I hadn’t experienced since watching the naked wrestling scene in Borat with my parents in high school (for the record, my mom laughed her ass off throughout Blockers).
My ticket was $5.50, only a third of the price of admission at most theaters in Atlanta. At that price, I’d need to see two movies per month to make MoviePass worth it, and three to make it a steal. There is not yet evidence that people in smaller markets are signing up for MoviePass en masse. That too could spell trouble for the company, which is counting on customers in cheaper markets to offset the film obsessives in New York or Los Angeles who could rack up a hundred dollars in ticket costs per month. Right now about 44 percent of MoviePass users reside in 10 major American cities, according to a study by the National Research Group.
Farnsworth believes MoviePass can reach 30 million to 40 million subscribers in the United States. That figure roughly lines up with the number of Americans who currently go the movies about once per month. If MoviePass can stay afloat at its current price point long enough, it will probably reach such heights. Who doesn’t want to go see lots and lots of movies for free? But there’s a lot that could go wrong between 3 million and 30 million customers.
“The worst-case scenario is that no-man’s-land in the middle, where they’re possibly cheapening the movie experience while not actually adding that much for the studios and theaters,” says The Hollywood Reporter’s Belloni. “And then they go out of business.”
Avengers: Infinity War
Regal Atlantic Station 16, 9:30 p.m.
There were so many people trying to see Infinity War on opening weekend that Atlanta’s largest movie theater threw together an unannounced screening 15 minutes after the sold-out one that I had planned to see. This extra screening was also packed, buzzing with the anticipation you can get only during an event movie on opening weekend.
I was seated next to a fellow MoviePass user, an Atlanta resident in his 30s named Karlos Emmanuel. He and his wife, Elizabeth, started using MoviePass about six months ago, and now go on one or two extra date nights to the movies every month. “It’s almost like you got Netflix, but you’re going to the theater,” Elizabeth says. The stakes for finding the perfect movie are now pleasingly low, so they end up seeing movies they never would have paid for individually, like Pacific Rim: Uprising. “Now it’s really not a decision [based on] how good the movie is,” Karlos says. “We just go if it’s halfway interesting.”
Infinity War is a particularly good movie to see with a crowd, filled with one-liners that sound less dopey among highly excitable children and deaths that seem more dramatic when accompanied by audible gasps. The biggest groan from the crowd came when [REDACTED] was raptured, the biggest laugh when Chris Pratt and Chris Hemsworth first squared off. No one was happy with the cliffhanger ending—a packed-house blockbuster often earns some applause at the end, but the most audible response was people cursing under their breath.
Elizabeth and I agreed that the movie was a little too busy for its own good—Black Panther and Captain America: Civil War had been more enthralling as smaller, self-contained stories. Karlos had dozed off during the climactic fight in Wakanda, but he didn’t seem too annoyed with himself. He figured he’d catch the movie again, for free, whenever he felt like it.
Actually, he won’t. The day Infinity War debuted, MoviePass banned repeat film viewings, apparently to cut down on fraudulent activity like account sharing among friends (or uh … scalping tickets). The company also now requires some customers to take photographs of their ticket stubs, likely to prevent them from using their MoviePass card to buy an IMAX or 3D screening (the subscription covers only 2D films). MoviePass customers are already used to getting yanked around. In addition to sometimes blocking theaters, the company has been known to black out certain movies in specific markets to show studios its power to influence box office returns.
And yet outside the angry corners of Reddit or the Better Business Bureau website, it’s hard to find customers who are mad at MoviePass. Eighty-three percent of respondents to the National Research Group survey said they were more satisfied with MoviePass than any other subscription services. When The Ringer tweeted a link to its survey, our mentions were filled with people espousing their love for the service. “I totally thought it was a scam when I first heard about it,” says Cheyenne Sanders, a 21-year-old college student in Virginia, who was watching a film per day when she first got her MoviePass in January. “I got to see everything that I had even a slight interest in. It was incredible.”
In mid-April, MoviePass introduced a cap of four movies per month on new subscriptions, a potential sign that heavy users like Sanders were throwing its precarious business model out of whack. The gravy train seemed to be slowing down. Sanity was being restored to the entertainment industry. Then, on Wednesday, MoviePass lifted the cap, bringing back the movie-per-day deal. Tens of thousands of people rushed to sign up.
Something has to give, according to traditional business sensibilities. But tech companies have been using twisted logic to turn “growth” into a suitable substitute for “profit” for decades now. MoviePass feels like the end point of a revolution that started when Amazon was practically giving away books on its tiny online store.
When I talked to Farnsworth the day after MoviePass reverted to its movie-per-day plan, I asked him how long the company could possibly maintain such a low price point. What I really wanted to know—what nervous theater owners, transfixed media onlookers, and a skeptical customer base along for the ride want to know—is how long a thing that’s too good to be true can continue being true.
“You never know,” Farnsworth says, laughing. “It might go down.”