Why A Company Is Willing To Be Upside Down Financially
MoviePass has been making a tremendous amount of headlines lately. Whether from being lauded as the next best thing to happen for consumers (and certainly not theater owners) to endless reports on its dire financial woes, one thing is clear. The ability for people to purchase the opportunity to view unlimited feature films every month does have consumer purchasing interest.
The problem? The actual cost of delivering the product makes the company completely upside down. But many companies, especially apps, operate that way today. And the reason for that is simple. These products provide an incredible amount of insight into individuals behavior, and that data is incredibly valuable dollar-wise. In this blog, Hollywood Branded dissects the true motives of the film screening app to understand how MoviePass uses data collection to generate sales and discusses future product placement offerings.
What Is MoviePass
MoviePass is an experiential app, one that is dedicated to creating the ultimate cinema-centric night for its customers.
The service is nearly effortless, with a shiny red credit card appearing in the mail just a few weeks after forking over the $9.95 for the monthly subscription. The company is clearly doing well, as it now has more than 2 million subscribers. It even accounts for 6% of all movie theatre ticket purchases. The end of the year projects that paid subscribers should reach 5 million and account for roughly 20% of ticket purchases; at least, this is the goal. Not only are they growing their own audience, but they seem to be expanding the theatrical as well. Ironically, the demographic that seemed to beckon the apocalypse for theaters everywhere may in fact be its savior. Millennials now occupy over 50% of the app’s subscriber list.
The startup has explained that their main vision encompasses trying to “build a night at the movies.”
In exchange for the audience boost, Lowe and his MoviePass squadron requests discounts and revenue sharing from participating cinemas. Though, not all theaters are ecstatic about the proposed partnership. AMC, in particular, has blacklisted most of their prime theatre locations. They and Cineworld have even begun their own subscription services overseas.
Less than one month ago, Tech Crunch released an article questioning the true integrity of MoviePass. The headline read,
“MoviePass CEO proudly says the app tracks your location before and after movies.”
Really? Though it's hard to believe that a CEO like Mitch Lowe would happily reveal that his app watches our every move before and after we are watching the latest flick, we do appreciate the enthusiasm. After releasing a statement explaining his mistake, Lowe may have left his customers in a state of theatrical unrest. Fret not readers!
Mitch Lowe’s statements come from a keynote he delivered at the Entertainment Finance Forum entitled “Data is the NewOil: How will MoviePass Monetize It?” In this keynote, he explains that “We [MoviePass] watch how you drive from home to the movies. We watch where you go afterwards,” (TechCrunch).
Eerie Prom Date remarks aside, Lowe is simply trying to convey a very good point. MoviePass absorbs an enormous amount of information. What they are doing with that information, however, is the true subject of this debacle.
But...Do They Really Know? The True Moneymaker of MoviePass
But back to the original statement of “We know all about you,” that has left many scratching their heads. The reason why Lowe would say this is, well, because that’s their main business.
You see, the true service of MoviePass is not to create a monthly subscription service with fancy cards that grant all of your movie wishes; this would make them wizards. Their true business is data collection. Information is the gold that motivates these pioneers. This is also why Lowe was speaking at the Entertainment Finance Forum. Surrounded by an audience of data seeking experts could have made him a bit too forthcoming about future plans. He later corrects himself in a Tech Crunch article explaining that his statements were not actually a reality yet.
“I need to correct what I said...I implied we know where you are when you’re on the way to the movies, and that’s not what we do.”
He explains that there are two main instances where location tracking is used. Once upon opening the app to check for theaters, and another when the user checks in at the selected theater.
Sink Or Swim
However their business model of collecting data still reins true, and they show no sign of leaving this plan behind.
Revenue & Data Collection
The type of data that the company is collecting fits very nicely into a long term revenue plan. In order to create the ultimate movie experience, they need to know where their users are coming from and going to outside of the theatre destinations.
Some questions may include,
- Where do our users go before the movies?
- Do they visit their favorite restaurants?
- How early are users willing to show up to a screening?
- Do they stay in the theatre the whole time?
Basically, it is location based marketing. Lowe suggests that instead of selling the data that they acquire, they will “use it to better inform how to market potential customer benefits including discounts on transportation, coupons for nearby restaurants, and other similar opportunities.”
This revenue plan is crucial for MoviePass. It is, essentially, the only true way that the company has any chance in surviving the coming years. With the current plan, MoviePass pays theaters full price for their tickets only to resell them to customers for a massive discount. This is why the service seems to good to be true. It’s great for theaters. It’s great for consumers. It is not that great for MoviePass.
The company is actually losing money at a startling rate, barely staying afloat due to new age survivalist tactics. Whereas businesses used to raise money before growing themselves, MoviePass chooses to play to the same tune of Netflix and Spotify (obvious behavior given Mitch Lowe’s work history with both Netflix and Redbox). They raise enough money month to month to fund their losses while, at the same time, they continue to monetize their user base. They skipped the fundraising all together and went straight to harvesting a loyal base of consumers. This is a daunting method to rely on, especially for a company that has yet to break even in cash flow.
The Ends May Justify The Means
Despite all of this, the company boasts inevitable increases in its base. Overall company costs have decreased due to lower costs of tickets, lower member churn, lower usage, and a combination of revenue from studios and brand partnerships. If MoviePass continues to keep a consumer first mentality without losing trust its base and maintaining strategic partnerships with various brands, they may just be able to rise into the next year.
Privacy will always be a major concern for consumers, but it may be forgotten when showered with movie going experiences that rival any other competition. With the announcement of their in house studio, MoviePass Films, the company will also be looking for solutions to generate broader exposure. Future opportunities will include dining partnerships with restaurants and brands paying for product placements in their films.
About That Product Placement Concept
So now that we know about MoviePass' goal to use product placement as a way to fund their company, one rue question still remains. Will brands jump on board? Let's be honest, brands are incredibly picky about what film projects they should pay for that their brand can be integrated into. They are usually much more open about product trade out or loan of product deals to help the film's lower line budget have some substantial cost savings. That's not to say brand's never pay. They absolutely do - but the opportunity must be a perfect storm with the right cast, the right storyline, and the right audience. Which means agencies like ours sift through dozens and dozens of projects to find the perfect gleaming opportunity for brand clients.
To learn more about making product placement work for your brand, read our blog on 3 Reasons Why Productions Use Product Placement, as well as these blogs:
- 4 Common Myths About Product Placement Debunked
- 10 Surprising Reasons Why Brands Do Product Placement
- 8 Ways To Use Product Placement Assets To Amplify Your Brand Into Sales
- 3 Important Steps In Planning Product Placement Strategy
- Thinking Product Placement Cost Is High (It Isn't!)
MoviePass's brand managers will have more than enough to think about in the coming months than creating strategies for brand partnerships through product placement, and your agency's own brand managers may not have adequate time to properly handle the demands of a smart integration. The easiest way to lay the foundation and develop a successful integration is to engage a seasoned entertainment marketing expert with social media and PR experience to provide guidance and actual activation.
Ever wondered how a comprehensive product placement program works? Do you want to know how to create a promotional partnership strategy with a movie partner? This video will answer all of your questions as it shows the steps and processes taken by Hollywood Branded that lead to your brand increasing both consumer engagement and sales!