Last week, I had a discussion with my boyfriend about the business model of the Movie Pass service. We both subscribe to it, and are heavy users — we watch 1-3 movies a month. Almost every Friday, we’re at the movies. He watches it more frequently since his brother has it too, and they watch movies when they’re free on weekday nights. It helps a lot that I live right next to a great movie theatre in Huntington Beach. So you can find us hanging out there watching as many films as possible when we’re together.
We were wondering how Movie Pass makes money. With a $9.99 monthly subscription that allows you to watch unlimited movies, the value it provides is much greater than the financial cost to us. Their loss is almost equal to our gain: everytime we watch a movie, Movie Pass has to shell out the cost of every ticket and make that available in our Movie Pass cards, which we swipe at the credit card counter, just like a regular credit card.
Essentially, Movie Pass has to come up with the money instantaneously between we check-in to the app and we swipe our cards, which I would say happens in under 5 minutes. I’m not convinced yet about its longevity, but it is an awesome service especially for movie buffs like us. Perhaps I don’t understand the business model clearly, but with the uncertain revenue source (the monthly fee is currently not enough to sustain the service), and the competitive landscape, they have to come up with an innovative business model.
There’s so many content providers out there these days– Netflix, Hulu, HBO Go. Actually, forget about all of them– even with Youtube alone, there is a non-stop supply of video c content that can last us a lifetime. Literally. As consumers, it’s hard to choose from so many different options, not just among the array of providers, but genres, and seasons and episodes…. and the list goes on.
When I was studying media management at Northwestern, my professor recommended that we read Anita Elberse’s work on the business of entertainment. She is a Harvard professor and researcher, focusing on the entertainment industry and the business model/profitability of entertainment companies. One the most memorable takeaways from her research is how film studios lose money in general on smaller movies, but their business is sustained by the profit they make on blockbusters. Much like how car companies, such as Honda, use the profits earned from highly profitable cars like Civic, in order to fund concept / futuristic cars and develop advanced technology. The big sellers certainly subsidizes R&D for current and future projects.
In the entertainment context, the biggest asset companies have is their customer base. They can communicate to them again and again, convincing them to consume content, merchandise or beta test new projects. Another opportunity is the scale of reach that companies can realize with digital audiences. Even if you don’t have a customer base yet, it’s not too late to start one, given that so many people can be reached online. And preferences change so quickly. New trends are always introduced. If you treat digital content as a product or service, you can always shop it around and find new audiences to consume it.
So, if Movie Pass can find a way to get ahold of content through partnerships with content creators (ie. studios), and find a way to distribute it effectively and efficiently (maybe online, on demand, as soon as they hit theatres?) then perhaps those folks working at Movie Pass is onto something. They’re biggest bet will be on the audience they are cultivating, whether to sell their product, or to leverage as a data asset to do business with other companies. And the customers are highly marketable to others who want to reach them: a population of movie lovers with discretionary income for entertainment, who share a lifestyle around consuming content. And that is tantalizing to many companies, not just in the entertainment world— companies in luxury, sports, gaming, publishing, and other lifestyle-based businesses will fork out money to get in front of these consumers.