MoviePass is likely playing hardball by kicking 10 AMC theaters off its service, and what happens next could have big implications for its business

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Miramax

  • MoviePass, the $9.95-a-month movie theater subscription service, kicked 10 big AMC theaters off its app.
  • It’s likely because AMC has refused to give MoviePass discounted tickets or other preferential treatment.
  • Whether or not AMC caves will have big implications for MoviePass’ long-term financial viability.

This week, the cold war between MoviePass and AMC saw actual direct conflict, with the movie-subscription app removing 10 big AMC locations from its service.

The CEO of MoviePass’ majority shareholder, Ted Farnsworth (of Helios and Matheson), pointed out that this represented “less than 2% of theaters” (AMC has 380 total locations). But it still raises concerns for users and investors, and is worth examining.

So why is MoviePass kicking some AMC theaters off its platform?

The most likely explanation is that AMC still refuses to give MoviePass discounted tickets, and MoviePass is trying to play hardball in negotiations.

The looming critique of MoviePass is that by charging a monthly subscription of $9.95, and paying movie theaters full price for tickets, it is essentially selling you $1 for $0.50. The thinking goes like this: Of course it’s signed up 1.5 million people, but eventually it will collapse under its own weight because it’s financially unsustainable.

This is a view that’s been expressed, publicly and privately, by some movie-theater execs and industry analysts. They think that if MoviePass can’t negotiate discounted tickets and a cut of concessions, it is doomed to failure.

moviepass graphic samantha lee

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Business Insider/Samantha Lee

MoviePass has a plan for this. When I talked to MoviePass CEO Mitch Lowe last year, he said the company was heavily focused on getting theaters on its side and into its system. The idea was that in exchange for promotion in the MoviePass app and other perks, theaters would give MoviePass a discount on tickets. The figure quoted at the time by Lowe was a 20% lower ticket price (though that could have changed).

But AMC has never been interested.

On a earnings call in November, AMC CEO Adam Aron said: “AMC has absolutely no intention, I repeat no intention, of sharing any – I repeat, any – of our admissions revenue or our concessions revenue with MoviePass.”

Farnsworth expressed this stance in another way in a statement Friday: “Since the get-go, AMC has not been interested in collaborating with MoviePass.”

So AMC doesn’t want to give MoviePass any special treatment (though it will still accept the full-price ticket sales from MoviePass members).

Now by booting 10 AMC theaters from its app, MoviePass seems to be flexing its muscles, likely trying to prove that its 1.5 million subscriber base can do some real damage to the bottom line of the top US theater chain.

“We already know in past testing that MoviePass subscribers are not theater-loyal,” Farnsworth said. “They’re happy to drive by a theater that may be closer to a theater that will accept MoviePass – because of the MoviePass value.”

It’s probably no accident that the theaters getting thrown out of MoviePass are in major markets – New York, Boston, Los Angeles – places where people have a choice of whether to go to AMC or somewhere else.

Will AMC feel that pain and cave? The answer to that question will have huge implications for the long-term financial viability of MoviePass.