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5 Ways AMC Is Putting MoviePass Out of Business

Rick Munarriz, The Motley Fool

MoviesPass may not be technically dead, but it's pretty much curtains for the Helios and Matheson Analytics (NASDAQOTH: HMNY) subsidiary. At its peak -- nearly a year ago -- there were more than 3 million film buffs paying $9.95 a month for the multiplex subscription plan. It's been all downhill ever since.

The popular narrative here is that the demise of MoviePass was self-inflicted. The model was flawed. Helios and Matheson didn't have the financial resources to see its cash-draining vision through. It ran out of money before it ran out of ideas. However, there's also something to be said for the role that AMC Entertainment (NYSE: AMC) played in shoving MoviePass into its downward spiral. Let's go over the ways that the leading multiplex operator played a starring role in the fall of the upstart service that wanted to revolutionize the way we watch movies. 

Red leather reclining seats at an AMC Theatre cinema.

Image source: AMC Entertainment.

1. AMC taunted MoviePass

MoviePass was a fledgling service with just 20,000 subscribers when Helios and Matheson gobbled up a majority stake in the platform two summers ago, immediately slashing its price. Paying $9.95 a month for the ability to see daily movie screenings was too good to be true, especially with Helios and Matheson paying retail for most of the tickets.

As the popularity of MoviePass exploded, it helped fill up movie theaters, but it also devalued the moviegoing experience. Most exhibitors simply ignored the MoviePass threat, but AMC CEO Adam Aaron relished the opportunity to mock the service. 

He pointed out in an earnings call that "hundreds of thousands" of MoviePass subscribers frequented AMC Theatres, and AMC was receiving $12.02 per movie from them -- more than its average price of $9.78. He was mocking a service that would put itself in the red with just the very first movie consumed. 

2. It played hardball

MoviePass knew it was never going to turn a profit with its service. It was a loss leader. The payoff would come from marketing to its growing subscriber base and eventually getting into the movie business itself. To help stop the bleeding it needed help from the multiplex operators. It tried to to get chains to accept $3 less for MoviePass-purchased tickets or give the service operator a piece of the high-margin concession revenue.

Then MoviePass made the fatal mistake of trying to shake down AMC. When the country's largest exhibitor refused to negotiate discounts with MoviePass, the platform blocked the use of the service at 10 of the busiest AMC locations. AMC never flinched. 

3. AMC built a better mousetrap

The biggest shot at MoviePass came from the launch of AMC Stubs A-List early last summer. AMC found the flaws in the MoviePass product -- the inability to make advance reservations, limiting access to just standard screenings -- and it carved out a service where folks can see as many as three movies a month including most of the premium screening formats. 

AMC didn't need to negotiate with itself for a piece of the concessions or a break on the tickets. It knew that it could run its superior model with better cost controls than MoviePass. AMC Stubs A-List is now up to 600,000 members, many of them likely ex-MoviePass subscribers. In other words, MoviePass saved AMC Entertainment the costs of educating the market on movie subscription plans.

4. Reserved seating seals the deal

With MoviePass already on the ropes late last year, AMC began implementing reserved seating across more of its theaters. This may not seem like much of a shot at MoviePass, but it actually strikes at the core of the cumbersome nature of MoviePass. 

Subscribers can't place MoviePass orders until the day of the screening, and even then they're at the mercy of it being an available option on the platform. MoviePass tickets also need to be purchased when the subscriber is at the movie theater. In short, by the time a MoviePass member gets to order an AMC screening most of the good seats are already gone.

5. Mobile ordering is the next shoe to fall

AMC's latest move is to expand the number of theaters that let patrons order food and drinks ahead of time through the mobile app. This is another tactic that may not seem to have MoviePass in its crosshairs, but it will also leave a mark. 

AMC wants people to engage more with its official mobile app, the same platform that actively promotes AMC Stubs A-List, advance reservations for movies, and screenings not available through MoviePass. The goal here is to cut out the middlemen, and that also includes MoviePass. 

MoviePass is dying, and AMC's fingerprints are everywhere. 

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Rick Munarriz owns shares of AMC Entertainment Holdings. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.