The idea of a subscription-based ticket service to see the latest theatrical releases was a revolutionary idea when it was introduced by MoviePass, a division of Helios and Matheson Analytics (NASDAQ: HMNY). Unfortunately, a viable business strategy was difficult to come by, and the company has struggled. AMC Entertainment Holdings (NYSE: AMC) has had much greater success with its member loyalty program, AMC Stubs.
AMC just announced that the multitiered Stubs program now boasts more than 18 million households and 46 million Americans, covering more than 14% of the population. This is an impressive achievement, especially considering that AMC topped just 17 million in early November, adding more than 1 million member households in just over two months.
Image source: AMC.
That's not the best part
While adding that many moviegoers to its loyalty program is notable, what's even more impressive is the growth of Stubs A-List. Since AMC introduced its MoviePass competitor last summer, the service has grown like wildfire, recently topping more than 600,000 subscribers in its first six months of existence.
Stubs A-List Debuts
Data source: AMC.
Subscribers to A-List, the top tier of the company's loyalty program, have the opportunity to watch up to three movies per week at any AMC theater location and in any format -- including showings at its premium large-format screens by IMAX (NYSE: IMAX) and Dolby (NYSE: DLB), for $19.95 per month, while also enjoying the perks of the lower tiers.
Members of Stubs Premiere, the lower tier -- which predated A-List -- enjoy a host of other benefits. These include free upgrades of popcorn and soda, free refills on large popcorn, priority lines at the concession, and a free large popcorn and large drink on your birthday. Customers also receive bonus points for every dollar spent, which results in a $5 reward for every $50 in purchases, including spending on concessions -- all for an annual cost of just $15.
A spin-off in the works
Helios and Matheson recently announced that it would spin off the beleaguered MoviePass business segment, which has struggled financially after slashing the price of its monthly subscription from a range of $40 to $50 per month to $9.95 last summer. This service allowed members to see a movie each day, and while its subscriber numbers soared, the business model ultimately proved unsustainable. The company instituted a series of price increases and began limiting access to new releases. The service eventually limited customers to three movies per month, with pricing plans ranging from $12.95 to $21.95 per month, a move that was unpopular with members and sent many packing.
At its peak, the service was reportedly burning through as much as $45 million per month, and for the first nine months of 2018, Helios and Matheson lost nearly $247 million, with most of that tied to MoviePass.
AMC launched Stubs A-List in late June, 2018. In its third-quarter earnings report, the company reported that its profits took a $6.9 million hit due to the launch of A-List, a far cry from the hundreds of millions in losses suffered by the MoviePass parent.
A much better footing
Where MoviePass was a prime example of an unsustainable business model, AMC has taken a much more measured approach. The company also has a significant advantage over its erstwhile competitor. Since AMC owns the theaters, it's able to make up for the discount plans with a greater volume of moviegoers and increased business at its concession stands. There are much greater margins to be had in popcorn and soda than in tickets.
Time will tell whether AMC will turn a profit from A-List, but the rapid growth of the service show that it's already a hit with movie buffs.
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