Have you ever used MoviePass when going to the movies? How about Sinemia? I’ve been drawn to the current topic because the two movie subscription services have been in the news lately, mostly due to their business models and concerns about whether they are sustainable.
MoviePass, for instance, has managed to overcome mountainous financial challenges to stay in business. In fact, the company was under the microscope for much of 2018, with many wondering if it would still be standing at the end of the year due to the rate at which it was burning through cash. For example, in May 2018, its parent company Helios and Matheson Analytics Inc. reported that it only had cash flow of $15.5 million, which triggered a sharp decline in share prices for MoviePass. At the same time, the service was spending upwards of $21 million per month, all following a reported loss of $150 million in 2017.
The owners of MoviePass decided to remain optimistic of its chances of bouncing back and sought to raise $1.9 billion in July. That optimism was anchored by the belief that there were numerous potential investors lined up willing to pour more funds into the service despite growing competition.
Its main competitor, Sinemia, appeared to have had a more sober business model. Sinemia was met with some amount of cynicism when it just launched in North America, especially as it related to keeping up with demand for its services. In addition, the company was hit with a lawsuit by MoviePass for patent infringement, which I learned is still before the courts.
In light of the challenges faced by both Sinemia and MoviePass in the recent past, why have they still been able to attract investors? Is it that they are/were extremely good at communication their vision in an attractive way? I did a bit of digging to see if I could answer this question for myself, as well as for those of you who might be wondering the same thing. First, let’s look a bit closer at the two services and how they operate.
The more popular of the two, MoviePass has been around since 2011. Initially, they were just a service offering discounted movie tickets. In the summer of 2017, however, its popularity erupted fantastically, after they came out with an unlimited plan that moved from $45 to just $9.95 per month. That move has since seen the service’s user base go from just 12,000 to over 3 million, which is an impressive feat. The main draw of its unlimited plan is that it allows subscribers to see one movie per day for an entire month. Its other plan for $7.95 offers three movies per month.
If you do the math, $9.95 works out to about $0.33 cents per movie ticket if a subscriber did, in fact, go to the movies every day using the plan. That’s far less than the actual cost of a movie ticket, even the very cheap ones, and MoviePass would have paid the full cost for each ticket upfront to the cinemas. Right away, it’s not hard to see why MoviePass has been losing money despite dramatically growing in number of users.
But MoviePass is not just about trying to sell movie tickets for unbelievably low prices. Its parent company seems to have a long-term, money making strategy. For starters, Helios and Matheson Analytics Inc. is a major data collections company. Simply put, the company gets data on the movie-going habits of its users, which it can then sell to players in the film industry, including movie studios, cinemas, and distributors.
In addition, MoviePass has entered into deals with studios and distributors, starting with showing ads on its mobile app for low-budget movies. On top of that, they have gone into the ownership and distribution of movies under the moniker MoviePass Films. So far, they have bought the rights for a movie called “American Animals,” and has deals for several upcoming movies after joining forces with Emmett Furla Oasis Films.
MoviePass is also hoping that cinemas in general can play a part in cutting its costs due to the fact that its users tend to spend more at the concession stand. It’s no secret that cinemas make more money from people buying popcorn and soda than they do on movie tickets and, with MoviePass users reportedly spending an average of $13 on food, which is more than twice that of non-MoviePass users, the company could see theater chains cutting it some slack on how much it actually pays for each ticket.
Update: MoviePass has been juggling its subscription fees since the start of 2019, having switched to a three-tier plan in January. As of April, the movie ticket subscription service has reverted back to its original $9.95 offer, albeit with heavier restrictions, according to this article.
Founded in 2014, Sinemia is a startup from Turkey that also launched in Australia and the U.K. before coming to the U.S. in 2017. Its numbers in terms of plans seemed a little more sobering. Its four-tier plan includes a $4.99 offer to see one movie per month, as well as a $14.99 subscription that allows a user three movie tickets per month. When it was entering into the U.S. market, its founder and CEO, Rifat Oguz, raised $1.5 million.
Not only that, he described the MoviePass business model as unsustainable, even while lauding his service to be more user-friendly. And in some ways, he seems to have a point; although Sinemia’s main plan costs more while offering far less movies, it doesn’t put a restriction on the types of shows moviegoers can watch. Users can watch any type of movie, whether 2D, 3D, or IMAX. On the other hand, MoviePass users can only watch 2D movies.
In addition, Sinemia offers advance ticketing, meaning that its users can purchase tickets days ahead of going to the movies. In comparison, MoviePass users can only buy a ticket through the mobile app when they are within 150 feet of a cinema.
Also, Sinemia believes its service makes more sense because most people go to the movies only a few times per month instead of every day. Of course, MoviePass supporters counter that by saying most of its users would still benefit, even if they went to the movies just once per month.
Sinemia has been growing, nonetheless. Oguz has proven to be a competent young entrepreneur so far, reporting an increase in customer base by 50% in May 2018 alone. And it has been rolling out innovative plans, such as Sinemia for Two, which promotes couples going to the movies. It has also been offering restaurant deals to its customers and partnered with ride-sharing services. The company has also reported a healthy operating profit margin, in contrast to the financial woes being faced by MoviePass.
Still, Sinemia has not been without its challenges. It was heavily criticized after it ran out of membership cards earlier this year. It has also been sued by MoviePass, an action which is still before the courts. But overall, Sinemia seems to have more stability and is even expecting another round of financing by year end while looking to further expanding into Asia.
With all that said, only time will tell whether MoviePass and Sinemia manage to survive, especially with looming competition on the horizon. Large cinema chain AMC, for example, has already rolled out a $20 per month subscription service which could bite into the popularity of both MoviePass and Sinemia.
Update: While updating this article in May 2019, I learned that Sinemia has announced that it will be shutting down operations in the U.S. in May.
What are your thoughts?
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‘Mylène’s Blog’ gives you an answer to something you’ve been curious about. ⑇ Are you a songwriter or have friends who are? I co-founded Tunedly, a selective music publishing and recording studio. ⑇ The Homepage of my website is the best place to learn about me. LinkedIn Twitter Facebook ⑇