Have you ever used MoviePass when going to the movies? How about Sinemia? I’ve been drawn to the current topic, not because I’m much of a movie buff but 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 faced a mountain of speculation as to whether it will still be standing at the end of 2018 due to the rate at which it is burning through cash. In May, 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 its share prices. At the same time, the service was burning through upward of $21 million per month and reportedly lost $150 million for 2017.
Yet, the owner of MoviePass was seeking to raise $1.9 billion in July, all while proclaiming that there were numerous potential investors lined up willing to pour more funds into the subscription service. This, despite Wall Street not having much confidence in its prospects. On the other hand, Sinemia, while seeming to have a more sober business model, has also been met with some amount of cynicism.
So, why are they still attracting investors willing to fork out millions? Is it that they are extremely good at communicating 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 cinema. 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.
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 seem a little more sobering. Its four-tier plan include $4.99 to see one movie per month and 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 suicidal and 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.
What are your thoughts?
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