WEBVTT - TechStuff Gets a MoviePass 0:00:04.120 --> 0:00:07.160 Get in touch with technology with tech Stuff from how 0:00:07.200 --> 0:00:14.080 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:14.160 --> 0:00:17.159 I'm your host, Jonathan Strickland. I just happened to be 0:00:17.200 --> 0:00:20.240 an executive producer at a little place called hell Stuff Works, 0:00:20.760 --> 0:00:25.400 and I love all things tech and listeners, Susanna, don't 0:00:25.440 --> 0:00:27.480 you cry for me? Asked if I could do an 0:00:27.520 --> 0:00:31.880 episode about a company called movie Pass, which has made 0:00:31.920 --> 0:00:35.159 the headlines a few times over the last year. So 0:00:35.200 --> 0:00:37.559 where did this company come from? What does it do, 0:00:37.880 --> 0:00:40.680 how does it make money? Does it make money? And 0:00:40.760 --> 0:00:45.120 what is its future? Does it have a future? Well, first, 0:00:45.560 --> 0:00:47.199 before I go into the history, I think it's a 0:00:47.240 --> 0:00:50.640 good idea to explain what movie passes. Value proposition is 0:00:50.880 --> 0:00:54.600 what it's all about. But things do change. It's it's 0:00:54.840 --> 0:00:58.520 method and business plan has changed dramatically several times, especially 0:00:58.560 --> 0:01:01.160 in the last year. But here's is a general overview. 0:01:01.880 --> 0:01:05.600 More or less. The company offers up a subscription based 0:01:05.800 --> 0:01:10.640 service for going to the movies to see movies in 0:01:10.760 --> 0:01:15.520 movie theaters for a recurring regular fee. Subscribers get to 0:01:15.560 --> 0:01:18.639 go to the movie theaters and watch movies a certain 0:01:18.720 --> 0:01:22.800 number of times per month. That number changes depending upon 0:01:22.959 --> 0:01:26.240 what era of movie passes history we're talking about. So 0:01:26.360 --> 0:01:28.480 rather than buying a ticket every time you go to 0:01:28.520 --> 0:01:31.960 the movie theater, you would subscribe to this service, and 0:01:32.160 --> 0:01:37.040 at a participating theater you would be able to activate it. 0:01:37.240 --> 0:01:40.000 And a lot of theaters did not want to participate, 0:01:40.040 --> 0:01:42.560 but didn't have much choice in the matter. The business 0:01:42.560 --> 0:01:45.279 plan left a lot of people wondering how the heck 0:01:45.520 --> 0:01:49.120 movie pass was going to make money because someone still 0:01:49.160 --> 0:01:52.080 has to pay for those movie tickets, and movie tickets 0:01:52.120 --> 0:01:57.560 aren't necessarily cheap. So unless movie Pass is charging an 0:01:57.720 --> 0:02:02.440 enormous subscription fee and as get incredible deals on movie 0:02:02.440 --> 0:02:05.440 ticket prices with these movie theaters, they're going to start 0:02:05.480 --> 0:02:09.519 losing money pretty fast. Well. According to the National Association 0:02:09.600 --> 0:02:13.080 of Theater Owners, the average movie ticket price in the 0:02:13.160 --> 0:02:17.520 United States hit eight dollars ninety seven cents in two 0:02:17.560 --> 0:02:20.160 thousand seventeen, which is the most recent year they have 0:02:20.280 --> 0:02:24.560 information available. That same page mentions that if you took 0:02:24.560 --> 0:02:28.840 a the average price in nineteen seventy seven, that was 0:02:28.919 --> 0:02:31.799 when it was a two dollars twenty three cents per ticket, 0:02:32.320 --> 0:02:35.480 and then you adjusted that amount for inflation, it would 0:02:35.480 --> 0:02:38.480 be the same as nine dollars and forty cents in 0:02:38.520 --> 0:02:41.959 two thousand seventeen. So the point the Theater Association is 0:02:42.000 --> 0:02:46.040 trying to make is well, sure, it costs more dollars 0:02:46.480 --> 0:02:50.519 now than it did in nineteen seventy seven, but in actuality, 0:02:51.040 --> 0:02:54.840 from a purchasing price standpoint, it's cheaper than it was 0:02:54.880 --> 0:02:57.240 in nineteen seventy seven. So going to the movies as 0:02:57.240 --> 0:03:01.560 a bargain now, that's just the national average. I would 0:03:01.600 --> 0:03:04.160 not be surprised to hear from you guys in the 0:03:04.280 --> 0:03:08.639 United States in various places that the ticket prices are 0:03:08.760 --> 0:03:12.000 much different from eight dollars and ninety seven cents per ticket. 0:03:12.040 --> 0:03:14.760 I can tell you right now, if movie ticket prices 0:03:15.120 --> 0:03:18.399 were eight dollars in ninety seven cents here in Atlanta, 0:03:18.919 --> 0:03:23.320 I'd go to the movies way more frequently. According to 0:03:23.800 --> 0:03:27.920 a site called ex pattistan, which is a site that 0:03:27.919 --> 0:03:31.800 helps determine the difference in cost of living in various cities, 0:03:31.919 --> 0:03:34.880 so if you wanted to relocate somewhere, you could find 0:03:34.920 --> 0:03:37.720 out how much money you would need to have your 0:03:37.800 --> 0:03:40.560 your you know, quality of life in that new place. 0:03:41.000 --> 0:03:44.200 The cost for two movie tickets in Atlanta, Georgia, that's 0:03:44.200 --> 0:03:47.920 where I live, is twenty five dollars, which means if 0:03:47.920 --> 0:03:50.440 you break that down by half, it's about twelve dollars 0:03:50.440 --> 0:03:54.040 fifty cents per ticket. That is way higher than that 0:03:54.160 --> 0:03:57.360 supposed national average of eight dollars and ninety seven cents, 0:03:57.960 --> 0:04:00.320 and in other cities it's way more and so of 0:04:00.480 --> 0:04:03.200 then twelve dollars fifty cents, especially once you start looking 0:04:03.240 --> 0:04:06.640 at special screenings, like screenings where you can reserve a 0:04:06.720 --> 0:04:10.920 seat or three D or imax, that kind of stuff. 0:04:10.960 --> 0:04:14.600 So if you subscribed to movie Pass, and if the 0:04:14.640 --> 0:04:17.760 subscription fee was something like ten bucks a month and 0:04:17.800 --> 0:04:21.000 you saw more than one movie, then you would be 0:04:21.680 --> 0:04:23.560 saving a huge amount of money. And how the heck 0:04:23.640 --> 0:04:26.800 was the company supposed to make money that way? How 0:04:26.880 --> 0:04:29.119 was it going to make money? If it's spending more 0:04:29.200 --> 0:04:32.000 on tickets, then it's getting in subscription fees. That's part 0:04:32.040 --> 0:04:34.880 of what we'll look into. So now let's take a 0:04:34.880 --> 0:04:36.839 look at the birth of movie Pass and how it 0:04:36.880 --> 0:04:40.080 all got started. This goes back to two thousand eleven 0:04:40.160 --> 0:04:42.280 and a couple of co founders. So one of our 0:04:42.360 --> 0:04:45.960 key players in this story is a guy named Stacy Spikes, 0:04:46.240 --> 0:04:48.880 and Spikes got started in the nineteen eighties. He started 0:04:48.880 --> 0:04:52.320 as a project manager for Motown Records, which is pretty 0:04:52.400 --> 0:04:55.280 darn cool. He worked for folks like Spike Lee and 0:04:55.360 --> 0:04:58.600 Queen Latifa, pretty awesome. He then went on to go 0:04:58.720 --> 0:05:02.400 work with Sony and their music division before transitioning to 0:05:02.400 --> 0:05:06.279 the head of marketing for Miramax. Back in nine he 0:05:06.360 --> 0:05:09.800 founded a film festival in n in New York City, 0:05:10.120 --> 0:05:12.599 and he had a history in the entertainment business that 0:05:12.720 --> 0:05:15.800 dated a couple of decades, so he had been around 0:05:16.120 --> 0:05:19.480 for a while before coming up with this idea. The 0:05:19.560 --> 0:05:22.280 other key player in the early days it is a 0:05:22.320 --> 0:05:25.680 guy named Hammett wat What had earned a degree from 0:05:25.760 --> 0:05:30.760 Florida Agricultural and Mechanical University back in nineteen four. His 0:05:30.800 --> 0:05:34.200 first job was with the New Africa Opportunity Fund, which 0:05:34.240 --> 0:05:37.520 is an investment company that focused on opportunities in Africa, 0:05:37.760 --> 0:05:41.640 and in two thousand he founded an advertising company called 0:05:41.760 --> 0:05:45.000 Next Medium. He would serve as the CEO of that 0:05:45.040 --> 0:05:47.680 company until two thousand seven, then he would transition to 0:05:47.880 --> 0:05:50.560 Chairman of the board and then two years later he 0:05:50.600 --> 0:05:54.000 would step down. So for three years while he was 0:05:54.120 --> 0:05:57.279 also working at Next Medium, he also served as a 0:05:57.279 --> 0:06:01.599 consultant for Nielsen Media Research. Then in two thousand nine, 0:06:01.680 --> 0:06:05.120 he would become an entrepreneur in residence for True Ventures, 0:06:05.200 --> 0:06:09.400 a venture capital firm. The two of them met and 0:06:09.760 --> 0:06:13.360 got to talking about entertainment and movies and decided to 0:06:13.400 --> 0:06:16.200 collaborate on a project with the goal of becoming the 0:06:16.320 --> 0:06:20.039 Netflix of the movie going experience. Which is funny to 0:06:20.080 --> 0:06:22.680 me because if you listen to my Netflix shows, you 0:06:22.680 --> 0:06:25.320 know that Netflix started off to try and become the 0:06:25.400 --> 0:06:29.800 Amazon of something. So movie Pass was trying to become 0:06:29.800 --> 0:06:32.320 the Netflix of going to the movies. Netflix was trying 0:06:32.320 --> 0:06:36.599 to become the Amazon of something. They weren't sure what 0:06:36.880 --> 0:06:40.800 before they really got settled on the movie rental agency. 0:06:40.960 --> 0:06:43.599 But never mind all that. The plan was to create 0:06:43.640 --> 0:06:46.679 a service in which users would subscribe for a monthly 0:06:46.760 --> 0:06:51.520 fee of fifty dollars a princely some In return, they 0:06:51.520 --> 0:06:54.839 could see up to one movie per day every day 0:06:54.880 --> 0:06:58.520 for a month. Initially, the two co founders encountered a 0:06:58.680 --> 0:07:01.200 ton of resistance for an theater owners when they were 0:07:01.200 --> 0:07:04.800 approaching them regarding this plan, and so their first attempt 0:07:05.360 --> 0:07:12.360 was not destined for greatness. Uh what and Spikes thought 0:07:12.560 --> 0:07:15.440 maybe what they could do is launch a pilot program 0:07:15.480 --> 0:07:19.320 a small version of their idea tested out, get some 0:07:19.440 --> 0:07:22.640 data and then use that to pitch to movie theater 0:07:22.720 --> 0:07:25.120 owners in the future and maybe get a better chance 0:07:25.120 --> 0:07:26.920 of it, and they decided they would use the San 0:07:26.960 --> 0:07:30.840 Francisco area as their test site. Their proposal got a 0:07:30.880 --> 0:07:35.280 lot of interest from potential customers. Apparently about nineteen thousand 0:07:35.280 --> 0:07:37.920 people signed up on in one day to try and 0:07:37.960 --> 0:07:40.760 become part of this program, and Spikes and What had 0:07:40.800 --> 0:07:44.440 ideas of how their business could benefit movie theater owners. 0:07:44.720 --> 0:07:47.400 They had visions of using the data from their service 0:07:47.680 --> 0:07:51.080 to help theaters develop more effective marketing plans. Studios would 0:07:51.080 --> 0:07:53.560 find the data helpful too, and that access to this 0:07:53.680 --> 0:07:57.560 data could lead to increased patronage of theaters and even 0:07:57.560 --> 0:08:01.560 increase the number of concessions purchases. And since concessions is 0:08:01.600 --> 0:08:04.000 where movie theaters really make a lot of their revenue, 0:08:04.200 --> 0:08:06.559 which is due to the complicated nature of box office 0:08:06.560 --> 0:08:09.600 sales and how much money goes to studios, this could 0:08:09.600 --> 0:08:12.040 actually be a strong motivator for theaters to play ball, 0:08:12.120 --> 0:08:16.800 but it did not work. Instead, it all fell apart. So, 0:08:17.400 --> 0:08:20.720 according to the stories that broke around this time, major 0:08:20.800 --> 0:08:24.360 theater chains were not told about this pilot program and 0:08:24.400 --> 0:08:27.840 they objected to being included in it. They said they 0:08:27.880 --> 0:08:31.160 would not participate in the program, and this was just 0:08:31.320 --> 0:08:34.160 at you know, days before the program was supposed to 0:08:34.240 --> 0:08:36.840 launch over the course of a weekend. Now this is 0:08:36.840 --> 0:08:39.880 pretty interesting to me, since the theory movie Pass would 0:08:39.880 --> 0:08:42.760 be buying every ticket at full price from the theater, 0:08:42.920 --> 0:08:46.319 so people going to see movies would pay a flat 0:08:46.400 --> 0:08:49.560 monthly fee for the privilege to movie Pass, but the 0:08:49.559 --> 0:08:51.720 theaters themselves would still get the full price of a 0:08:51.760 --> 0:08:55.920 movie ticket for every single screening. For the pilot program, 0:08:55.960 --> 0:08:59.320 a third party supplier was set to purchase these individual 0:08:59.360 --> 0:09:03.280 tickets on half of movie Pass. In order for this 0:09:03.360 --> 0:09:06.440 to work moving forward and to scale up beyond just 0:09:06.559 --> 0:09:10.040 being a San Francisco pilot program, the theaters were going 0:09:10.080 --> 0:09:12.800 to need to participate with movie Pass. There was gonna 0:09:12.840 --> 0:09:15.199 have to be some sort of partnership here and honor 0:09:15.320 --> 0:09:18.960 vouchers from that company to allow movie Pass customers inside 0:09:18.960 --> 0:09:22.800 to watch a movie. Then, presumably the theaters would invoice 0:09:22.880 --> 0:09:26.600 movie Pass for each ticket. But two of those chains, 0:09:26.840 --> 0:09:30.760 AMC and Landmark, objected to this whole enterprise and said 0:09:30.800 --> 0:09:34.200 they would not participate. The initial beta test was to 0:09:34.240 --> 0:09:38.280 cover twenty one theaters and am C owned six of them, 0:09:38.480 --> 0:09:41.560 so because they said they would not participate, Spikes and 0:09:41.559 --> 0:09:44.240 What had to make the tough decision to step back 0:09:44.600 --> 0:09:48.080 put this pilot program on pause. So they had to 0:09:48.120 --> 0:09:50.400 tell all their customers, I'm sorry, we're not actually going 0:09:50.440 --> 0:09:53.360 to do this after all and put their business on 0:09:53.440 --> 0:09:57.280 what they called a temporary hiatus. It was a bad 0:09:57.400 --> 0:10:01.000 enough start to lead some analysts to that the company 0:10:01.200 --> 0:10:04.800 was done before it could even begin. It was difficult 0:10:04.800 --> 0:10:07.679 to imagine a scenario in which the business plan would 0:10:07.679 --> 0:10:12.320 work unless movie Pass could establish some sort of major 0:10:12.440 --> 0:10:16.080 discount ticket relationship with various movie theater owners and chains, 0:10:16.559 --> 0:10:20.360 and that just didn't seem likely. But the company wasn't 0:10:20.440 --> 0:10:23.440 down for the count yet. I'll explain more in a second, 0:10:23.480 --> 0:10:26.880 but first let's take a quick break to thank our sponsor. 0:10:34.559 --> 0:10:38.080 Spikes and Watt tried again a few months after the 0:10:38.160 --> 0:10:42.320 abandoned pilot program, and this time the plan was slightly different. 0:10:42.360 --> 0:10:45.760 They were going to provide vouchers to customers. So a 0:10:45.800 --> 0:10:48.200 customer would sign up for the program, and when he 0:10:48.280 --> 0:10:51.080 or she wanted to see a movie, they would select 0:10:51.120 --> 0:10:52.800 the film and time that they wanted to see it. 0:10:53.080 --> 0:10:56.439 And this would trigger a voucher to be sent to them, 0:10:56.480 --> 0:11:00.200 which they would download and print. Each voucher print out 0:11:00.200 --> 0:11:03.800 included a single use credit card number that was good 0:11:03.800 --> 0:11:07.160 for the purchase price of the movie ticket. But this 0:11:07.240 --> 0:11:12.000 approach didn't make customers or theater employees happy. It was 0:11:12.000 --> 0:11:14.520 a hassle to have to print a voucher at home 0:11:14.559 --> 0:11:17.679 and then bring it with you, and the transactions at 0:11:17.720 --> 0:11:20.440 the theaters took a lot of time to process because 0:11:20.760 --> 0:11:24.440 cashier's had to manually input the single use credit card 0:11:24.520 --> 0:11:27.280 numbers into a system, then they had to wait for 0:11:27.320 --> 0:11:30.960 the system to validate the purchase. And then there were 0:11:31.000 --> 0:11:34.400 the allegations that movie chains were putting pressure on a 0:11:34.440 --> 0:11:37.720 company called Hollywood Movie Money that was the company that 0:11:37.800 --> 0:11:40.760 was actually in charge of producing the vouchers on behalf 0:11:40.800 --> 0:11:44.960 of movie Pass. And this Hollywood Movie Money under pressure 0:11:45.080 --> 0:11:48.240 pulls out of this agreement, and this attempt ends up 0:11:48.240 --> 0:11:51.160 fizzling out too. So this is the second attempt to 0:11:51.160 --> 0:11:54.880 get movie Pass going, and the second time it fails. However, 0:11:55.360 --> 0:11:58.320 Spikes still wasn't discouraged. He went back to the drawing 0:11:58.360 --> 0:12:01.240 board again and a few months later he returned with 0:12:01.400 --> 0:12:05.560 a new version of movie Pass. This one was a 0:12:05.600 --> 0:12:08.640 little different from the earlier proposed one. The monthly fee 0:12:08.640 --> 0:12:12.199 you'd pay would be dependent upon where you lived, because, 0:12:12.200 --> 0:12:15.520 as I mentioned, movie tickets cost a different amount depending 0:12:15.600 --> 0:12:18.599 upon where you are, and so if you lived in 0:12:18.640 --> 0:12:21.760 a more expensive market where the average movie ticket price 0:12:21.920 --> 0:12:24.960 was higher, you'd have to pay a higher monthly fee 0:12:25.280 --> 0:12:27.960 to be a subscriber to movie Pass compared to someone 0:12:28.000 --> 0:12:31.040 who lived in a lower cost market. So the subscription 0:12:31.080 --> 0:12:33.600 fees ranged from twenty nine dollars on the low end 0:12:33.880 --> 0:12:36.040 to thirty four dollars on the high end, which was 0:12:36.080 --> 0:12:38.560 still a huge bargain when you consider the pilot program 0:12:38.600 --> 0:12:41.560 was going to cost fifty bucks, and in general they 0:12:41.600 --> 0:12:45.840 were aiming at a price that would represent roughly three 0:12:46.480 --> 0:12:49.280 films a month. That was kind of how they came 0:12:49.320 --> 0:12:52.320 to the conclusion that this would be the right subscription price. 0:12:52.679 --> 0:12:55.800 Customers would download an app and they would get a 0:12:55.840 --> 0:13:00.400 special debit card along with their subscription. The app depended 0:13:00.480 --> 0:13:04.720 upon a smartphone's geolocation capabilities, and here's how it worked. 0:13:05.240 --> 0:13:07.880 Let's say that I have subscribed to movie Pass. I'm 0:13:07.880 --> 0:13:11.160 a movie Pass customer. I have decided I am going 0:13:11.200 --> 0:13:16.280 to go and watch a film at my local cinema, Plextorium, 0:13:16.320 --> 0:13:19.040 and I've got my smartphone and I look to see 0:13:19.040 --> 0:13:21.760 which movies are playing. Let's say I'm in for a 0:13:21.880 --> 0:13:24.680 bad time. I want to watch the matrix reloaded, so 0:13:24.720 --> 0:13:27.440 I choose the matrix reloaded. I choose the time I'm 0:13:27.480 --> 0:13:29.720 going to go see it. I get to the theater, 0:13:29.880 --> 0:13:34.880 I activate my app the UH the app shows my selection, 0:13:35.160 --> 0:13:39.000 It detects from my geolocation data that I am in 0:13:39.120 --> 0:13:41.880 fact at the theater and sends a message back to 0:13:41.920 --> 0:13:46.480 movie Pass headquarters. That message authorizes the debit card that 0:13:46.640 --> 0:13:51.320 is associated with my account to become active for thirty minutes, 0:13:51.920 --> 0:13:54.000 and the debit card works the same way as any 0:13:54.040 --> 0:13:57.120 other debit or credit card does. So in theory, at least, 0:13:57.480 --> 0:14:01.880 movie theaters that accepted that tip of card would have 0:14:01.960 --> 0:14:04.800 nothing to complain about. They could process the payment just 0:14:04.920 --> 0:14:07.840 like any other ticket purchase, and they would get the 0:14:07.840 --> 0:14:10.960 full purchase price at that point, and I would get 0:14:11.000 --> 0:14:13.160 to go in and see the movie. Using this approach, 0:14:13.520 --> 0:14:17.240 movie Pass launched and invite only beta test, and immediately 0:14:17.640 --> 0:14:20.880 there were questions from the industry, like, how could such 0:14:20.920 --> 0:14:23.880 a business remain in operation long if people were you know, 0:14:24.960 --> 0:14:27.800 using the service they were paying for. If you actually 0:14:27.800 --> 0:14:32.080 went and saw more than three movies in your region, 0:14:32.800 --> 0:14:35.440 then every single time you're going to see a movie, 0:14:35.520 --> 0:14:39.520 you're costing movie pass money. How could you possibly stay 0:14:39.520 --> 0:14:43.240 in business? I mean, if the average movie ticket in 0:14:43.320 --> 0:14:46.120 my city cost more than twelve dollars a pop, we're 0:14:46.160 --> 0:14:48.280 going to round it down to twelve dollars. Will say 0:14:48.280 --> 0:14:50.000 that my subscription is on the high end at thirty 0:14:50.040 --> 0:14:53.280 four dollars per month. If I see more than two films, 0:14:53.640 --> 0:14:56.200 movie passes losing money on that deal, if they're having 0:14:56.200 --> 0:15:00.320 to pay full price for the tickets, and presumably least 0:15:00.320 --> 0:15:02.280 at first, I'm going to see as many movies as 0:15:02.280 --> 0:15:05.000 I possibly can. I mean, typically when people sign up 0:15:05.000 --> 0:15:09.120 to a news service like this, they binge initially. That 0:15:09.240 --> 0:15:12.840 might tail off after a while, but it means that 0:15:12.880 --> 0:15:16.200 the more customers you get, the more expensive it is 0:15:16.240 --> 0:15:18.960 to operate. You're not making more money, you're actually losing 0:15:19.000 --> 0:15:23.800 more money in that case. So it did not take 0:15:23.920 --> 0:15:27.440 long for people to say, how can this service stick around? 0:15:27.520 --> 0:15:29.800 I mean, not only does it cost them to operate 0:15:30.200 --> 0:15:32.920 in this manner, they still have all the other expenses 0:15:32.960 --> 0:15:35.200 that any other company has. You know, to pay for 0:15:35.240 --> 0:15:38.600 the back end, to pay for office space, to pay salaries. 0:15:39.040 --> 0:15:41.520 All that stuff still exists for this company too, on 0:15:41.640 --> 0:15:44.520 top of the fact that their business plan means they 0:15:44.560 --> 0:15:48.240 actually lose money the more people use their service. In 0:15:48.280 --> 0:15:51.160 an interview with The New York Times, Spikes said that 0:15:51.240 --> 0:15:56.280 his long term plans included revenue from several streams besides 0:15:56.480 --> 0:15:59.760 subscription fees. So he was pressed on this point. They 0:15:59.760 --> 0:16:03.920 were asked, you know, he was asked, rather, what exactly 0:16:03.920 --> 0:16:06.080 do you plan to do? What what are these other 0:16:06.360 --> 0:16:10.120 streams of revenue, and so he answered the question. He said, 0:16:10.520 --> 0:16:13.040 there are three big ones, and that would be advertising, 0:16:13.160 --> 0:16:16.920 which is pretty straightforward. That means that he would allow 0:16:17.080 --> 0:16:21.040 other companies to advertise through the app, and movie Pass 0:16:21.040 --> 0:16:23.080 would be able to supplement the money coming in from 0:16:23.400 --> 0:16:27.520 subscriptions by the fact that people are viewing ads on 0:16:27.560 --> 0:16:31.160 the app itself. Then there was sell through. So what 0:16:31.200 --> 0:16:33.480 does that mean? What does sell through mean? What's sort 0:16:33.480 --> 0:16:37.560 of like up selling in the retail space or impulse shopping. 0:16:37.680 --> 0:16:41.080 It's taking the opportunity to sell stuff related to the 0:16:41.080 --> 0:16:44.560 movies that customers are seeing. So movie Pass knows what 0:16:44.680 --> 0:16:46.800 movie I'm gonna go see. I have to select it, 0:16:47.160 --> 0:16:49.760 I select the title and the time, and it ends 0:16:49.840 --> 0:16:53.640 up sending me the um the authorization for me to 0:16:53.680 --> 0:16:57.200 purchase my movie ticket. But that means I'm I'm telling 0:16:57.240 --> 0:16:59.080 movie Pass each time I go to see a movie 0:16:59.120 --> 0:17:01.240 what it is I'm going to see and where I'm 0:17:01.280 --> 0:17:06.560 seeing it. Based on that, they can send me data 0:17:06.600 --> 0:17:09.160 about stuff that I might want to purchase that's related 0:17:09.359 --> 0:17:11.320 to the film I'm seeing. If I've just gone to 0:17:11.320 --> 0:17:14.480 see the latest Star Wars film, movie Pass might present 0:17:14.560 --> 0:17:17.560 me with offers to purchase the earlier films in the 0:17:17.600 --> 0:17:21.000 Star Wars saga on Blu Ray, or it might have 0:17:21.320 --> 0:17:25.320 links to purchase merchandise related to Star Wars if I 0:17:25.359 --> 0:17:27.560 want to get, you know, a real geeky Star Wars 0:17:27.560 --> 0:17:30.359 T shirt or whatever, and and goodness knows I have 0:17:30.400 --> 0:17:34.320 plenty of those. So that was the second revenue source. 0:17:34.520 --> 0:17:39.880 The third was about data. The data side is one 0:17:39.960 --> 0:17:44.399 I find particularly interesting, especially since I've recently done so 0:17:44.440 --> 0:17:49.360 many episodes about privacy and security. Now, according to Spikes nineties, 0:17:49.440 --> 0:17:54.160 six percent of all movie tickets sold were from walk ups, 0:17:54.520 --> 0:17:58.520 meaning the vast majority of seats at movie theaters were 0:17:58.520 --> 0:18:02.639 being sold at the ticket counter, not in advance, and 0:18:02.680 --> 0:18:06.280 the challenge for theaters and for studios is that walk 0:18:06.359 --> 0:18:09.679 ups give very little information about the people coming to 0:18:09.800 --> 0:18:13.199 see those individual films. You can see at a glance 0:18:13.200 --> 0:18:16.000 which movies are performing well, you can see in ticket 0:18:16.040 --> 0:18:18.040 sales which ones are doing well, but you don't know 0:18:18.160 --> 0:18:22.320 very much about the individual audiences. Spikes argued that with 0:18:22.359 --> 0:18:25.960 a program like movie Pass, theaters and studios would learn 0:18:26.200 --> 0:18:29.040 a lot about the type of people who go to 0:18:29.080 --> 0:18:32.320 see specific kinds of films, and that this in turn 0:18:32.760 --> 0:18:36.080 could help guide marketing efforts to maximize the number of 0:18:36.119 --> 0:18:39.640 people to see those movies, and so movie Pass would 0:18:39.720 --> 0:18:43.120 end up making some of its money by selling information 0:18:43.200 --> 0:18:48.000 about its customers to other companies. Spikes would say, quote 0:18:48.359 --> 0:18:51.840 our technology, lets us say this is the type of 0:18:51.880 --> 0:18:55.160 people who are going, this is when they went, this 0:18:55.240 --> 0:18:57.800 is what time of day it was. We can break 0:18:57.840 --> 0:19:01.840 it up by age, by race, sex. The only thing 0:19:01.880 --> 0:19:04.119 we can't tell you is what they ate for lunch 0:19:04.440 --> 0:19:08.600 and what their blood type is. End quote. Those probably 0:19:08.600 --> 0:19:11.480 sound like pretty cool concepts to companies, but it might 0:19:11.560 --> 0:19:14.840 come across as a little bit orwellian for your average 0:19:14.840 --> 0:19:18.000 movie fan. In addition, I'm sure there was a hope 0:19:18.040 --> 0:19:20.600 that people would sign up for the service and then 0:19:20.640 --> 0:19:24.199 just you know, not use it that frequently. Kind of 0:19:24.280 --> 0:19:26.200 like how some people will sign up for a gym 0:19:26.240 --> 0:19:29.800 membership and then you know, they don't go to the gym. 0:19:29.840 --> 0:19:31.959 So the gym makes money whether you're there or not, 0:19:32.359 --> 0:19:34.639 and if you're not there, you're not causing wear and 0:19:34.680 --> 0:19:38.080 tear on equipment. So gems love it when you sign 0:19:38.160 --> 0:19:40.320 up and you don't go, And maybe that was what 0:19:40.359 --> 0:19:42.679 movie Pass was kind of hoping for. Two and so 0:19:42.840 --> 0:19:46.960 movie Pass began normal operations by early two thousand thirteen. 0:19:47.280 --> 0:19:50.160 It had rolled out in many markets. At that time, 0:19:50.240 --> 0:19:54.399 the only app available was for the iPhone, though you 0:19:54.440 --> 0:19:57.840 could access the movie Pass system through a mobile website 0:19:57.880 --> 0:19:59.960 if you happen to have a smartphone using a diff 0:20:00.040 --> 0:20:04.399 front operating system than iOS, Every user or household member 0:20:04.440 --> 0:20:07.320 would have to have his or her own subscription and 0:20:07.400 --> 0:20:11.040 personal card. They didn't have an option for signing up 0:20:11.040 --> 0:20:14.159 for like a family account or anything like that. The 0:20:14.200 --> 0:20:17.240 app would depend upon that geolocation data to confirm that 0:20:17.280 --> 0:20:20.000 you were actually at the theater to buy a ticket 0:20:20.080 --> 0:20:22.680 before you were allowed to use the associated cards. That way, 0:20:22.720 --> 0:20:24.840 you couldn't just claim that you're going to go see 0:20:24.840 --> 0:20:28.240 a movie and then use your activated debit card to 0:20:28.280 --> 0:20:31.440 buy something else like a cheeseburger. And after a one 0:20:31.480 --> 0:20:34.800 month trial period, users would be committed to a year 0:20:34.840 --> 0:20:38.320 long plan with cancelation fees that would range from twenty 0:20:38.320 --> 0:20:41.679 dollars to seventy five dollars. The amount of the cancelation 0:20:41.720 --> 0:20:44.040 fee depended upon how long you had been a member. 0:20:44.359 --> 0:20:46.320 If you wanted to cancel right away, you're gonna have 0:20:46.359 --> 0:20:48.520 to pay pay pay. So I began to grow its 0:20:48.520 --> 0:20:51.920 customer base, and because it was using a Discover card 0:20:52.119 --> 0:20:55.840 methodology for payments originally anyway, later on they would change 0:20:55.880 --> 0:20:58.399 that the master card. There wasn't a whole lot of 0:20:58.400 --> 0:21:02.840 movie theater chain could do besides protests the whole concept 0:21:03.400 --> 0:21:06.280 if in fact, they took Discover Card because the amount 0:21:06.280 --> 0:21:10.560 of the method of payment was pretty straightforward. Uh So 0:21:10.680 --> 0:21:13.680 things continued. The one thing they really could do, if 0:21:13.680 --> 0:21:16.040 they really wanted to, would be to put up a 0:21:16.040 --> 0:21:19.440 fuss and demand that Movie Pass not include their theaters 0:21:20.080 --> 0:21:22.440 in the app. Since you had to use the app 0:21:22.480 --> 0:21:25.199 to pick the daytime and title that you plan to 0:21:25.200 --> 0:21:27.960 see and which movie theater you were going to, they 0:21:28.000 --> 0:21:30.600 could at least in theory demand that their locations be 0:21:30.720 --> 0:21:34.160 left off of Movie Passes service, but that was about it. Well, 0:21:35.440 --> 0:21:39.600 things would rapidly change for movie Pass over the next 0:21:39.640 --> 0:21:42.159 few years. I'll explain more in just a second, but 0:21:42.280 --> 0:21:45.800 first let's take another quick break to thank our sponsor. 0:21:53.520 --> 0:21:57.000 In two thousand and fourteen, movie Passes experience as a 0:21:57.000 --> 0:22:01.640 company was starting to hit some bumps, and this would 0:22:01.680 --> 0:22:05.520 continue up till today. On the one hand, movie Pass 0:22:05.600 --> 0:22:09.199 was able to forge something of an uneasy alliance with 0:22:09.440 --> 0:22:14.520 the movie theater chain AMC, which had been a pretty 0:22:14.760 --> 0:22:18.960 reluctant participant up to this point and would continue to 0:22:18.960 --> 0:22:22.159 be actually, but this deal was sort of a pilot 0:22:22.200 --> 0:22:27.240 program for theaters in Boston, Massachusetts and Denver, Colorado. There 0:22:27.240 --> 0:22:31.720 were two tiers of subscriptions that users could choose. For 0:22:31.800 --> 0:22:34.560 thirty five dollars a month, subscribers would be able to 0:22:34.560 --> 0:22:38.480 see films in standard two D format at AMC theaters, 0:22:38.560 --> 0:22:40.560 and for forty five dollars a month, they could see 0:22:40.560 --> 0:22:44.399 films in any format, including three D or IMAX. Now. 0:22:44.440 --> 0:22:47.840 According to Business Insider, at this point, movie pass had 0:22:47.880 --> 0:22:52.200 about thirty thousand subscribers, and the company began to consult 0:22:52.400 --> 0:22:54.800 with an expert in the field, and it's a guy 0:22:54.840 --> 0:22:58.000 I talked about recently in the episodes about Netflix. So 0:22:58.040 --> 0:22:59.760 if you heard those episodes, you're gonna hear a name 0:22:59.760 --> 0:23:02.720 that's it was kind of familiar. That would be Mitch Low. 0:23:03.359 --> 0:23:06.359 Mitch Low was not only instrumental in getting Netflix up 0:23:06.359 --> 0:23:08.920