Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: stuff works dot com. Hey there, and welcome to tech Stuff.
Speaker 1: I'm your host, Jonathan Strickland. I just happened to be
Speaker 1: an executive producer at a little place called hell Stuff Works,
Speaker 1: and I love all things tech and listeners, Susanna, don't
Speaker 1: you cry for me? Asked if I could do an
Speaker 1: episode about a company called movie Pass, which has made
Speaker 1: the headlines a few times over the last year. So
Speaker 1: where did this company come from? What does it do,
Speaker 1: how does it make money? Does it make money? And
Speaker 1: what is its future? Does it have a future? Well, first,
Speaker 1: before I go into the history, I think it's a
Speaker 1: good idea to explain what movie passes. Value proposition is
Speaker 1: what it's all about. But things do change. It's it's
Speaker 1: method and business plan has changed dramatically several times, especially
Speaker 1: in the last year. But here's is a general overview.
Speaker 1: More or less. The company offers up a subscription based
Speaker 1: service for going to the movies to see movies in
Speaker 1: movie theaters for a recurring regular fee. Subscribers get to
Speaker 1: go to the movie theaters and watch movies a certain
Speaker 1: number of times per month. That number changes depending upon
Speaker 1: what era of movie passes history we're talking about. So
Speaker 1: rather than buying a ticket every time you go to
Speaker 1: the movie theater, you would subscribe to this service, and
Speaker 1: at a participating theater you would be able to activate it.
Speaker 1: And a lot of theaters did not want to participate,
Speaker 1: but didn't have much choice in the matter. The business
Speaker 1: plan left a lot of people wondering how the heck
Speaker 1: movie pass was going to make money because someone still
Speaker 1: has to pay for those movie tickets, and movie tickets
Speaker 1: aren't necessarily cheap. So unless movie Pass is charging an
Speaker 1: enormous subscription fee and as get incredible deals on movie
Speaker 1: ticket prices with these movie theaters, they're going to start
Speaker 1: losing money pretty fast. Well. According to the National Association
Speaker 1: of Theater Owners, the average movie ticket price in the
Speaker 1: United States hit eight dollars ninety seven cents in two
Speaker 1: thousand seventeen, which is the most recent year they have
Speaker 1: information available. That same page mentions that if you took
Speaker 1: a the average price in nineteen seventy seven, that was
Speaker 1: when it was a two dollars twenty three cents per ticket,
Speaker 1: and then you adjusted that amount for inflation, it would
Speaker 1: be the same as nine dollars and forty cents in
Speaker 1: two thousand seventeen. So the point the Theater Association is
Speaker 1: trying to make is well, sure, it costs more dollars
Speaker 1: now than it did in nineteen seventy seven, but in actuality,
Speaker 1: from a purchasing price standpoint, it's cheaper than it was
Speaker 1: in nineteen seventy seven. So going to the movies as
Speaker 1: a bargain now, that's just the national average. I would
Speaker 1: not be surprised to hear from you guys in the
Speaker 1: United States in various places that the ticket prices are
Speaker 1: much different from eight dollars and ninety seven cents per ticket.
Speaker 1: I can tell you right now, if movie ticket prices
Speaker 1: were eight dollars in ninety seven cents here in Atlanta,
Speaker 1: I'd go to the movies way more frequently. According to
Speaker 1: a site called ex pattistan, which is a site that
Speaker 1: helps determine the difference in cost of living in various cities,
Speaker 1: so if you wanted to relocate somewhere, you could find
Speaker 1: out how much money you would need to have your
Speaker 1: your you know, quality of life in that new place.
Speaker 1: The cost for two movie tickets in Atlanta, Georgia, that's
Speaker 1: where I live, is twenty five dollars, which means if
Speaker 1: you break that down by half, it's about twelve dollars
Speaker 1: fifty cents per ticket. That is way higher than that
Speaker 1: supposed national average of eight dollars and ninety seven cents,
Speaker 1: and in other cities it's way more and so of
Speaker 1: then twelve dollars fifty cents, especially once you start looking
Speaker 1: at special screenings, like screenings where you can reserve a
Speaker 1: seat or three D or imax, that kind of stuff.
Speaker 1: So if you subscribed to movie Pass, and if the
Speaker 1: subscription fee was something like ten bucks a month and
Speaker 1: you saw more than one movie, then you would be
Speaker 1: saving a huge amount of money. And how the heck
Speaker 1: was the company supposed to make money that way? How
Speaker 1: was it going to make money? If it's spending more
Speaker 1: on tickets, then it's getting in subscription fees. That's part
Speaker 1: of what we'll look into. So now let's take a
Speaker 1: look at the birth of movie Pass and how it
Speaker 1: all got started. This goes back to two thousand eleven
Speaker 1: and a couple of co founders. So one of our
Speaker 1: key players in this story is a guy named Stacy Spikes,
Speaker 1: and Spikes got started in the nineteen eighties. He started
Speaker 1: as a project manager for Motown Records, which is pretty
Speaker 1: darn cool. He worked for folks like Spike Lee and
Speaker 1: Queen Latifa, pretty awesome. He then went on to go
Speaker 1: work with Sony and their music division before transitioning to
Speaker 1: the head of marketing for Miramax. Back in nine he
Speaker 1: founded a film festival in n in New York City,
Speaker 1: and he had a history in the entertainment business that
Speaker 1: dated a couple of decades, so he had been around
Speaker 1: for a while before coming up with this idea. The
Speaker 1: other key player in the early days it is a
Speaker 1: guy named Hammett wat What had earned a degree from
Speaker 1: Florida Agricultural and Mechanical University back in nineteen four. His
Speaker 1: first job was with the New Africa Opportunity Fund, which
Speaker 1: is an investment company that focused on opportunities in Africa,
Speaker 1: and in two thousand he founded an advertising company called
Speaker 1: Next Medium. He would serve as the CEO of that
Speaker 1: company until two thousand seven, then he would transition to
Speaker 1: Chairman of the board and then two years later he
Speaker 1: would step down. So for three years while he was
Speaker 1: also working at Next Medium, he also served as a
Speaker 1: consultant for Nielsen Media Research. Then in two thousand nine,
Speaker 1: he would become an entrepreneur in residence for True Ventures,
Speaker 1: a venture capital firm. The two of them met and
Speaker 1: got to talking about entertainment and movies and decided to
Speaker 1: collaborate on a project with the goal of becoming the
Speaker 1: Netflix of the movie going experience. Which is funny to
Speaker 1: me because if you listen to my Netflix shows, you
Speaker 1: know that Netflix started off to try and become the
Speaker 1: Amazon of something. So movie Pass was trying to become
Speaker 1: the Netflix of going to the movies. Netflix was trying
Speaker 1: to become the Amazon of something. They weren't sure what
Speaker 1: before they really got settled on the movie rental agency.
Speaker 1: But never mind all that. The plan was to create
Speaker 1: a service in which users would subscribe for a monthly
Speaker 1: fee of fifty dollars a princely some In return, they
Speaker 1: could see up to one movie per day every day
Speaker 1: for a month. Initially, the two co founders encountered a
Speaker 1: ton of resistance for an theater owners when they were
Speaker 1: approaching them regarding this plan, and so their first attempt
Speaker 1: was not destined for greatness. Uh what and Spikes thought
Speaker 1: maybe what they could do is launch a pilot program
Speaker 1: a small version of their idea tested out, get some
Speaker 1: data and then use that to pitch to movie theater
Speaker 1: owners in the future and maybe get a better chance
Speaker 1: of it, and they decided they would use the San
Speaker 1: Francisco area as their test site. Their proposal got a
Speaker 1: lot of interest from potential customers. Apparently about nineteen thousand
Speaker 1: people signed up on in one day to try and
Speaker 1: become part of this program, and Spikes and What had
Speaker 1: ideas of how their business could benefit movie theater owners.
Speaker 1: They had visions of using the data from their service
Speaker 1: to help theaters develop more effective marketing plans. Studios would
Speaker 1: find the data helpful too, and that access to this
Speaker 1: data could lead to increased patronage of theaters and even
Speaker 1: increase the number of concessions purchases. And since concessions is
Speaker 1: where movie theaters really make a lot of their revenue,
Speaker 1: which is due to the complicated nature of box office
Speaker 1: sales and how much money goes to studios, this could
Speaker 1: actually be a strong motivator for theaters to play ball,
Speaker 1: but it did not work. Instead, it all fell apart. So,
Speaker 1: according to the stories that broke around this time, major
Speaker 1: theater chains were not told about this pilot program and
Speaker 1: they objected to being included in it. They said they
Speaker 1: would not participate in the program, and this was just
Speaker 1: at you know, days before the program was supposed to
Speaker 1: launch over the course of a weekend. Now this is
Speaker 1: pretty interesting to me, since the theory movie Pass would
Speaker 1: be buying every ticket at full price from the theater,
Speaker 1: so people going to see movies would pay a flat
Speaker 1: monthly fee for the privilege to movie Pass, but the
Speaker 1: theaters themselves would still get the full price of a
Speaker 1: movie ticket for every single screening. For the pilot program,
Speaker 1: a third party supplier was set to purchase these individual
Speaker 1: tickets on half of movie Pass. In order for this
Speaker 1: to work moving forward and to scale up beyond just
Speaker 1: being a San Francisco pilot program, the theaters were going
Speaker 1: to need to participate with movie Pass. There was gonna
Speaker 1: have to be some sort of partnership here and honor
Speaker 1: vouchers from that company to allow movie Pass customers inside
Speaker 1: to watch a movie. Then, presumably the theaters would invoice
Speaker 1: movie Pass for each ticket. But two of those chains,
Speaker 1: AMC and Landmark, objected to this whole enterprise and said
Speaker 1: they would not participate. The initial beta test was to
Speaker 1: cover twenty one theaters and am C owned six of them,
Speaker 1: so because they said they would not participate, Spikes and
Speaker 1: What had to make the tough decision to step back
Speaker 1: put this pilot program on pause. So they had to
Speaker 1: tell all their customers, I'm sorry, we're not actually going
Speaker 1: to do this after all and put their business on
Speaker 1: what they called a temporary hiatus. It was a bad
Speaker 1: enough start to lead some analysts to that the company
Speaker 1: was done before it could even begin. It was difficult
Speaker 1: to imagine a scenario in which the business plan would
Speaker 1: work unless movie Pass could establish some sort of major
Speaker 1: discount ticket relationship with various movie theater owners and chains,
Speaker 1: and that just didn't seem likely. But the company wasn't
Speaker 1: down for the count yet. I'll explain more in a second,
Speaker 1: but first let's take a quick break to thank our sponsor.
Speaker 1: Spikes and Watt tried again a few months after the
Speaker 1: abandoned pilot program, and this time the plan was slightly different.
Speaker 1: They were going to provide vouchers to customers. So a
Speaker 1: customer would sign up for the program, and when he
Speaker 1: or she wanted to see a movie, they would select
Speaker 1: the film and time that they wanted to see it.
Speaker 1: And this would trigger a voucher to be sent to them,
Speaker 1: which they would download and print. Each voucher print out
Speaker 1: included a single use credit card number that was good
Speaker 1: for the purchase price of the movie ticket. But this
Speaker 1: approach didn't make customers or theater employees happy. It was
Speaker 1: a hassle to have to print a voucher at home
Speaker 1: and then bring it with you, and the transactions at
Speaker 1: the theaters took a lot of time to process because
Speaker 1: cashier's had to manually input the single use credit card
Speaker 1: numbers into a system, then they had to wait for
Speaker 1: the system to validate the purchase. And then there were
Speaker 1: the allegations that movie chains were putting pressure on a
Speaker 1: company called Hollywood Movie Money that was the company that
Speaker 1: was actually in charge of producing the vouchers on behalf
Speaker 1: of movie Pass. And this Hollywood Movie Money under pressure
Speaker 1: pulls out of this agreement, and this attempt ends up
Speaker 1: fizzling out too. So this is the second attempt to
Speaker 1: get movie Pass going, and the second time it fails. However,
Speaker 1: Spikes still wasn't discouraged. He went back to the drawing
Speaker 1: board again and a few months later he returned with
Speaker 1: a new version of movie Pass. This one was a
Speaker 1: little different from the earlier proposed one. The monthly fee
Speaker 1: you'd pay would be dependent upon where you lived, because,
Speaker 1: as I mentioned, movie tickets cost a different amount depending
Speaker 1: upon where you are, and so if you lived in
Speaker 1: a more expensive market where the average movie ticket price
Speaker 1: was higher, you'd have to pay a higher monthly fee
Speaker 1: to be a subscriber to movie Pass compared to someone
Speaker 1: who lived in a lower cost market. So the subscription
Speaker 1: fees ranged from twenty nine dollars on the low end
Speaker 1: to thirty four dollars on the high end, which was
Speaker 1: still a huge bargain when you consider the pilot program
Speaker 1: was going to cost fifty bucks, and in general they
Speaker 1: were aiming at a price that would represent roughly three
Speaker 1: films a month. That was kind of how they came
Speaker 1: to the conclusion that this would be the right subscription price.
Speaker 1: Customers would download an app and they would get a
Speaker 1: special debit card along with their subscription. The app depended
Speaker 1: upon a smartphone's geolocation capabilities, and here's how it worked.
Speaker 1: Let's say that I have subscribed to movie Pass. I'm
Speaker 1: a movie Pass customer. I have decided I am going
Speaker 1: to go and watch a film at my local cinema, Plextorium,
Speaker 1: and I've got my smartphone and I look to see
Speaker 1: which movies are playing. Let's say I'm in for a
Speaker 1: bad time. I want to watch the matrix reloaded, so
Speaker 1: I choose the matrix reloaded. I choose the time I'm
Speaker 1: going to go see it. I get to the theater,
Speaker 1: I activate my app the UH the app shows my selection,
Speaker 1: It detects from my geolocation data that I am in
Speaker 1: fact at the theater and sends a message back to
Speaker 1: movie Pass headquarters. That message authorizes the debit card that
Speaker 1: is associated with my account to become active for thirty minutes,
Speaker 1: and the debit card works the same way as any
Speaker 1: other debit or credit card does. So in theory, at least,
Speaker 1: movie theaters that accepted that tip of card would have
Speaker 1: nothing to complain about. They could process the payment just
Speaker 1: like any other ticket purchase, and they would get the
Speaker 1: full purchase price at that point, and I would get
Speaker 1: to go in and see the movie. Using this approach,
Speaker 1: movie Pass launched and invite only beta test, and immediately
Speaker 1: there were questions from the industry, like, how could such
Speaker 1: a business remain in operation long if people were you know,
Speaker 1: using the service they were paying for. If you actually
Speaker 1: went and saw more than three movies in your region,
Speaker 1: then every single time you're going to see a movie,
Speaker 1: you're costing movie pass money. How could you possibly stay
Speaker 1: in business? I mean, if the average movie ticket in
Speaker 1: my city cost more than twelve dollars a pop, we're
Speaker 1: going to round it down to twelve dollars. Will say
Speaker 1: that my subscription is on the high end at thirty
Speaker 1: four dollars per month. If I see more than two films,
Speaker 1: movie passes losing money on that deal, if they're having
Speaker 1: to pay full price for the tickets, and presumably least
Speaker 1: at first, I'm going to see as many movies as
Speaker 1: I possibly can. I mean, typically when people sign up
Speaker 1: to a news service like this, they binge initially. That
Speaker 1: might tail off after a while, but it means that
Speaker 1: the more customers you get, the more expensive it is
Speaker 1: to operate. You're not making more money, you're actually losing
Speaker 1: more money in that case. So it did not take
Speaker 1: long for people to say, how can this service stick around?
Speaker 1: I mean, not only does it cost them to operate
Speaker 1: in this manner, they still have all the other expenses
Speaker 1: that any other company has. You know, to pay for
Speaker 1: the back end, to pay for office space, to pay salaries.
Speaker 1: All that stuff still exists for this company too, on
Speaker 1: top of the fact that their business plan means they
Speaker 1: actually lose money the more people use their service. In
Speaker 1: an interview with The New York Times, Spikes said that
Speaker 1: his long term plans included revenue from several streams besides
Speaker 1: subscription fees. So he was pressed on this point. They
Speaker 1: were asked, you know, he was asked, rather, what exactly
Speaker 1: do you plan to do? What what are these other
Speaker 1: streams of revenue, and so he answered the question. He said,
Speaker 1: there are three big ones, and that would be advertising,
Speaker 1: which is pretty straightforward. That means that he would allow
Speaker 1: other companies to advertise through the app, and movie Pass
Speaker 1: would be able to supplement the money coming in from
Speaker 1: subscriptions by the fact that people are viewing ads on
Speaker 1: the app itself. Then there was sell through. So what
Speaker 1: does that mean? What does sell through mean? What's sort
Speaker 1: of like up selling in the retail space or impulse shopping.
Speaker 1: It's taking the opportunity to sell stuff related to the
Speaker 1: movies that customers are seeing. So movie Pass knows what
Speaker 1: movie I'm gonna go see. I have to select it,
Speaker 1: I select the title and the time, and it ends
Speaker 1: up sending me the um the authorization for me to
Speaker 1: purchase my movie ticket. But that means I'm I'm telling
Speaker 1: movie Pass each time I go to see a movie
Speaker 1: what it is I'm going to see and where I'm
Speaker 1: seeing it. Based on that, they can send me data
Speaker 1: about stuff that I might want to purchase that's related
Speaker 1: to the film I'm seeing. If I've just gone to
Speaker 1: see the latest Star Wars film, movie Pass might present
Speaker 1: me with offers to purchase the earlier films in the
Speaker 1: Star Wars saga on Blu Ray, or it might have
Speaker 1: links to purchase merchandise related to Star Wars if I
Speaker 1: want to get, you know, a real geeky Star Wars
Speaker 1: T shirt or whatever, and and goodness knows I have
Speaker 1: plenty of those. So that was the second revenue source.
Speaker 1: The third was about data. The data side is one
Speaker 1: I find particularly interesting, especially since I've recently done so
Speaker 1: many episodes about privacy and security. Now, according to Spikes nineties,
Speaker 1: six percent of all movie tickets sold were from walk ups,
Speaker 1: meaning the vast majority of seats at movie theaters were
Speaker 1: being sold at the ticket counter, not in advance, and
Speaker 1: the challenge for theaters and for studios is that walk
Speaker 1: ups give very little information about the people coming to
Speaker 1: see those individual films. You can see at a glance
Speaker 1: which movies are performing well, you can see in ticket
Speaker 1: sales which ones are doing well, but you don't know
Speaker 1: very much about the individual audiences. Spikes argued that with
Speaker 1: a program like movie Pass, theaters and studios would learn
Speaker 1: a lot about the type of people who go to
Speaker 1: see specific kinds of films, and that this in turn
Speaker 1: could help guide marketing efforts to maximize the number of
Speaker 1: people to see those movies, and so movie Pass would
Speaker 1: end up making some of its money by selling information
Speaker 1: about its customers to other companies. Spikes would say, quote
Speaker 1: our technology, lets us say this is the type of
Speaker 1: people who are going, this is when they went, this
Speaker 1: is what time of day it was. We can break
Speaker 1: it up by age, by race, sex. The only thing
Speaker 1: we can't tell you is what they ate for lunch
Speaker 1: and what their blood type is. End quote. Those probably
Speaker 1: sound like pretty cool concepts to companies, but it might
Speaker 1: come across as a little bit orwellian for your average
Speaker 1: movie fan. In addition, I'm sure there was a hope
Speaker 1: that people would sign up for the service and then
Speaker 1: just you know, not use it that frequently. Kind of
Speaker 1: like how some people will sign up for a gym
Speaker 1: membership and then you know, they don't go to the gym.
Speaker 1: So the gym makes money whether you're there or not,
Speaker 1: and if you're not there, you're not causing wear and
Speaker 1: tear on equipment. So gems love it when you sign
Speaker 1: up and you don't go, And maybe that was what
Speaker 1: movie Pass was kind of hoping for. Two and so
Speaker 1: movie Pass began normal operations by early two thousand thirteen.
Speaker 1: It had rolled out in many markets. At that time,
Speaker 1: the only app available was for the iPhone, though you
Speaker 1: could access the movie Pass system through a mobile website
Speaker 1: if you happen to have a smartphone using a diff
Speaker 1: front operating system than iOS, Every user or household member
Speaker 1: would have to have his or her own subscription and
Speaker 1: personal card. They didn't have an option for signing up
Speaker 1: for like a family account or anything like that. The
Speaker 1: app would depend upon that geolocation data to confirm that
Speaker 1: you were actually at the theater to buy a ticket
Speaker 1: before you were allowed to use the associated cards. That way,
Speaker 1: you couldn't just claim that you're going to go see
Speaker 1: a movie and then use your activated debit card to
Speaker 1: buy something else like a cheeseburger. And after a one
Speaker 1: month trial period, users would be committed to a year
Speaker 1: long plan with cancelation fees that would range from twenty
Speaker 1: dollars to seventy five dollars. The amount of the cancelation
Speaker 1: fee depended upon how long you had been a member.
Speaker 1: If you wanted to cancel right away, you're gonna have
Speaker 1: to pay pay pay. So I began to grow its
Speaker 1: customer base, and because it was using a Discover card
Speaker 1: methodology for payments originally anyway, later on they would change
Speaker 1: that the master card. There wasn't a whole lot of
Speaker 1: movie theater chain could do besides protests the whole concept
Speaker 1: if in fact, they took Discover Card because the amount
Speaker 1: of the method of payment was pretty straightforward. Uh So
Speaker 1: things continued. The one thing they really could do, if
Speaker 1: they really wanted to, would be to put up a
Speaker 1: fuss and demand that Movie Pass not include their theaters
Speaker 1: in the app. Since you had to use the app
Speaker 1: to pick the daytime and title that you plan to
Speaker 1: see and which movie theater you were going to, they
Speaker 1: could at least in theory demand that their locations be
Speaker 1: left off of Movie Passes service, but that was about it. Well,
Speaker 1: things would rapidly change for movie Pass over the next
Speaker 1: few years. I'll explain more in just a second, but
Speaker 1: first let's take another quick break to thank our sponsor.
Speaker 1: In two thousand and fourteen, movie Passes experience as a
Speaker 1: company was starting to hit some bumps, and this would
Speaker 1: continue up till today. On the one hand, movie Pass
Speaker 1: was able to forge something of an uneasy alliance with
Speaker 1: the movie theater chain AMC, which had been a pretty
Speaker 1: reluctant participant up to this point and would continue to
Speaker 1: be actually, but this deal was sort of a pilot
Speaker 1: program for theaters in Boston, Massachusetts and Denver, Colorado. There
Speaker 1: were two tiers of subscriptions that users could choose. For
Speaker 1: thirty five dollars a month, subscribers would be able to
Speaker 1: see films in standard two D format at AMC theaters,
Speaker 1: and for forty five dollars a month, they could see
Speaker 1: films in any format, including three D or IMAX. Now.
Speaker 1: According to Business Insider, at this point, movie pass had
Speaker 1: about thirty thousand subscribers, and the company began to consult
Speaker 1: with an expert in the field, and it's a guy
Speaker 1: I talked about recently in the episodes about Netflix. So
Speaker 1: if you heard those episodes, you're gonna hear a name
Speaker 1: that's it was kind of familiar. That would be Mitch Low.
Speaker 1: Mitch Low was not only instrumental in getting Netflix up
Speaker 1: and running, but also after he left that company, he
Speaker 1: would go on to co found the company red Box.
Speaker 1: But on the other hand, two thousand fourteen was also
Speaker 1: a tough year for the movie theaters in general because
Speaker 1: from a box office standpoint, gross revenue was down more
Speaker 1: than five percent compared to two thousand thirteen. That might
Speaker 1: have been one of the reasons AMC was actually willing
Speaker 1: to go through with this partnership, and that partnership would
Speaker 1: begin in early two thousand fifteen. A year later, at
Speaker 1: the end of the pilot program, the two companies participated
Speaker 1: in a data analysis study to see how it all
Speaker 1: shook out, and the white paper would come out in
Speaker 1: the spring of two thousand fifteen. And the white paper
Speaker 1: which would come out that spring said that the average
Speaker 1: theater customer was going to a MC movie theaters about
Speaker 1: one and a half times per month on average. Before
Speaker 1: the pilot program. So you know, when you break out
Speaker 1: the average of all the people going who were not
Speaker 1: in this program, at first, it ended up being one
Speaker 1: and a half times a month. Then once the pilot
Speaker 1: program began, AMC saw that number go up to three
Speaker 1: times per month, which was not surprising people went to
Speaker 1: the movies more after subscribing, but then it settled back
Speaker 1: down to about one and a half times a month
Speaker 1: after that. That led AMC to argue that this partnership
Speaker 1: wasn't terribly valuable for the company, that they could actually
Speaker 1: make more money launching their own subscription service, because if
Speaker 1: they only experienced this rush of usage in the first
Speaker 1: month and then it tapered off again, it would make
Speaker 1: more sense if they could just keep all the money. So, uh,
Speaker 1: you know, if you're if you're paying a premium price
Speaker 1: to go to the movie theater and you only go
Speaker 1: one and a half times a month on average, then
Speaker 1: chances are you're paying more for the subscription than you
Speaker 1: would if you went to the theater and just bought
Speaker 1: individual tickets. So AMC would win out if it were
Speaker 1: in charge of the whole show. So they kind of
Speaker 1: canceled or concluded this whole partnership. In two thousand sixteen,
Speaker 1: Mitch Lowe would go from being a consultant to movie
Speaker 1: Pass to becoming the CEO of movie Pass. Spikes, who
Speaker 1: had been CEO, would become co chairman alongside fellow co
Speaker 1: founder Hammett Watt. The following year, in data company Helios
Speaker 1: and Matheson Analytics announced it would acquire a majority stake
Speaker 1: in movie Pass for a reported twenty seven million dollars.
Speaker 1: And while that was big news, the first move out
Speaker 1: the gate really made headlines, at least among movie Pass fans.
Speaker 1: The company would offer a brand new plan for nine
Speaker 1: dollars per month. You could see quote unlimited movies in
Speaker 1: theaters with no blackout dates, no contracts end quote. That
Speaker 1: announcement was crazy. I mean, there's barely more than a
Speaker 1: single ticket at the the average price in the US,
Speaker 1: right like nine a month. That's like one dollar more
Speaker 1: than what the average ticket cost was. Going to the
Speaker 1: movies just two times for any person in the United
Speaker 1: States would mean that Movie Best would be paying more
Speaker 1: than what it was getting in subscription fees. Here in Atlanta,
Speaker 1: going just once would mean that the full ticket price
Speaker 1: was more than what you were paying in a subscription fee.
Speaker 1: By this point, Movie Bass had established discount ticket rates
Speaker 1: with some movie theater chains, but not all of them.
Speaker 1: I bet you can guess the identity of one movie
Speaker 1: theater chain that continued to refuse to have discount rates
Speaker 1: with movie Pass If you can't guess, it's AMC. But
Speaker 1: even so, even with discount ticket prices, even if they're
Speaker 1: not paying full ticket cost, that's still a super low
Speaker 1: subscription fee, and unsurprisingly people began to jump on board
Speaker 1: because at that price, how could you not more than
Speaker 1: a fift people would attempt to sign up to the
Speaker 1: service in the forty eight hours following their announcement, and
Speaker 1: that puts such a load on the company's servers that
Speaker 1: they started to crash, and the app and the website
Speaker 1: was unavailable quite a few times in that period. AMC's
Speaker 1: reaction was negative, to say the least. The theater chain
Speaker 1: said it was going to look into the possibility of
Speaker 1: shutting out movie Pass from its chain entirely. In early
Speaker 1: movie Pass would remove ten AMC theaters off its app
Speaker 1: in various cities, and that appeared to be in response
Speaker 1: to this problem of not getting those reduced ticket prices.
Speaker 1: By the end of two thousand seventeen, movie Pass had
Speaker 1: accumulated a million news subscribers. Usually you'd say that's a
Speaker 1: good thing. The plan at this point was still to
Speaker 1: make most of the revenue by selling data about customer
Speaker 1: behaviors to various partners, and since of the users were
Speaker 1: class to fight as millennials, young people who are presumably
Speaker 1: going to potentially be a customer for a really long time,
Speaker 1: it seemed like that would be particularly valuable information. In
Speaker 1: two thousand eighteen, movie Pass announced a new division called
Speaker 1: movie Pass Ventures, which would do film acquisition and distribution.
Speaker 1: That led to some controversy later on. The first film
Speaker 1: the division would acquire was called American Animals, and the
Speaker 1: second was the film Gaudy Geo t t I with
Speaker 1: John Travolta. It received the rare zero percent rating on
Speaker 1: Rotten Tomatoes. Now, Rotten Tomatoes aggregates reviews from critics and
Speaker 1: then assigns a rating based on that aggregation, so zero
Speaker 1: percent doesn't automatically mean the movie is worse than say
Speaker 1: a twenty film. It just means more critics gave it
Speaker 1: a negative review. But the controversy came when the audience
Speaker 1: score was much much higher than the critics score. Some
Speaker 1: analysts suspected that there was manipulation at play, that maybe
Speaker 1: Movie Pass customers were given an incentive to give a
Speaker 1: good review to these films, and a few people pointed
Speaker 1: out that some of the user reviews that were being
Speaker 1: left on Rotten Tomatoes had only ever reviewed one other
Speaker 1: film in their history, and that other film was American Animals,
Speaker 1: the other movie Pass ventures picture, which does look a
Speaker 1: little suspicious. In the spring of a movie Pass presentation
Speaker 1: revealed that the app wasn't just using your location data
Speaker 1: to make certain you were at the theater to buy
Speaker 1: tickets when you said you were. It wasn't just an
Speaker 1: activation methodology. It was also tracking you. It was including
Speaker 1: information from before you arrive at the theater and after
Speaker 1: you visited the theater, So, in other words, they were
Speaker 1: watching where customers were going, where they were coming from,
Speaker 1: where they were going to. Spikes had originally said that
Speaker 1: they wouldn't be able to tell you what you had
Speaker 1: for lunch, but based on this data, they might have
Speaker 1: been able to give a pretty darn good guess, and
Speaker 1: a lot of people argued that the company had not
Speaker 1: clearly disclosed to people when they signed up to the
Speaker 1: service that their location could be tracked. Subscription numbers dropped.
Speaker 1: They dropped again a little bit later when movie passed,
Speaker 1: in an effort to stop hemorrhaging so much money, remove
Speaker 1: the ability to see a film a day on that
Speaker 1: nine dollars per month plan. Instead, now people could see
Speaker 1: up to four movies a month. And this initial change.
Speaker 1: Part of this was because so many new people were
Speaker 1: subscribing and going to the movies, so movie Pass was
Speaker 1: losing more money more rapidly because they were so popular,
Speaker 1: making it up in volume was not an option. In addition,
Speaker 1: users would be prevented from buying tickets to select movies
Speaker 1: more than once, so in other words, if you were
Speaker 1: going to go see a really popular film, you were
Speaker 1: limited to seeing that film just one time in the
Speaker 1: movie theater during its run, rather than being able to
Speaker 1: see it multiple times using your passes. That was one
Speaker 1: way movie Pass was trying to limit the number of
Speaker 1: times people were going to the theater. In April two eighteen,
Speaker 1: it became clear that the parent company for movie Pass
Speaker 1: had been losing twenty million dollars every month since September
Speaker 1: of two thousand seventeen, and an auditor expressed concern that
Speaker 1: Movie Pass would not be able to continue for very
Speaker 1: much longer. The company would reintroduce the one ticket per
Speaker 1: day plan a little bit later, because subscribers were still
Speaker 1: dropping off dramatically, and now the company was saying, well,
Speaker 1: it hurts us financially to have too many subscribers, but
Speaker 1: then we won't have a company if everybody leaves the service.
Speaker 1: But then, in order to balance out the fact that
Speaker 1: now you could go see a movie a day again,
Speaker 1: they introduced the concept of peak pricing, in which customers
Speaker 1: discover they would face additional fees to see certain popular
Speaker 1: movies at busier times of day. So if you had
Speaker 1: no job and you could go to the movie theater
Speaker 1: in the middle of a work day, you probably weren't
Speaker 1: too bothered by this because you could just see the
Speaker 1: film whenever you wanted to. But if you had normal
Speaker 1: working hours, you were likely to run into peak pricing
Speaker 1: because that happened to be the same time when you
Speaker 1: would have availability to go see a movie in the
Speaker 1: first place. Later, still, the company suffered a massive service outage,
Speaker 1: and they had tomorrow five million dollars because they admitted
Speaker 1: they did not have enough money to stay in operation.
Speaker 1: Without taking out a five million dollar loan. It increased
Speaker 1: the subscription fee of fourteen dollars cents per month. Keep
Speaker 1: in mind, this is still a point where you would
Speaker 1: agree to like a year long plan, so while it
Speaker 1: would be broken out to fourteen dollars per month, you're
Speaker 1: actually paying for a full years service, so they subscription
Speaker 1: fee goes up to month. And it also limited the
Speaker 1: number of times UH subscribers could watch new popular movies
Speaker 1: and reduced which screenings you could go to, so for
Speaker 1: brand new movies that were like tent pole films, you
Speaker 1: would only be able to see it maybe once, and
Speaker 1: you couldn't go see it at the most popular times.
Speaker 1: In early August two eighteen, the stock price for movie
Speaker 1: Passes parent company dropped fifty six percent and movie pass
Speaker 1: would again remove the movie a day option for users,
Speaker 1: going down to three films per month, so once again,
Speaker 1: you can no longer go see a new movie every
Speaker 1: single day. You can only see three a month. According
Speaker 1: to Mitch Lowe, this was okay because the average person
Speaker 1: would only go see three movies or fewer a month anyway,
Speaker 1: so it wouldn't really impact most users, except it does
Speaker 1: impact customer approval and the company did reduce the price
Speaker 1: back down to nine dollars cents had been known for previously,
Speaker 1: so at least that changed. It was no longer and
Speaker 1: they said that they were going to nix the surge
Speaker 1: pricing feature as well, but just a couple of weeks later,
Speaker 1: in mid August, and yeah, we're getting real close to
Speaker 1: when I'm recording this episode. But this is how quickly
Speaker 1: things have been changing. Movie Pass would change yet again
Speaker 1: mid August. Now users could only choose from between six
Speaker 1: movies each day, with limited showtimes, so there was no
Speaker 1: guarantee that the movie you wanted to see would even
Speaker 1: be listed on the day you could go see it,
Speaker 1: or it might be listed, but it might be only
Speaker 1: available at an inconvenient time because of the movie Pass availability,
Speaker 1: no matter how many times it might be showing at
Speaker 1: the actual theaters near you. On August two thousand eighteen,
Speaker 1: a board member of Helios and Matheson named Carl Schram
Speaker 1: would resign, and as part of an open letter he
Speaker 1: issued during his resignation, he alleged that movie Pass per
Speaker 1: basfully withheld information and made critical decisions without informing the board,
Speaker 1: let alone getting bored approval for them, and analytics company
Speaker 1: called Sensor Tower Store Intelligence stated that the first time
Speaker 1: downloads of movie Passes app have dropped by seventy six
Speaker 1: percent over the past three months. I'm recording this at
Speaker 1: the end of September two eighteen, uh in fact September
Speaker 1: two eighteen, and that report published yesterday September. So as
Speaker 1: I record this, there are tons of analysts who are
Speaker 1: predicting the demise of movie Pass. Heck, by the time
Speaker 1: this episode publishes one week after I have recorded it,
Speaker 1: that company might not exist anymore. It's been losing money,
Speaker 1: it's been losing subscribers. Who was playing a really dangerous
Speaker 1: waiting game to try and get enough users and to
Speaker 1: be seen as valuable in order to make a profit
Speaker 1: from all the data it was gathering. But that was
Speaker 1: a pretty expensive thing to wait out, and the controversies
Speaker 1: have hurt the company's credibley with its user base. So
Speaker 1: will movie Pass survive? That's possible, but with competing services
Speaker 1: coming out, some of which are coming out from the
Speaker 1: very movie chains that have been resisting movie Past this
Speaker 1: whole time, and with flagging user confidence and approval in
Speaker 1: the service itself, it's gonna be a long shot. Doesn't
Speaker 1: mean it's impossible, but it's gonna be super challenging for
Speaker 1: movie Pass to make it through UM and survive to
Speaker 1: two thousand nineteen. I would not be surprised to see
Speaker 1: it go away. UM. It would be kind of a shame. Like,
Speaker 1: I still am not quite sure how the company could
Speaker 1: make enough money, even with those additional streams of revenue,
Speaker 1: to make it a truly profitable experience without it being
Speaker 1: something launched by the actual theater chain itself. It's tough, UM,
Speaker 1: and I don't know how I feel. Actually, I do
Speaker 1: know how I feel about making money through selling data.
Speaker 1: I feel schivy about it. It's a skive thing. It's
Speaker 1: one thing to say, oh, well, here's a way you
Speaker 1: can send Jonathan a message saying, oh, this new movie
Speaker 1: is coming out, and you like this other movie that
Speaker 1: was like it, so maybe you'll like this one too.
Speaker 1: That I don't object to so much. But there's no
Speaker 1: telling what sort of companies movie Pass might start selling
Speaker 1: data to. It might be totally different companies that have
Speaker 1: completely different business models, And I'm not terribly comfortable with that.
Speaker 1: This happens all the time. You know, your information is
Speaker 1: sold to tons of different actors out there, and by actors,
Speaker 1: I mean agents, you know, companies, that sort of thing.
Speaker 1: But I don't want to invite more of that necessarily
Speaker 1: into my life. That's just me. It's my own personal
Speaker 1: reflection text stuff. Listeners. We have some breaking news. Right
Speaker 1: after I recorded this episode, some news broke that I
Speaker 1: felt I had to include before we published. So I'm
Speaker 1: recording this attendom the day before the show goes live.
Speaker 1: I'm so sorry. Sorry, but anyway, some crazy stuff happened
Speaker 1: that I think we need to address. Movie Past did
Speaker 1: something I think is pretty insane. Several customers who had
Speaker 1: canceled their subscriptions after the service had gone through multiple
Speaker 1: changes in two thousand eighteen ended up receiving emails that
Speaker 1: said they would have to quote unquote opt out of
Speaker 1: enrollment into a new subscription service. The email said that
Speaker 1: these lucky individuals and I am using air quotes for
Speaker 1: that had been selected to be automatically enrolled in this
Speaker 1: new service that would return to unlimited movies per month.
Speaker 1: In reality, it would be unlimited movies within movie Pass inventory,
Speaker 1: meaning you know movies that Movie Pass had access to.
Speaker 1: That actually means that things like blockbusters on opening weekend
Speaker 1: would be off limits, so not really unlimited movies, but anyway,
Speaker 1: it meant that unless you went to the proper settings
Speaker 1: in your account and you opted out of this service
Speaker 1: that you did not ask to be in, you would
Speaker 1: start getting charged by movie Pass for this service. So
Speaker 1: imagine that you are upset at movie Pass because the
Speaker 1: service changes have been going back and forth and it's
Speaker 1: not the service that you originally signed up for, so
Speaker 1: you decide it's not worth this hassle and you cancel
Speaker 1: your subscription. And then, uh, as of like the end
Speaker 1: of September, you get an email that says, surprise, your
Speaker 1: service has been re enacted without your permission and that
Speaker 1: if you don't do anything about it, you're going to
Speaker 1: get charged for it. I think it's safe to say
Speaker 1: this is banana. You should not have to deal with
Speaker 1: that sort of thing. I think it's ridiculous for any
Speaker 1: company to enroll a former customer into a new subscription
Speaker 1: service without their permission and then say it's on you
Speaker 1: to opt out of it. That to me is absolutely crazy.
Speaker 1: It doesn't sound ethical to me. Now that's my personal opinion,
Speaker 1: but I think it's a reasonable one. And then just
Speaker 1: hours before I was to come into this studio to
Speaker 1: record this update, more news broke the CEO of Helios
Speaker 1: and Mathison Analytics, Ted Farnsworth. Helios and Mathison Analytics is,
Speaker 1: of course, the parent company of movie Pass. Has said
Speaker 1: that they raised sixty five million dollars in new funding
Speaker 1: in September. But that being said, Helios and Mathison Analytics
Speaker 1: is still having some major problems. As of this recording.
Speaker 1: Their stock price for that company is at a single
Speaker 1: penny per stock one cent stocks, and it is in
Speaker 1: danger of being delisted from the Nasdaq Stock Exchange. On
Speaker 1: October eighth, the company is going to hold a stockholder
Speaker 1: meeting to discuss the possibility of a reverse stock split.
Speaker 1: Now I've talked about stock splits in the past. To
Speaker 1: stock split is when you take the number of stocks
Speaker 1: and you increase that number, really the number of shares
Speaker 1: in stock. You increase the number of shares, and then
Speaker 1: you decrease the individual share price. That way, the company's
Speaker 1: value is preserved as a whole, but you can increase
Speaker 1: the number of shares. So you might typically hear of
Speaker 1: a two for one stock split, which means that if
Speaker 1: the company has a thousand stocks now it has two
Speaker 1: thousand stocks, but there are two thousand stocks where each
Speaker 1: share is worth half of what they used to be worth.
Speaker 1: This helps improve liquidity and trading, but it doesn't change
Speaker 1: the value of the company. This is going to be
Speaker 1: a reverse stock split, so instead of a stock splitting,
Speaker 1: it's shares the stocks merging together. So this would be
Speaker 1: a five hundred shares of stock merging to form one share.
Speaker 1: So for every five hundred shares now there would just
Speaker 1: be one share that would be five hundred times the
Speaker 1: price of the original yaars, so instead of all one
Speaker 1: cent share, it would be five dollars essentially. Yikes. Anyway,
Speaker 1: those are the breaking news points that I wanted to
Speaker 1: include in this episode. Uh decided to add it on
Speaker 1: here at the end, and I'm sure by the time
Speaker 1: this publishes, they'll be yet more news about movie Pass.
Speaker 1: Probably not good, but I only have so much time
Speaker 1: and we have to publish at some point, so fingers crossed,
Speaker 1: it won't be catastrophic huge news. I'm sure we will
Speaker 1: be talking about movie Pass, perhaps in the past, tense
Speaker 1: again in the future. All Right, Susannah, that was our
Speaker 1: episode about movie Pass. If any of you out there
Speaker 1: have suggestions for topics I should cover in future episodes
Speaker 1: of tech Stuff, whether it's a technology, a person in tech,
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Speaker 1: you want me to interview or have on as a guest,
Speaker 1: let me know, send me an email. The address for
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