Netflix, MoviePass, and the Future of Cinema

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The motion picture industry is undergoing disruptive times. Video streaming platforms and subscription-based movie ticketing services bring about never before seen change to the traditional world of film studios and theater chains. Will the antiquated ecosystem and new business models continue to coexist or ultimately consolidate?

Disney and Netflix, Two Different Approaches to Streaming

Disney's video streaming platform will launch in 2019 and likely will leverage blockbuster movies from Pixar, Lucasfilm, and Marvel. Disney yields huge box office returns nearly every time it releases a film. Popular movies at the box office are likely to be popular on streaming services, indicating that Disney will have a high probability of success. Netflix, on the other hand, runs a much wider content strategy than the big studios. Instead of investing in a few blockbusters, in 2018 alone it spends $8 billion to develop 700 TV series and films. If Disney every year releases a few remarkable movies and a handful of popular TV series on its new streaming platform, will it be more attractive to consumers than 700 Netflix originals? Disney and Netflix are taking very different strategies in order to find out.

MoviePass, Subscription-based Movie Ticketing Instead of Streaming?

MoviePass is a subscription-based movie ticketing service in the U.S. trying to bring to movie theaters what Netflix achieved with video streaming: Watch as many movies as you want for $9.95 per month. Once signed up, you receive a MoviePass credit card in the mail. In close proximity to the theater, you can choose your film on the MoviePass app and simply swipe their credit card at the box office. MoviePass then pays the full price of your ticket at most theaters. Prices range from $9 to $15 and up, putting MoviePass in the red when a subscriber watches just one movie per month. The service ultimately hopes that subscribers might binge at first, but slow down once the novelty wears off. On the other hand, subscribers need to watch between 8 and 13 movies a year to break even. To get well beyond the 2 million users it already has, MoviePass needs to convince consumers that they really want to go to movies more often. Difficult here are several restrictions: MoviePass is limited to only one movie per day, excludes more expensive 3D titles and advance online sales, and does not allow for group bookings. The new business model is gaining international popularity and cPass, a UK-based MoviePass copy, currently launches with prices set at £9.95/month. While the question for these unlimited movie ticket deals is how to monetize it, the real source of revenue might lie in the data that each subscriber provides.

Acquisition of Theater Chains by Streaming Platforms, A Vision for the Future

Theater chains, such as AMC Entertainment, must screen what film studios dictate them and have little to no bargaining power. Lack of broadly appealing content has led to declining sales of theater tickets over the past years. Cinema is, however, not forsaken, it just has not evolved to today's market, and the only way to do so is through a major disruption. Disruption will require a new pricing model, technology, and vertical integration to increase bargaining power. If Netflix, for example, would buy AMC Entertainment, this would certainly lead to such disruption. The new model would then be subscription-based, powered by big data and mobile apps, and offer a combination of original and leased content, just like their streaming service. Netflix is generating vast amounts of original, award-winning content. It would be great to have another screen on which to air this content, especially in a location that can up-sell concessions and experience. While non-Netflix subscribers could still buy tickets in the traditional way, Netflix members would reserve a seat at no charge and walk right into the screening room. In order for Netflix to cover ticket costs for leased content an expanded subscription price and a monthly limit on the number of movies that can be seen under that subscription could cover the cost of screening traditional studio films. Studios likely will not be able to afford restricting content to Netflix owned theaters, nor would they want to. Netflix could use geographic data of users to optimize occupancy across theater locations and could fill seats in between leased films with original TV series or films. Binge watching and special advanced screenings of Netflix content could get consumers to come back, or come more often, if it was part of an expanded subscription package.

If this hypothetical consolidation of theater chains and streaming platforms would take place, the big screen would be provided with the new pricing model, the technology, and the vertical integration needed to evolve to today's market and turn into a more encompassing experience again. Merging the two worlds would result in more bargaining power for the new theaters and thereby help to overcome the limitations of MoviePass. This would make way for binge-watching and also make the theater experience more sociable again by facilitating group bookings. In the illustrated scenario, theater companies, as the “middleman”, would disappear, major film studios would lose control, and companies such as MoviePass would become superfluous in the world they contributed to create.

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Inspired by articles on EngadgetThe Motley FoolThe Seattle Times, and TheStreet.