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Hollywood Studios Fear AMC's New MoviePass Competitor Will Erode Their Revenue
6/22/18, 5:30 AM
Hollywood studios may seek changes to a new MoviePass rival because of concerns about how the service determines their cut of the sales, according to people with knowledge of their thinking.
The subscription service, announced earlier this week by AMC Entertainment Holdings Inc., the nation's largest cinema chain, would calculate studios' share of ticket sales based on a price that is lower than they actually cost in most major cities -- and lower even than the average charged nationwide by AMC.
"If admissions go up [substantially], then I will see an uplift," said one major studio executive briefed on the plan. "But right now I'm going to be taking a haircut."
As a result, the executives said they would be closely monitoring results of the new offering, called AMC Stubs A- List, and could push for it to be changed if they see revenue declines from it.
Right now, no studio is considering what one executive described as the "nuclear option" of withholding movies from AMC.
The executives said they have had little time to consider a response, as AMC informed them of the new service just this week, with little to no advance notice before its public announcement Wednesday.
An AMC spokesman pointed to comments made by the exhibitor's chief executive, Adam Aron, on a conference call with Wall Street analysts Wednesday, when he said the service was being offered "at a sustainable price point where we can be very confident that we will be profitable across the membership base and in turn can share that profitability with our studio and premium-format partners."
Stubs A-list costs $19.95 a month and lets subscribers see up to three films a week at any AMC theater in the U.S. It is a response to MoviePass, which has grown from 20,000 subscribers to more than 3 million since cutting its price last August to $9.95 a month for one movie a day in most theaters nationwide.
MoviePass is facing financial difficulties. On Wednesday, along with a plan to raise capital by selling $164 million of stock and convertible notes, its parent company, Helios & Matheson Analytics Inc., said it had just $48.8 million of cash and funds on deposit and that its monthly cash deficit had grown to $40 million in May and an estimated $45 million in June, compared with an average of $25 million between September and May.
MoviePass pays theaters the actual admission price for each movie its subscribers attend, and studios get their normal cut, making it more expensive for its owner than the new AMC program.
Each time a user of the Stubs A-List sees a film, the exhibitor will give studios their normal share of box office based on a price of $8.99 for a standard, 2-D film, said people briefed on the financial details. Typically, major studios get around 60% of domestic box-office for their films.
AMC's average U.S. ticket price in the quarter ended March 31 was nearly a dollar higher, $9.78. In cities like New York and Los Angeles, ticket prices can be $15 or higher. If more consumers in big cities use Stubs A-list, the studio executives said their box office revenue could fall significantly.
"That's one of the things that's going to have to be worked out," said another studio executive.
Some studios have deals in place mandating minimum ticket prices in certain locations higher than $8.99, which complicate their dealings with the new service, executives said.
People with knowledge of AMC's plan said it came up with the $8.99 ticket price because it is identical to that used by Cinemark Holdings Inc., the nation's No. 3 chain, for a subscription service it launched in December offering one movie a month for that price, along with food and beverage discounts.
However, Cinemark, which operates mainly in smaller markets than AMC, had an average U.S. ticket price of just $ 6.61 in the first quarter.
Some studio executives said that in principle they were enthusiastic about the idea of subscriptions that could appeal to younger people who have been drawn to MoviePass and Netflix. The number of movie tickets bought annually in the U.S. and Canada last year reached its lowest level since 1995, an alarming trend for the industry.
Write to Ben Fritz at ben.fritz@wsj.com
(END) Dow Jones Newswires
06-22-18 0530ET
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