One year before Steve Jobs passed he predicted a service like HMNY’s MoviePass would change how studios market their films. Now 8+ years after the marketing genius’s death, MoviePass stands.
Now 8+ years after the marketing genius’s death, Moviepass stands to deliver on Job’s prediction that technology would allow studios to efficiently reach audiences reducing their spiraling marketing costs.
At only 10% share of Studio Marketing budgets, Moviepass could stand to reap $230M a year in revenue from Studios. 10% is a conservative estimate given the efficiency of Moviepass.
Way back in 2010 Steve Jobs predicted at an industry conference a change from technology would emerge that would fundamentally change the way movie studios go to market and connect with their customers. His prediction was early, but is now being delivered via MoviePass.
Jobs stated “What the studios need to do is start embracing the front end of the business,” he said, “to start knowing who their customers are, and to start building mechanisms to communicate with them, and tell them when their new product is coming out.” Within two years, the Apple CEO predicted, selling films “is going to get a lot more interesting, more precise, cheaper, efficient.”
Jobs’ vision is now being precisely played out by Mitch Lowe, CEO of MoviePass. MoviePass is the ONLY service that can deliver the exact value Jobs prescribed.
MoviePass know’s their customer, in a way studios have never known who their customers were before. MoviePass can deliver a precise, efficient, and cheaper mechanism to get butts into movie seats, previously unavailable to studio marketing chiefs. And yes, they can do it in a way that is more interesting and exciting to the coveted millennial audiences studios are desperate to connect with. Only MoviePass can tell studios exactly who is going to their movies, and reconnect them with sequels, sell them add on products and introduce them to similar films. And only MoviePass has the power to do this on their mobile app platform, knowing the precise history of the users previously viewed movies, locations and times.
Mitch Lowe stated in his interview with Peter Kafka of ReCode
“..we have all these different ways that we make your life better as a customer. We know how to market films to you. You know, the studios are incredibly inefficient the way they market small films. Over the last three weeks, we bought one in every 19 movie tickets in the country, but when we promote a film, we’re buying one in 10, so we’re lifting. These are for subjective $50 million box office films. The studios are paying us to be a more efficient marketer of films.”
MoviePass is a dream come true to Marketing executives who knowingly waste billions every year on big TV advertising binges trying to ensure that big budget films don’t go bust at the theater. An increasingly big risk in the crowded movie marketplace, that has been seeing reduced attendance. MoviePass stands to be the single best way to ensure that a movie does not fizzle out in the all important opening week.
According to Variety Magazine,
Marketers know the power of digital media, but also are becoming more cognizant of its limits. Several executives say they are not convinced, for example, that trailers posted online aren’t just as readily avoided by consumers as are TV ads skipped in the age of the DVR.
“You only know for sure that the consumer saw the first second or two of your trailer. After that, it’s unclear,” suggests a marketing consultant. “And was the volume even turned on? We don’t know. We need better verification of who is really watching and hearing what.
MoviePass – is similar to – but better- than Google keywords for movie studios. MoviePass takes all the guesswork out of connecting directly with prospective theater goers by utilizing their deeply personal and engaging mobile platform. Simply put, there is no surer way for studios to drive customers to movies than using MoviePass as marketing partner. If and when MoviePass hits their 5 Million subscriber goal they have predicted to hit by the end of this year, that power of connecting to large scale theater audiences only continues to grow.
It is important to note, that MoviePass has already been extremely successful extending out the all important opening week for many movies as of late. CEO Mitch Lowe shares details in his interview with ReCode here.
In that same interview Lowe answers Kafka’s question of-
“What’s an example of a movie that the studios have paid you to promote?”
“I could list a bunch of them. “Maze Runner” is one over the last couple of weeks. “Lady Bird,” “I, Tonya,” almost every film …”
So it seems that MoviePass is already enjoying success promoting films for studios. We don’t yet know how much those deals are earning MoviePass, and it has been reported in SEC filings that many of the deals are performance based. Meaning that MoviePass gets paid and bonused on the number of actual tickets they help to sell. We will find out soon how material this is to MoviePass earnings, but because MoviePass is still private, (HMNY) has no right or even any good reason to share these details. I think we all may end up surprised by how big this advertising business can be.
MovieFone acquisition ups the anti on MoviePass advertising business potential.
When HMNY bought MovieFone – they upped the anti for their advertiser value proposition BIG TIME. The addition of MovieFone brings MoviePass 6-8 Million additional monthly UU’s to market films to. Taking the total addressable market for MoviePass advertisers to someplace near or above 10 Million people. Additionally, the deal cut with Verizon to by MovieFone allowed for MoviePass to continue working with AOL’s Oath division for ad sales. This is a big win for MoviePass because Oath has the largest display advertising salesforce in the business. Oath sells ads for all AOL properties, Yahoo, and Microsoft. This is a big benefit to a small company like MoviePass who would not be able to afford to build their own large salesforce early on. Having worked in this space, I can tell you that getting a large company like Oath to agree to sell inventory for a small site is very hard to obtain. When I was at Microsoft and we had a large ad salesforce, we were constantly asked by smaller partners to sell their inventory for them, but we would not do it because it created sales and channel conflicts for our own inventory. This may sound like small details, but I can assure you this stuff is critical for building a large ad business.
It is estimated that as much 1/3 of revenue for a movie is achieved in the first week of a movie’s release, and further, it often can determine if an expensive film makes or loses money for the studio. This fact, along with tight windows that can’t be moved for movie release dates is what forces movie studio executives to spend $100’s of millions of dollars to “ensure success” of big budget films.
A quick look at the potential revenue MoviePass could score from this powerful marketing asset reveals a potential big windfall for HMNY the majority owner of MoviePass. It is easy to believe that when MoviePass hits its estimated 5 Million subscribers by the end of the year, they could nab a 10% share of total marketing spend, estimated at $2.36B. Or $230 Million in revenue conservatively estimated. MoviePass CEO Mitch Lowe has previously estimated a potential of $6 Per Subscriber Per Month. Simple math of 5M Subscribers X $6 = $30 Million a month, or a yearly revenue run rate of $360 Million. This revenue source could easily be delivered at a Gross Margin in the 90% plus range.
Put simply, within 20 months, MoviePass + MovieFone has the potential to deliver a quarter billion dollars in run rate revenue from studio marketing budgets at incredible gross margins.
Remember, that Mitch Lowe, CEO of MoviePass has stated that the subscription business would run at breakeven at approximately 5 Million Subscribers.
My model shows that is indeed possible for MoviePass to breakeven or profit by next calendar year.