Peak Pricing Appears to be a Direct Hit

I have been lax on writing about MoviePass for a while, but now that summer heat is here in full force in Eastern Washington I am taking a few hours inside to enjoy some A/C and think and write a bit more about what could be with MoviePass.

It has been an exciting couple of weeks, with new SEC filings that almost nobody can make any sense of, calls for pending doom from going belly up.  But IMO the most important and exciting development for MoviePass is the official start of Peak Pricing, or what many are calling Surge Pricing.

It appears from weekend reports across the Internet that MoviePass has done an implementation that is going to be quite good for HMNY stockholders, and ultimately will be very good for MoviePass customers, although many customers are still working through their various stages of grief and going through the old Kubler-Ross Model.   If not familiar, there is a well-defined model for how humans deal with unexpected changes, particularly when they are dealing with a change of something they love.

First is Denial – We saw that when the news first came out, there were a lot of people saying it was only a rumor, then there were people saying that MoviePass would not implement it because the backlash would be too much.  Well, that all passed, and nobody is denying that surge pricing is here.

Second is Anger – we still have some people in that stage.  We have seen a lot of that, especially from the heavy users.   Most will get over it, but the anger has been there on full display.

Third is Bargaining- this is normally praying the change away, or trying to find some way to make the change not happen.  It is the strong desire to go back to the way things were before.

Forth is Depression –  You might think that is a stretch for MoviePass, but when I read comments on the MP Fans site on FB, I think some people really have found some bleak moments knowing that the “too good to be true” free for all is winding down just a bit.  Maybe folks are depressed, but some are “pretty bummed out”.

Fith and Last – is Acceptance – Many MoviePass holders have already moved to this, but everyone moves at their own pace.  Acceptance does not mean you love it, it simply means that you accept it as the new reality and move on to dealing with it.   In the case of MoviePass I know people have moved on to acceptance when they start talking about how they are going to try and avoid Peak Pricing.   I see folks saying they will try and buy tickets early in the morning, or see the big movies in the middle of the weak or later on in the lifecycle or whatever they decide to do.    When consumers start talking that way, you know they have moved on to acceptance.

Again – different people react in different ways, and people take their own time and pace to move through these things.

So – we have Peak Pricing announced, implemented, and we are slowly working our way through to acceptance with consumers.   If you are holding on to the idea that this is going to cause a mass cancellation effect and churn is going to go through the roof.  Forget about it!   That is not going to happen.  Consumers ultimately do what is good for their pocketbook, even if slightly miffed.   You need only know that people will drive several miles to save .05 on a gallon of gas.  Or people will brave the crowded Costco to pick up cheap paper towels and great deals on meat.  Trust me when I tell you, very few people will actually quit MoviePass because of Peak pricing.  The deal is still terrific and everybody logically knows that.   Remember, sites like facebook, twitter reddit etc, they all have the vocal minority who love to bitch and complain and tell the world how terrible things are, and they make big claims about how they will quit and protest different things.  99% of the time it is just a bunch of noise.   I mean if you are being at all realistic, you know that people have issues with Facebook, Amazon, Google, Microsoft, Apple, etc., they have some small vocal minority that throws a fit anytime changes happen, and then of course things settle down, and ultimately more often than not the companies move on with whatever their agenda is.   OK enough about that, because Peak Pricing really is not that bad for consumers and they will get that over time.

With MoviePass and HMNY – these steps are quite important.  Firstly because often times Farnsworth and or Mitch say something is going to happen, and well, it either does not happen or does not happen quite when or how they said it would happen.   So that they actually got the work done and implemented this thing is no small deal.

Again – From what I have been seeing on Facebook, Stocktwits, and other boards, it appears that MoviePass has made a direct hit with their implementation of Peak Pricing.   Let me explain.

First- It seems that AMC Theaters are taking direct hits on Peak Pricing, while partner theaters and other non-AMC theaters appear to be seeing less surge pricing.   MoviePass is now clearly at WAR with AMC.  Mitch and Ted have taken the gloves off and I think they’ve given up any hope of getting a deal done with AMC anytime soon, so now they are going to hit them where it hurts.  Ted has been vocal in his jabs at AMC lately, telling The Street that he thinks AMC is trying to put them out of business.   Mitch has long been saying nasty things about AMC,

so it is clear that the dynamic duo is more than ready to stick it to AMC as hard as they can.   I have seen many screenshots like the one below where AMC is the ONLY theater showing Peak Pricing for a particular location.   That is less true in NYC and LA where there is more widespread Peak Pricing.   But it seems obvious now that Partner Theaters are going to see lower or maybe zero Peak Pricing, and AMC is going to see a lot of it.   The effect of this will likely be that heavy users who really love AMC will likely jump to the more expensive AMC Stubs plan.   That is actually a good thing for MoviePass, the more heavy losers (I mean users sorry for the slip up there) that jump over to AMC’s plan, the less money MoviePass has to lose on them.  This brings down the utilization rate, which of course is key to getting MoviePass toward that Breakeven goal near the end of the year.   This will also punish AMC further, as they will be getting the worst type of users, the heavy users, that are paying $20 a month, who are very motivated to get their full value from the subscription.    So from MoviePass’s position, I am sure they are more than happy to bid farewell to those Movie Hogs, and maybe pick them up later as things change over time.   Some of the really heavy users are going to be happy to have both the AMC program and the MoviePass subscription, as over -time MoviePass will introduce exclusive benefits that movie fans will find irresistible.

Now onto why Peak Pricing is actually sort of good for consumers, and they just don’t really know it yet.   Peak pricing is doing something that no other theater company could do before.  It is using variable pricing to smooth out the demand curve.   And that IS actually good for consumers.

You see if MoviePass can successfully help theaters to reduce their perishable inventory by changing the demand lifecycle of a film, this will help MP help the theaters to make more money.   You have to think about a movie seat like an airline thinks about their seats.  Once the plane takes off, any seat without a butt in it is a loss for the airline.   Same of course goes for Movie seats.   If the movie plays to an empty seat that is a lost opportunity to sell an additional ticket.  OK I know that is super basic.  But the less basic part is, Movie Theaters make more profit on the tail end of movies lifecycle in the theater.  That’s right, movie theaters keep more of the sale on a movie ticket in the last week of a films showing than it does on opening weekend, where the studios take the lions share of the revenue.    So if MoviePass can show the theaters that they can actually get people to change their behavior and see movies a week or two into the release cycle this helps the theaters make a lot more money.

So how is this good for the consumer?  Well in a number of ways.  First, it gives consumers more choice on how to enjoy films in the theater, and do so at a great price.   By spreading out the demand, everyone can win.

Second, it gives smaller indie films a much better position to make some money.  Take this weekend, for example, maybe wait on Ant-Man, and instead see “Three Identical Strangers” a Movie that MoviePass is promoting.   As a consumer, you still get to see a new release, you get to see something maybe a bit more interesting than the movie everyone else is seeing, and it does not mean you can’t see Ant-Man later on in the theater.

By flattening out the lifecycle of blockbuster films, it helps the theaters make more money, it helps the independent movie producers make more money and thus produce more movies for theaters, and thus it helps consumers have more choices of more films, for significantly less money than they were seeing films for before MoviePass.

This is why I think Peak Pricing is the most significant move yet by MoviePass, and why I believe ultimately anyone who loves movies, or anybody who has invested in HMNY/MoviePass will look back at this weekend as a watershed moment for the success of MoviePass, and a very direct hit on AMC.