Netflix Co-Founder Wants to Sell You a Subscription to Go to the Movies
Almost two decades after helping found Netflix, Mitch Lowe is turning his attention to another startup trying to change the way people watch movies. Lowe has taken over as chief executive officer at MoviePass, a five-year old company that offers an all-you-can-watch subscription service for movie theaters.
MoviePass gives subscribers a debit card that allows them to attend as many movies as they want. The service starts at about $30 a month, with higher prices in more expensive cities. The subscription covers 90 percent of movie theaters in the U.S., according to MoviePass. Still, the experience feels like a bit of a hack in most places, largely because theaters haven’t completely bought into the idea. Outside a Manhattan theater on Saturday night, there was a laminated card taped to the box office window explaining how the MoviePass process works. It was five paragraphs long.
Lowe acknowledged that he has a lot of work to do to persuade both theaters and movie fans that this is something they should go along with. “We’ve got a subscription where you can go to the movies at almost any theater that accepts a debit card, yet people don’t really get how great an experience we can make it,” said Lowe. Earlier this year, he took a significant ownership stake in the company and began serving as an adviser, then agreed to take over as CEO. He said that Spikes, the co-founder and current CEO, will stay with the company.
If Lowe does jump-start MoviePass, it will be a satisfying capstone on a career that has touched on the development of many new business models for watching films. His first foray was an investment in Captain Video, a San Francisco Bay Area movie store chain, in 1982. During that era, Lowe’s big innovation was using color-coded paper clips on the 3-by-5 index cards used to track rentals so the manager would know what day to expect the tapes to be returned.
In the 1990s, he built a company that allowed stores to set up their own websites and became head of the Video Software Dealers Association, the trade group for video stores. There, he met Reed Hastings and Marc Randolph, who were looking to start a DVD-by-mail service called Netflix. He sensed a big idea and pitched himself as the person who could help make it happen. “They were looking for someone who knew the business,” he said. He later went onto be president of Redbox, the video-rental kiosk company.
One major stumbling block to proving the potential of a subscription service for theaters could be that the idea kind of runs counter to the last decade or so of movie-going habits. Attendance at U.S. movie theaters has declined by 17 percent since 2002, according to Box Office Mojo. Theaters have been able to weather the storm by charging people more each time they come to the theater. Average ticket prices have risen 45 percent, mostly because theaters focus on upselling people on such features as 3D or IMAX that are hard to replicate in private residences.
Subscription services seem to appeal best for products people consume routinely. Going to the movie theater is becoming less of a routine for Americans, and movie theaters are adjusting accordingly.
To get people comfortable with the idea of subscriptions, MoviePass plans to launch its first major marketing campaign. Lowe wants to expand the company’s range of services, with the cheapest subscription coming in at under $20 a month. He will immediately look to raise a further funding round.
Smoothing the customer experience probably means convincing movie theaters to work more closely with MoviePass. Over the last five years, many theater owners have been skeptical. “The movie industry has been very resistant to change,” said Wade Holden, an analyst at SNL Kagan. “They’re trying to draw in more crowds but still keep their traditional ticketing services.”
Lowe insists that theaters have nothing to fear. He believes a subscription service will inspire people to visit theaters more regularly. MoviePass doesn’t take a cut of the ticket sales it facilitates. Its business model is similar to the one employed by most fitness clubs—hoping more subscribers will underuse the service than overuse it. “The theaters will get full price,” said Lowe. “We’re not asking for a discount or a rebate. When we go into these conversations, that’s the first thing they expect us to be asking.”