Struggling movie subscription service MoviePass sent an email to users today who hold annual subscriptions, forcing them into the same terms as other members and offering refunds to those who want to cancel their memberships.
This is a continuation of the company's history of alienating users by changing its terms of service to add extra fees, cutting the amount of movies available per month from one per day to three in total and by blocking users from seeing some movies. Now, the company is taking things one step further by forcing annual subscribers — who until now, were grandfathered into the old plan — to switch to the new monthly plans.
The change comes as an odd move by the company since typically, companies only change service terms for users once they reach their renewal dates. MoviePass subscribers have, until now, been immune to all the changes the company has been making but now it seems like they're out of luck.
It cost $9.95 per month for the service and three movie tickets per month are included and all users are being forced into this plan under a change of service terms. The company is doing this by cancelling the annual plans and then applying the credit towards the monthly plans, or allowing users to quit the service and receive a pro-rated refund.
By citing the terms that users agreed to when they signed up for MoviePass, it is allowed to change the subscription without opening itself up to a class action lawsuit. There's no other option if people don't like the changes, with the company continuing with by saying "if this new plan no longer aligns with your viewing preferences, we completely understand and would be happy to offer you a refund for the remainder of your annual subscription."
Members only have one more week, until August 31st, to either cancel their plans or accept the new monthly subscription. Many users have already cancelled the service, since the company began to make drastic changes in search of profitability in July, ending with a full-blown blackout because it briefly went bankrupt.
The main issue with MoviePass' business strategy, however, is that movies aren't profitable in the digital age where they can be rented online for a fraction of the cost of one ticket. Studios like Disney and NBCUniversal make movies to boost toy sales and push people to visit their theme parks and cinema chains like Cineplex and AMC make the majority of their money from popcorn and other snacks. With Amazon Prime, the internet conglomerate pushes people to see its movies by luring them in with free two-day shipping and companies like Fandango make money by becoming a middleman in the ticket sale, charging a convenience fee to customers.
What MoviePass has failed to grow is its side business, dubbed MoviePass Films and MoviePass Ventures, which were founded with the intention of creating in-house movies to produce and distribute at a low cost. It's a great business plan in theory — the money people pay for the movie will come right back to MoviePass — but both of the movies the company produced were complete failures.
Profit margins on snacks are in the 70-80 percent range for most movie theatre chains, making them the money-making part of the business. That, along with advertising, events and promotions are how movie theatres survive after paying for the licensing fees, rent, staff and equipment just to show the movie. Initially MoviePass had planned to force chains into offering it a cut of their snack revenue, but that never panned out as planned.
To the company's credit, it did manage to work out discounted ticket deals with some smaller movie chains which helped it save some money in the long-run. But until the service is once again convenient for customers to actually use, they'll continue to cancel their memberships in droves.