From the northern California Video Droid movie rental chain he once owned to later co-founding Netflix and then moving over to Redbox as president, Mitch Lowe has made a career out of figuring out how to get us to watch more movies at home.
His latest endeavor, though, goes in the opposite direction. He’s the new CEO at another movie-focused startup – MoviePass – whose flagship product is a subscription service that covers the cost of going to see movies at your local multiplex.
The service is tailor-made for cinephiles, so no wonder Lowe took a big investment stake in the company earlier this year and then moved into the corner office. He calls himself as big a film buff as they come, once estimating that he’d spent some 13,000 hours behind the counter at his video stores – studying customers, watching which VHS tapes flew off the shelves, why and how often.
Then there were all the disruptive changes to come, when Lowe rode the digital tsunami that washed away the old, established video rental store order which he helped replace with rent-by-mail and those distinctive red kiosks.
“For the past 30-odd years, I’ve been involved in more of the at-home experience on the retail side,” Lowe tells BGR. “That’s been my passion. I spent my early career opening video stores and being part of video stores, behind the counter talking with people about movies and exploring their interest in film. How do people pick movies. What kind of pricing models are the best.
“I’ve become more and more a fan of seeing movies where the creative teams want you to see them. They make their films for the big screen with sound, and no matter what system you have it can never replicate that experience you get in a movie theatre. For me, the idea of getting more people into a theatre to explore films they might not otherwise see is exciting.”
To that end, a few years ago some friends at the True Ventures VC firm in San Francisco introduced Lowe to the MoviePass founders. They asked him to advise them, and he was looking for a way to get even more involved when he had the opportunity to make an investment in the company and then to come on board as its CEO.
As to how his stated excitement in “getting more people” through the cinema doors, here’s how MoviePass tries to do it.
The company’s subscription service uses a debit card in tandem with an app. Pay a monthly fee, and when you’re in range of the participating cinema, enough money is transferred to your card to cover the cost of the film. Founded in 2011, Moviepass’ model has been to generally charge a flat fee starting at $30 – it’s different depending on the market – and let that customer see one 2D movie every 24 hours.
You can quickly work out the math and see that it’s a great deal if you love going to the movies, as you can save plenty of money doing it this way. From MoviePass’ perspective, the company doesn’t say this but its economics are probably predicated on volume – attracting as large a pool of customers as possible and expecting that few people will probably see a movie every single day, even though that’s what the service offers them.
Plenty of questions loom. One: Can the service excite enough customers to get people to add this subscription to a pile that may already include everything from cable to Netflix to streaming music services, to name a few?
The latest stats out of the movie theatre business, not that it should come as a surprise, reflect a continuation of decline. The Motion Picture Association of America says cinema patrons between the ages 12 and 17, to use one demographic, numbered 5.3 million last year, down from 5.5 million in 2014 and 6.3 million in 2012.”
Lowe, though, thinks he knows how to reach at least one young demographic.
“Millennials love subscriptions,” Lowe said. “And by the way – 75 percent of our subscribers are millenials.”
MoviePass, for its part, is thinking about a big marketing push for the first time, and Lowe wants to bring in more investment funding. The company also in recent days decided to add a few pricing tiers to its offering.
It’s now offering new tiered pricing plans based on how many movies you typically see a month. The plans will start at $14.99 per month for capped plans (which allow for 2 or 3 movies a month) and start at $39.99 for up to a movie a day. A spokesman said the company will also be introducing a plan for 3D/Imax movies in the near future.
“Up till about five years ago, the movie theaters had two big problems,” Lowe said. “One is the theaters had not been upgraded in some time. They weren’t the quietest or cleanest places, and most millennials probably don’t know exhibitors have put huge investments into improving the quality of the environment, into better seating and the sound quality of the picture.
“The second problem is that while prices have increased, prices have decreased dramatically on the digital consumption side. You can get a full month’s worth of content on a phone or laptop for the price it costs to go to one movie in the theatre.”
Movie chains, he continued, have generally approached the situation the wrong way: They’ve raised prices to compensate for the decline.
“I believe the right way is to reintroduce people to an improved experience while at the same time giving them a pricing model they’re comfortable with,” he said. “The thing I specialize mostly in is business models – customer-facing business models. At Netflix, I was one of the couple of guys who walked into our warehouse in San Jose one day and saw 1 million DVDs sitting in boxes. We all looked at ourselves and said, ‘Why are these DVDs here? They should be sitting in customers’ homes.’
“From that, we devised the all-you-can-eat Netflix subscription, which transitioned into streaming, and the rest is history. I’m bringing the same kind of thinking to MoviePass.”