MoviePass Introduces Surge Pricing
Excerpts from an article by Jill Disis on CNN
MoviePass subscribers might have to spend a little more money on their next trip to the theater.
The service, which lets customers see one movie a day for $10 a month, began rolling out surge pricing Thursday.
MoviePass told customers that its Peak Pricing model will trigger whenever there is a lot of demand for a movie or showtime. For example, a subscriber who wants to see a popular evening showing of the latest "Avengers" movie might be warned by the MoviePass app that he or she will have to pay a few extra dollars to book a ticket.
Moviegoers will also be told when a particular showtime does not yet have an added fee, but is growing in demand and could have one soon, according to an email sent to customers.
The popular movie service began telling customers last month that surge pricing was coming. It's the latest tweak to a business model that Wall Street has been scrutinizing as one that's too good to be true.
MoviePass pays theaters for the tickets its customers use. Because its monthly rate is priced so low, the company loses money when its customers use a pass.
Parent company Helios and Matheson (HMNY) is now running out of money. The firm recently revealed in government filings that it blew through $40 million operating MoviePass in May. By the end of that month, the company had only $18.5 million in cash on hand, plus $30.3 million in accounts receivable.
Earlier this week, Helios and Matheson told government regulators that it wants to sell $1.2 billion in stock and debt securities as a way to raise money. The company's stock closed at 19 cents a share Thursday.
MoviePass recently passed 3 million subscribers, and is trying to draw in more as part of its plan to stay afloat. Executives want to reach 5 million members by the end of the year, a number they say should help make the business profitable.
In a statement Thursday, MoviePass said that it is still in a testing period with surge pricing, which will roll out to all subscribers over the next few weeks. To start, it said members can expect a fee of between $2 and $6. Members on an annual or quarterly plan won't have to pay surge pricing until they renew their subscription.
In a post on its website, MoviePass painted the new model as one that would allow it to "continue offering our low monthly rate for a movie a day."
The company also took a jab at competitors like AMC Theaters, which recently revealed a $20 a month movie ticket service plan. By keeping the $10-a-month plan as its base offering, MoviePass said its customers "still get the best deal possible."
The company added that it will soon allow all of its users to waive a peak fee once each month.