MoviePass’s new business plan is to charge you whatever it wants

The plan is changing.
The plan is changing.
Image: AP Photo/Darron Cummings
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MoviePass is rolling out peak pricing, its own version of surge pricing that will charge customers more to see popular movies during what the company considers “high demand” times.

MoviePass is a subscription movie ticket service that typically costs $9.95 a month to see up to one movie in US theaters per day. The company has been hemorrhaging cash to subsidize these monthly subscriptions, which can cost less than a single movie ticket in some US cities. MoviePass parent company Helios and Matheson reported spending $40 million more in cash than it brought in for the month of May, and it expected that gap to increase to $45 million for the month of June.

The company is looking to raise another $1.2 billion by selling stock and debt. But if MoviePass wants to survive, it also needs to start losing less money on its subscribers, and fast.

That’s where peak pricing comes in. MoviePass was vague on the details when it teased peak pricing in late June, and it hardly cleared things up in an email to users today (July 5).

“Peak Pricing goes into effect when there’s high demand for a movie or showtime,” MoviePass wrote in its email. “You may be asked to pay a small additional fee depending on the level of demand.” Movies currently experiencing peak pricing will be marked with a red circle containing a white lightening bolt; movies growing in demand that “could enter Peak Pricing soon” will get a gray version of the icon.

How much will the “small additional fee” be? In June, MoviePass CEO Mitch Lowe said the surcharges would be $2 or more. In the example MoviePass emailed to users today, the extra fee is $3.43. “Note: the actual Peak Pricing surcharge will vary based on showtime and movie title,” MoviePass unhelpfully supplies.

MoviePass’s online support page, updated earlier today, is similarly unhelpful. “Movies that are high in demand for title, date, or time of day will be impacted,” MoviePass advises. Peak pricing “will be based on movie demand so some weekends will have it, and others will not.” MoviePass, in other words, will charge you whatever it wants.

Zach Salk, a spokesman for MoviePass, said in an emailed statement that MoviePass is “still in a testing period” with peak pricing. To start, he said, members could expect surcharges of $2 to $6, depending on the film and showtime. Peak pricing will roll out to all MoviePass members in the next few weeks, except for quarterly and annual members, who won’t see it until their plans renew. MoviePass also plans to let each user waive one peak fee per month.

If past startups are a guide, hidden fees are almost always a bad sign. Many on-demand delivery companies, struggling to make their businesses work, have used opaque markups and “service” fees to try to increase margins. Shortly before meal delivery service Maple went under, it stopped giving out free cookies and added in a delivery fee.

In MoviePass’s case, an added fee of $2 or $3.43 might not sound like much, but for the company it could be significant. After all, those surcharges are 20% and 34%, respectively, of the monthly $9.95 subscription fee. They could go a long way toward helping MoviePass effectively raise prices without officially increasingly its sticker price.

Will people choose to pay? The answer seems likely to be yes. A lot of people might not have that many options for when they can get away for the time needed to see a film. And paying an extra $2 to $4 is still going to be cheaper than paying full price for a movie theater ticket, especially when you’ve already sunk $9.95 into that month’s MoviePass subscription.

This post was updated to include additional information from MoviePass.