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US movie exhibitors expand subscription plans as MoviePass retools offering

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US movie exhibitors expand subscription plans as MoviePass retools offering

Explosive growth in the subscription cinema business is prompting another U.S. theater chain, Regal Cinemas Inc., to contemplate a new offering.

Regal parent Cineworld Group PLC already operates an unlimited monthly subscription plan for £17.90 at its U.K. theaters. If the plan came to Regal, it would join similar services already operated by competitors AMC Entertainment Holdings Inc., Cinemark Holdings Inc. and MoviePass Inc., the Helios and Matheson Analytics Inc.-owned company that has drawn interest and scrutiny for pricing its unlimited ticket subscription offering at $9.95 per month.

Although MoviePass remains far ahead of its U.S. competitors in terms of total subscribers, its future is uncertain amid a steady cash burn. In the past month, after parent Helios and Matheson Analytics drew emergency financing to keep the service operating, MoviePass announced changes to its subscription plan's terms and pricing. While some of the changes were quickly rescinded, MoviePass executives said the recent decision to limit its subscribers to three movies per month will help put the service on a path to more stable growth.

Cineworld CEO Moshe Greidinger said during an Aug. 9 earnings call that the company is interested in expanding its unlimited ticket subscription plan to its Regal theaters, but it will take more time to assess the market and strike agreements with studios.

Responding to a question from an analyst, Greidinger said Cineworld would not be interesting in buying the assets or client list of MoviePass should MoviePass reach a liquidation event.

Cineworld's unlimited plan, priced similarly to AMC's less generous offering, targets heavy moviegoers, or those who see multiple movies a month, Greidinger said. That contrasts with the MoviePass, which is looking to attract the occasional moviegoer, as MoviePass CEO Mitch Lowe said in a recent interview with S&P Global Market Intelligence. Cineworld is looking to support its most engaged customers, where MoviePass is looking to drive box office attendance by engaging a more moderated consumer base, according to executive comments from both companies.

AMC, an outspoken critic of MoviePass' business model, launched its competing A-List plan in June. Cinemark rolled out its Movie Club in December 2017. AMC said A-List had reached 182,275 members as of its Aug. 1 earnings call, while Cinemark on Aug. 8 said its program had more than 350,000 subscribers. Both companies said they expect to hit 500,000 members around the end of the first year of launch, but AMC CEO Adam Aron suggested that A-List could easily surpass 500,000 before its one-year anniversary.

AMC predicted its service will eventually add $15 million to $25 million in incremental EBITDA if members see about 2.5 movies per month, per 1 million members. However, "there will be some early cannibalization, too," Aron said on a June 20 call announcing the A-List program. The program could cost as much as $10 million in ticket revenue in the second half of 2018. The U.K. version of its subscription offering already accounts for 10% of its ticket sales in that region, and executives predicted the U.S. program could eventually drive similar results. The company expects more traditional sales to account for more of its future business, however.

"Most of the economics of AMC are going to be sold one ticket at a time in the future, just as it has been the case in the past," CEO Aron said on AMC's recent earnings call.

Cinemark's Movie Club, priced at $8.99 per month and limited to one movie per month plus discounts on other sales, currently accounts for about 5% to 6% of its box office sales, CEO Mark Zoradi said on that company's earnings call.

MoviePass surpassed 3 million members after launching its $9.95 per month plan in August 2017, which originally included unlimited 2D tickets per month agnostic to theater chains and was recently rolled back to three tickets per month. CEO Lowe said he expects the service to mature at 20 million members. At about 3 million members, MoviePass said its service accounted for 5% of total U.S. box office sales and 30% of sales for films that were actively advertised on the MoviePass platform.

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