trending Market Intelligence /marketintelligence/en/news-insights/trending/YInIyPwv-jHV0xTAEPxKFA2 content esgSubNav
In This List

Regal, AMC bet on subscriptions to drive US admissions amid broad declines

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Volume of Investment Research Reports on Inflation Increased in Q4 2021

Blog

Price wars in India: Disney+ Hotstar vs. Amazon Prime Video vs. Netflix

Blog

Using ESG Analysis to Support a Sustainable Future


Regal, AMC bet on subscriptions to drive US admissions amid broad declines

The high cost of the subscription movie theater ticket business drove one of its trailblazers out of the market, but a new class of services offered by traditional theater operators appears to be here to stay.

Subscription movie ticket provider MoviePass Inc. spurred U.S. theater chains to launch their own premium subscription offerings, despite concerns about how the services could impact pricing and profits. Now, the initial results are in, MoviePass is out, and the major exhibitors are using subscription services to help combat a broad decline in U.S. theater admissions.

SNL Image

The subscription business is not without risk, even for traditional theater operators with other revenue streams. AMC Entertainment Holdings Inc. reported declines in U.S. revenues, attendance and average ticket prices in the quarters immediately after it launched its Stubs A-List program in June 2018, which the company attributed partially to the new subscription program. The company's stock fell sharply after it missed expectations for its earnings in the September 2018 quarter, the first full period after it launched the Stubs A-List offering, and it has yet to recover. Shares remain down nearly 50% since AMC's third-quarter 2018 earnings report in November of last year.

AMC management has sought to assure investors ever since that the subscription program would become accretive in the long run. In its most recent earnings call, executives said its approximately 900,000 A-List members attended theater screenings about 2.85x per month, driving better-than-average attendance rates for the industry. They also said the service turned profitable in 2019.

While the program weighed on average ticket prices, AMC will look to make up for the loss in higher attendance and promotions driving high-margin food and beverage sales. Concessions can cut 80% margins, while ticket prices are split with studios and other partners, Wedbush analyst Michael Pachter noted in an email interview.

"AMC saw a hit because early adopters were higher frequency visitors and because they didn't price the program right. I think they have it under control now," Pachter said.

The U.K.'s Cineworld Group PLC launched a subscription program for Regal, its U.S. theater chain, in July. The launch followed an 18.5% decline in U.S. admissions that Cineworld executives attributed in part to business lost to competitors' subscription programs.

"There is for sure the market for subscription," Cineworld CEO Moshe Greidinger said on the company's Aug. 8 earnings call. "I think this unlimited [subscription service] is going to take us forward in the U.S."

Total U.S. box office attendance for the first half of 2019 was down about 9.7%, according to Kagan, a media market research group within S&P Global Market Intelligence. Kagan analyst Wade Holden said movie subscription programs may not appeal to all consumers, but they do drive theater chain loyalty.

AMC saw admissions fall 3.6% for the first half of the year but reported year-over-year gains for the second quarter. Cinemark Holdings Inc., which launched a more limited subscription service than AMC's in December 2017, similarly reported growth in admissions for the second quarter but a decline of 6.7% for the first half. Cinemark had 800,000 subscribers to its Movie Club service in the second quarter.

The pricing and services offered via the new Regal Unlimited service more closely resemble that of AMC's Stubs A-List than Cinemark's Movie Club. The price of A-List varies from $19.95 to $23.95 per month, depending on geography, and it includes three movies a week and specialty showings like IMAX. Regal's Unlimited program costs $18 to $23.50 per month, depending on the number of theaters the subscription covers, and Regal does not limit the number of films its Unlimited subscribers can see. Cinemark's Movie Club program costs $8.99 per month, but only provides one 2-D ticket per month with the option of purchasing two additional tickets at $8.99.

Cinemark saw some volatility in its average ticket price following the launch of Movie Club in late 2017, but it did not attribute the fluctuations to the new subscription program. The company's average ticket price was $8.12 in the second quarter, compared to $7.98 in the fourth quarter of 2017.

SNL Image