Film-Tech Forum ARCHIVE: Subscription based theatre

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Posted by Frank Cox (Member # 6258) on 01-01-2013, 07:27 PM:

A small-town theater campaign's larger projections

quote:
OAKHURST, Calif. — Once in a while, Hollywood comes through this gateway to Yosemite National Park. People still talk about the time Ron Howard accidentally left one of his children (briefly) in a doughnut shop.

But Oakhurst's main connection to the movies has been the local Met Cinema, scene of countless first dates and family outings. When the Met closed abruptly in November — "Skyfall Coming Soon" still up on the marquee — it meant that those living in this mountain town and neighboring communities would have to drive at least 70 miles to Fresno to see James Bond on the big screen.

Now for the plot twist:

Three childhood friends believe they've developed a subscription plan that could save not only the Met but also struggling small-town theaters across the country.

The deadline to find out if they can make it work here is Dec. 31. If enough people enroll, the trio will be able to sign a lease and reopen the movie house. If not, the landlord plans to look for other tenants.

James Nelson, 30, a life coach who defines his specialty as "figuring out how to make the impossible possible," was driving back from a wealth-training seminar when his wife told him about the theater going under.

Nelson promptly turned to Matt Sconce, 31, a local church youth leader and filmmaker who got his start by winning an "American Idol" music video contest in 2004. (Sconce also works as a magician, selling DVDs of trick instruction to help supplement the family income.)

The pair then called Keith Walker, 32, a San Francisco software engineer for Klout, which ranks people according to their social media influence. Walker got in his car and started driving.

Soon the three were clustered around a computer — just like when they were kids and built a robot that was so amazing none of the adults believed it was their work.

"It felt exactly like the old days," Walker said. "Except we're taller."

They ran models of Nelson's subscription-based theater idea, showing that to break even they would need 3,000 people, or 15% of the mountain communities, to sign up. For $19.95 per month, a member would be able to see each movie one time and buy individual tickets for friends. Non-members could buy a $16 day pass.

While researching the theater business, Nelson learned that studios are transitioning to digital distribution. Thousands of independent theaters that couldn't afford equipment upgrades have closed over the last 10 years, according to industry experts. Hundreds of others — which, like the Met, still show print films — remain on the brink. The subscription business model could pay for the new equipment.

"We realized this could be our big idea, the one we've been waiting for," Nelson said. "Saving small-town movies."

Walker asked for a leave of absence to work on the project. When it was turned down, he quit his job.

Sconce began marketing the Be a Met Hero program, including dressing his two children as superheroes and having them hold signs along the highway.

"We like to be a little corny," Nelson said.

"We don't 'like to be.' We just are," Sconce corrected.

"Yes," Walker agreed. "We have no choice."

The tricky part of the membership-model calculation is that box-office totals are based on ticket sales, and distribution deals for a movie include a percentage of each ticket sold. But Met members would scan magnetic cards to record attendance totals for each film.

In the end, the success of the venture may come down to whether major studios are willing to negotiate contracts without traditional tickets being sold. But first, success depends on signing up members.

Sconce, Nelson and Walker have spoken to the local rotary clubs. They performed Handel's "Hallelujah" chorus while pitching their idea at the Yosemite High Winter Concert at Bass Lake. And Walker was a hit at the Sierra Springs Village Mobile Home Park's Christmas party.

"He was adorable. So gung-ho," said Cindy Karr, 65. "Everybody was in favor and signed up. It's important to get out and see new releases."

In the first two days of the campaign, 500 people joined, many of them affixing "I'm a Met Hero" stickers to their car bumpers. At last count, 2,633 had committed. No one will be charged unless the plan is a go.

Before the Met went dark last month, moviegoers tended to come early to chat with neighbors, hush up during the show and hang out in the popcorn-scented lobby afterward to critique what they'd seen.

That's what makes movie night in small towns something to be saved, Walker said.

"There's something magical about experiencing a movie with a bunch of other people," he said. "Your couch and a movie theater are not the same thing."

Posted by Scott Norwood (Member # 30) on 01-01-2013, 09:21 PM:

I wonder what his boxoffice reports will look like. Is he booking only flat-rate titles or has he convinced the distributors to change their business model?

Posted by Martin McCaffery (Member # 37) on 01-01-2013, 09:27 PM:

3000 subscribers?!? I wish them well, but I don't think that is at all realistic.

Posted by Marcel Birgelen (Member # 6801) on 01-02-2013, 03:24 AM:

quote: Martin McCaffery
3000 subscribers?!? I wish them well, but I don't think that is at all realistic.

Well, I don't think that 3000 subscribers is the real problem, but rather that it amounts to about 15% of the local community...

Those 3000 subscribers would get you a turnover of $718200/year from admissions alone. I guess it should be possible to sustain a small scale local operation with less than that.

Personally, I think that running a subscription-only movie operation and only allowing individual sales for friends of subscription holders and selling day-passes for $16 is a stupid idea.

Why not just offer both? That would not even be novel, there are several theater chains around here that are already doing the same for about the same price. Additionally, they also don't impose any stupid limitations, like seeing every movie just once.

Posted by Mike Rivest (Member # 5500) on 01-02-2013, 12:35 PM:

Walter Reade tried out an subscription based cinema in NYC in 1946
http://movie-theatre.org/usa/ny/NYC/readmanhattan page 105. It was a big flop.

Posted by Mike Blakesley (Member # 26) on 01-02-2013, 01:39 PM:

Well things are A LOT different now than in 1946, however the local theater was a lot more important to people in '46 than now, too.

I guess this is the unclear part:

quote:
For $19.95 per month, a member would be able to see each movie one time and buy individual tickets for friends. Non-members could buy a $16 day pass.

They don't say how much the individual tickets would cost. I agree with Marcel, they should just offer both.

The county in which Oakhurst is located has over 150,000 people BUT the town of Oakhurst has less than 3,000 people. So I guess it kind of depends on how much competition there is, and how close it is. If there's not much competition nearby (or if the competition is poorly run), I don't see why they can't make it on the traditional theater model. If there IS a lot of competition nearby, then they're probably screwed unless there is A LOT of sentimental attachment to that theater -- and these days people don't seem to have much sentimental attachment to anything, especially young people.

I can see where a lot of folks will sign up at first but the trick is going to be constantly adding new subscribers, because the drop-out rate is going to be high as peoples' kids grow up, or they leave town, pass away, change jobs, re-evaluate their monthly spending or whatever.

Posted by Mitchell Dvoskin (Member # 751) on 01-02-2013, 02:11 PM:

The Met Cinemas Web Site.

I think it is worth a try, but ultimately, I think it will fail. There are just not enough movies out in any given month that the average customer wants to see to justify the ticket price. Further, this is only a 5 screener, which normally would be fine for a small town, but not for a subscription based model.

quote: From The Web Site

How does the "Member buying tickets for guest" thing work?

If you were a member of the Met with an individual plan (19.95 per month) You could then watch every movie at the theater. If your guests want to watch a movie, you, as a member, can buy them tickets at the 5.50 matinee, 6.00 kids/senior, or normal 7.00 adult price. They do not need to be members.
How can Non-Members who are not with a member (i.e. Tourists) see a movie?

For non-members who are not with a member, we have interviewed tourists and what we have come up with seems to excite them. They can buy a $16.00 day pass which allows them to watch all the movies at the Met for 1 day or the $19.95 price which allows them (If they are staying for a few days) to watch every movie at the Met over those days. The tourists seem to like that idea. A ticket for only 1 movie in San Francisco is $14 to $16 and, in Fresno, a 3D movie is $15.50, so to pay $16.00 for all the movies at the Met gives them an option to watch movies by being a day "Member". Of course if they are coming with a member, the member can just buy them an affordable member priced ticket for one showing. There is no other way to do this with non-members or it undermines the member model and the Met fails because there will not be consistent income to meet overhead costs and improve the theater.

Posted by Mike Blakesley (Member # 26) on 01-02-2013, 06:29 PM:

They are making one tragic mistake: They assume that there are lots of people who will want to see EVERY movie they show. Those people are extremely rare, if they even exist.

People can evolve quite rapidly from being frequent moviegoers into infrequent ones or "never." All it takes is for them to move, get married, buy a big new TV, go into a big debt, get pissed off at the theatre staff or any number of things. So like I said above they're going to need a constant flow of new people to replace the ones who quit.

Also no "tourist" is going to want to come in and see EVERY movie they're showing. My wife and I have gone to lots of movies as "tourists" and we've never been inclined to sit through more than one movie at a time. There just aren't that many movies out in a given time that we're interested in watching. So a tourist coming in and paying $16 to watch all the movies they're showing in a day....probably not going to happen too often. And $16 is too much for one movie.

Maybe if there was absolutely nothing else to do in the town, or if they have a lot of transient type workers like railroaders who have to spend a night or two....but other than that they're really looking through rose-colored glasses.

Posted by Mark Hajducki (Member # 1732) on 01-02-2013, 07:14 PM:

I assume that they are a single screen (they don't specify on their website) so customers would not have a large choice from their unlimited membership. I doubt that their plans to show "first run movies as well as classic, family, foreign, and independent films" would be possible.

If they get the community to support them they would probably get enough people to sign up for some form of membership even if they sold tickets at the door. A cheaper form of membership (such as $50 per year giving a discount on tickets and a few free tickets) would probably sell well.

Posted by Mike Blakesley (Member # 26) on 01-02-2013, 07:23 PM:

It's a five-screen.

Posted by Mark Hajducki (Member # 1732) on 01-02-2013, 07:31 PM:

That would make the subscription more worthwhile, their website seems to give very little detail about their cinema.

Posted by Marcel Birgelen (Member # 6801) on 01-02-2013, 07:49 PM:

Maybe interesting to know, but according to a post in this Slashdot discussion, they already signed up 3000 subscribers:

quote:

This is my local theater.

Last night they announced that they hit the 3,000 subscriber mark they were shooting for and will make a go at opening.

I wish them the best, though I think there are still some very big questions to be answered about the viability of the business model. Will the studios go along with it? Will subscriptions _remain_ high enough after the buzz fades away to be a viable business? I hope so, but only time will tell. The local economy is almost entirely tourism based, and their model effectively shuts out tourists who I think will be reluctant to shell out $16 for a day pass - so long-term local support is essential.

Obviously, I don't know how reliable this information is and if they just have 3000 commitments or 3000 people that actually pulled their credit card.

Posted by Mike Frese (Member # 4361) on 01-03-2013, 01:33 AM:

Article about the theater closing last fall.

http://www.sierrastar.com/2012/11/07/60066/mourning-the-met.html

Mourning the Met
Published: November 7, 2012

Area movie theater closes after 26 years of operation

Carmen George

The day after Halloween, a nightmare came true in the Mountain Area.

Plagued with sleepless nights since the fall of 2008 over the financial solvency of the Met Cinema, owners Ray and Irma Martinez regretfully closed the Oakhurst movie theater on Nov. 1 -- a decision that hit them and area residents unexpectedly.

"The word we're using is grieving," Ray said. "Just thank you community, and we're sorry."

After the Martinezes spoke with their lawyer last week about their hopes of at least pushing through to the holiday season, they were advised that wouldn't be possible. Close the doors tomorrow, or go under, he told them.

"Had we put it out there and said, 'We're about to close,' people would have showed up and maybe made a two month effort, but we couldn't have made a permanent change (to make things better)," Ray said.

The cost of running the business had become astronomical for the couple: a monthly rent of $18,500, utility bills in the thousands, and some money still owed to previous owners Rusty and Sara Murphy, who operated the Met until they sold it to the Martinezes in May of 2008.

About 75% of ticket sales went back to movie studios, and their concession sales were also down -- where they make most of their money, the Martinezes said.

Some studios also require a $5,000 to $10,000 payment for popular movies before they are even shown, and if ticket sales end up accounting for less than the credit, theaters don't get the money back, they said.

"Some months were bad, some were good, but you never thought it would come to this," said Patty Alvarado, whose worked at the Met for nine years in cleaning and concessions.

"I think the economy affected the attendance tremendously," said Jean Clarke, whose worked in tickets and concessions for 10 years at the Met. "It's just sad ... it's going to hurt the community, not just in terms of entertainment. When people go to see a movie, they usually go shopping and go eat out too, and now they'll go to Fresno to do that."

The theater's seven employees received severance pay after they were told Nov. 1 that the Met was now closed.

Ray works as a Cal Fire firefighter in Fresno County and Irma ran a Fresno day care before taking over operation of the Met. The Oakhurst couple also has seven children -- six living at home, four of them adopted, three with special needs, and two with serious special needs that require frequent hospital visits.

Another challenge was the "age of digital" looming before them.

With many studios switching to digital distribution, the Met still played traditional film on old projectors. To upgrade to a digital system, it would cost between $40,000 and $70,000 for each of the Met's five screens, Ray said.

"Thousands of independent movie theaters have closed over the last few decades," reported the Institute for Local Self-Reliance in a 2005 article. "Many of the historic theaters built before 1950 have been demolished or converted to other uses, says Kennedy Smith, executive director of the League of Historic American Theaters. She estimates that there are only a few hundred independent movie theaters left and only a portion of those show first-run films. The top ten chains account for nearly one-third of all theaters and more than half of the total number of screens."

Yet while small theaters may be shutting down, the number of movie screens nationwide has risen significantly -- from about 20,600 screens in 1987 to 38,974 screens last year, reported the National Association of Theatre Owners.

"(Our business got) a lot smaller the farther along we went, and independent anything is becoming a way of the past now, it's sad," said former Met owner Sara Murphy. "I think it's tough for everyone all over the country, and the past couple years with the way the economic climate has been, it's been worse. The big guys are taking over, but there's still people out there fighting, so good for them."

The Met Cinema opened March 20, 1986 and was the recipient of the chamber's Business of the Year award in 1987.

"I don't have anything negative to say about anything, just that it's sad," Sara added about its closing.

"It is always a sad occurrence when a locally owned and independent business closes their doors in our community," said Darin J. Soukup, executive director of the Oakhurst Area Chamber of Commerce. "The Met Cinema's presence will definitely be missed by our residents and our community. Not only was the Met Cinema an entertainment center for Eastern Madera County, but Ray and Irma were such strong supporters of local events and graciously allowed their venue to be used for fundraising by many service organizations."

Posted by Mike Blakesley (Member # 26) on 01-03-2013, 10:52 AM:

Here we go again....

quote:
About 75% of ticket sales went back to movie studios ... the Martinezes said.

Some studios also require a $5,000 to $10,000 payment for popular movies before they are even shown, and if ticket sales end up accounting for less than the credit, theaters don't get the money back, they said.

They just lost a lot of my sympathy with these two outrageous lies.

At least they didn't overstate the cost of a digital conversion.

Posted by Frank Angel (Member # 248) on 01-03-2013, 11:01 AM:

We sold subscription vouchers at one time. It was a really good marketing tool. A patron bought a book at the concession stand with 5 vouchers in it plus two coupons for free small popcorns. We had two prices at the box office -- one for walk-up and one for "members." Someone with a voucher from the book would exchange it for the reduced price ticket. They could use each voucher for any films we ran for up to a year. They had full flexibility -- they could use all five for one movie and take their friends or they could see five films themselves; the books were good for one season (a year) and then expired.

As far as the distributor was concerned, we did the box office reports exactly as always. We had two prices, one for $6 for walk-ups and one for $5 for "members." They got their percentage of each ticket sale for either priced ticket. The vouchers, as far as the distributor was concerned were transparant.

EXCEPT.....the thing that we never could figure out and honestly, we never really pressed it much, was what happened when someone didn't use all their vouchers or used none of them? We had their $25 and the studio got no percentage. To this day I think the studios probably would find something wrong with that, but we couldn't see what it was as the voucher was not a ticket and it wasn't for any particular movie from any particular studio.

It's like this small exhibitor my boss in Texas once told me about who would buy second run titles flat (no percentage) and then advertise that he was should the movie for FREE with any ID card (school, car license, anything). This was before video so getting to see a movie free, even if it wasn't first run, pulled in big crowds -- the need to have an ID was just a come-on gimmick. They said he made a fortune on concessions way over and above the cost of the film rental. Finally the distrib said he wasn't allowed to do that. He asked why, and the distrib's booker said, he didn't know why, but he just couldn't. They stopped giving him titles flat.

Posted by Mark Hajducki (Member # 1732) on 01-03-2013, 12:41 PM:

quote: Frank Angel
EXCEPT.....the thing that we never could figure out and honestly, we never really pressed it much, was what happened when someone didn't use all their vouchers or used none of them? We had their $25 and the studio got no percentage. To this day I think the studios probably would find something wrong with that, but we couldn't see what it was as the voucher was not a ticket and it wasn't for any particular movie from any particular studio.

I don't think the studios could complain about this. The vouchers were effectively $5 gift vouchers (that could only be spent on tickets), the studios would only get their percentage when the voucher was converted to a ticket. The issuer would be able to keep the value of unused expired vouchers.

Posted by Mike Blakesley (Member # 26) on 01-03-2013, 08:47 PM:

Right, plus there'd be no way to know which studio would get the "cut."

Posted by Scott Jentsch (Member # 1681) on 01-04-2013, 09:58 AM:

I think this is a novel approach, and I hope that they succeed. However, they just barely reached their goal of 3,000, and that was with the help of lots of publicity. In so many cases of local community theaters that need to be "saved" the community rallies in support, but then the interest wanes as everyone gets back to their regular lives and their habits slide into what caused the theater to decline and close in the first place.

As with any subscription model, they will now have to worry about "new subs" and "churn" on a daily basis. How will they keep those 3,000+ people paying their $20 every month, and how will they attract new people to replace those that do not renew their subscriptions (combating churn) and find new people to grow the business on an ongoing basis?

My guess is that they'll backpedal on the daily passes requirement, because tourists will not pay $16 per day (when most people don't see more than one movie per day) for the non-member rate. They compare themselves to the ticket prices in San Francisco (which they say are $16), but if they are not providing an experience equivalent to those SF theaters, they aren't being realistic.

I like the idea of the membership model, because it creates a community within the community, and many people like being part of a group and seeing familiar people. One would hope that these members are also not being taken advantage of at the concession stand, as is the standard at traditional theaters. Members should expect that beverages should be similar to vending machine prices ($1.00-$1.50 for 12 oz soda, or whatever is typical for the area) and that popcorn and other items are not overpriced either.

These three people have proven that they can rally support behind the idea of saving a community theater with a novel approach that gained them some initial publicity; all very exciting things to do. Time will tell if they know how to run a movie theater on an ongoing basis and handle the non-exciting parts of running a business day after day.

Posted by Mike Blakesley (Member # 26) on 01-04-2013, 01:04 PM:

quote: Scott Jentsch
As with any subscription model, they will now have to worry about "new subs" and "churn" on a daily basis. How will they keep those 3,000+ people paying their $20 every month, and how will they attract new people to replace those that do not renew their subscriptions (combating churn) and find new people to grow the business on an ongoing basis?

Once they get up and running maybe the could sell a contract plan, where you sign up for five years at a nice discount.

Posted by Mike Blakesley (Member # 26) on 01-04-2013, 07:41 PM:

[delete]

Posted by Frank Angel (Member # 248) on 01-06-2013, 10:39 AM:

I am afraid I think Scott is right -- this kind of thing isn't self sustaining. There is a reason a theatre falls on hard time, much of which isn't necessarily anything they have control of. There's demographic changes, population shifts in age, VIDEO and the public's viewing habits in general. As Scott says, there maybe an initial surge of enthusiasm -- mostly there is a built-in nostalgia quotient where people tend to want things to stay the same, especially if they have fond memories of times they've gone to that theatre. But now they mostly watch their movies on cable or Netflix or whatever. And yes, they don't like the idea of loosing the familiar, but that doesn't mean they will change their viewing habits and watch movies differently.

Yes, the membership thing is a good idea, but will it be enough to keep the place running as a viable business model? I hope so, but I have to admit, as someone who has seen what demographic shift can do to decimate a core audience -- where were used to get full houses of 60-80 yr olds, over ten years they a quarter of them have moved to Florida and another quarter have died, and half of what's left are too infirmed to come out to the theater -- I wish I weren't but yes, I am pessimistic that this can work for them.

Posted by Dennis Benjamin (Member # 1137) on 01-06-2013, 04:04 PM:

I have written several business plans for movie theatres over the 24 years I have been in the business. While this subscription plan sounds like a good idea, it isn't very practical.

I know a decade or so ago, the average American went to the movies 4 or 5 times A YEAR. While this younger generation might go a little more often and obviously if an individual signs up for the "subscription plan" - they would go more often, I don't think it's economically practical.

I've been following an upstart over at Moviepass.com

I think thier approach is a little better and a little broader (not location specific).

I wish these guys luck and will follow thier progress.

Posted by Scott Jentsch (Member # 1681) on 01-07-2013, 09:54 AM:

I think they'll have to stay very in touch with their members and very present in the minds of non-members by being active in the community and visible in local media, signage, etc.

It'll have to be a club atmosphere with the members, so that they feel special and would miss it should they not renew. Their selections of movies will have to be spot-on with their members, too, so that's going to be a tricky thing to do every week of the year. Constant communication will allow members who have gone to the shows relive the experience and look back on it with good feelings, as well as give those that did not attend a feeling like they missed an opportunity for a good time.

I wonder if a majority of their subscriptions are recurring monthly or yearly? When those subscriptions come up for renewal, that's when they'll start finding out if they have what it takes to be successful.

Posted by Mike Blakesley (Member # 26) on 01-07-2013, 11:09 AM:

They should use an "auto-renew" system, if they haven't done that already. Lots of people will just get in the habit of paying it and will just let it keep renewing. That happens to lots of people with XM/Sirius radios....I've talked to guys who say "I haven't listened to that thing in 6 months, guess I should cancel it" and then they forget again.