How MoviePass radically changed the movie theater customer experience

Repeat Customer Podcast: Episode Two

Repeat Customer podcast, episode 2


Movie theaters have been struggling against a tide of new digital offerings that are keeping people on their couches and out of theater seats. But recently, the industry was thrown a lifeline from an unlikely quarter: When MoviePass dropped its monthly subscription fee to $10 a month, it introduced a radically different customer experience to moviegoers, and people headed back to theaters in droves. We spoke to the CEO of MoviePass and industry watchers about what’s happening behind the scenes of the evolving customer experience of going to the movies.

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Transcript

[Mio Adilman]
Hey! This is a brand new business podcast called Repeat Customer. More about that in a minute, but first, I thought we could, you know, break the ice with a question...seen any good movies recently?    

[Dave Buckmaster]
My name is Dave Buckmaster. I live in the Portland, Oregon area. I would say, this month, that I have seen 25 films, I believe, uh in the theater.

[Mio Adilman]
Twenty-five movies...in one month. How is that even possible? Forget how much time that would take. It would cost me over $300!

[Dave Buckmaster]
My old movie viewing habits would probably have just been three or four films a year. That was probably about it.

[Mio Adilman]
Right, but then, last year, something happened to Dave. Something big. Something cinematic.

[Dave Buckmaster]
The big change occurred for me when I was recommended MoviePass from a friend.

[Mio Adilman]
Yeah MoviePass. It’s an app that, for the low cost of just, like, ten dollars a month, it lets you see up to one movie a day. In a theatre. On a big screen. It’s a subscription, for movies. I mean, I can’t even tell you the last time I went to a movie theatre. Hasn’t this guy heard of Netflix?

[Dave Buckmaster]
It’s been fun (laughs). I think that’s what it comes down to. I've had a blast. I used to love going to cinema when I was a kid, and it's just kind of rekindled that.

[Mio Adilman]
Welcome to...Repeat Customer...an original podcast from Zendesk about great customer experiences...how companies create them...and why their superfans love them so much.

My name is Mio Adilman. And Zendesk is a customer service and engagement platform. Both of us love a good customer experience. So I have scoured the earth for businesses that are redefining what that means.

Which brings us to MoviePass. Right now there’s a lot of buzz, hype, noise, hi-fiving, also hand-wringing and controversy about MoviePass.

Because they are changing the customer experience of going to the movies. And that means millions of people like this guy Dave are rediscovering movie theatres. And, spoiler...alert, it isn’t just because it only costs $10 a month.

[Movie Trailer Narrator Voice]
In a digital age...where lonely souls squint at feature films on tiny phone screens...a brave tech startup yearns for the human connections of an earlier, simpler time. This is the heartwarming, origin story of an impossible dream. To put bums back in seats.

[Mio Adilman]
Okay, um, I don’t know about that. But MoviePass does seem to be putting bums in seats. Last year, a couple million people signed up.

Here’s how it works: You download the MoviePass app for 10 bucks a month. They send you a specialized MasterCard credit card. Go to a theatre. Within thirty minutes of screen time, choose a film through the app. MoviePass puts the admission charge on your MasterCard. Get your ticket at a kiosk. Walk into the theatre. It’s totally simple.

Now, MoviePass has been around since 2011. But it finally took off last year for a bunch of really interesting reasons related to different levels of the customer experience. And we’re going to get deep into that, but first let’s talk about the customer experience of going to a movie before MoviePass came along.

Like many people in the 70s and 80s, I grew up going to a lot of movies. I remember standing in line in the rain for hours with all of the kids from my street to watch Rocky III. It was awesome. The audience went nuts when Rocky beat the crap out of Clubber Lang who was played by Mr. T.

But then VCRs soon took over, and every year, me and my friends, and everyone else starting going to less and less movies.

[Brent Lang]
It actually starts in the '50s with television.


[Mio Adilman]
Oh right, with television.

[Brent Lang]
Yeah, yeah.

[Mio Adilman]
This is me getting schooled by Brent Lang. No relation to Clubber Lang. He writes about films for Variety Magazine.

[Brent Lang]
Yeah well, if you look at really the height of movie-going, it is in the silent era, the World War II era, where people were going to the movies on a weekly basis. They’d actually make a day of it… they'd have newsreels, they'd have B pictures, cartoons… It was a gathering hub. If you look at movie going, attendance decreases dramatically in the 1950's, and there's this thought that we have to compete with television. And it's not totally dissimilar to what you see today, because in the 1950's, they started to do different kinds of projectiothen  have things like Cinemascope, and there's a sense like, "Well, you can't see this in your home.”

[Mio Adilman]
Television was later joined by VCRs, video games, the internet, then our iPhones, then streaming: you know, Netflix, Amazon Prime, Hulu. That’s a bunch of really good reasons to stay home instead of going to the movies.

[Brent Lang]
Going to a movie [00:05:30] is actually a very passive experience, and I think sometimes people want maybe a more interactive experience.


[Mio Adilman]
But just like in the 50s, movie theatres have come up with a bunch of things you can really only enjoy in the theatre: 3D, VIP, IMAX, UltraAVX, reclining chairs, vibrating chairs, bigger chairs with better sight lines. I think it’s safe to say that the experience of seeing a movie in a theatre is way better than when I was a kid. But it comes at a cost.

[Brent Lang]
As admissions have gone down, and they've gone down since 2002 I think about 22%. They've sort of papered over that with...higher ticket prices. [[00:01:30] since 2002, ticket prices have gone up more than 50%, so it's become a much more premium, much higher-end experience.

[Mio Adilman]
A higher end experience that seems to favor a certain kind of movie.

[Brent Lang]
If you really look at film history, what is now the dominant genre that were B pictures [00:12:30] 30 years ago. And it really starts with Jaws and Star Wars are these movies have a kind of popularity that Hollywood had never seen before, so they started sort of moving more and more in that direction.]

[Mio Adilman]
Star Wars and Avengers, Avengers and Star Wars, rinse and repeat. Indie films not so much.

[Brent Lang]
You know, in 1988 I think the highest-grossing film was Rainman. I mean, that would be unthinkable today.

[Mio Adilman]
So, even though really improving the customer experience of seeing a movie in a theatre, and even though there’s the odd major hit—I’m thinking of The Last Jedi, and the amazing Black Panther—overall ticket sales are still down. Less people are going to see less films. There seems to be a disconnect. Something missing in the customer experience, maybe?

And this is where things get interesting, because recently the movie theatre industry was basically handed a lifeline from someone who could be blamed, in part, for the decline of moviegoing in general.

[Mitch Lowe]
My name is Mitch Lowe and I'm the CEO and president of moviepass.com.

[Mio Adilman]
Did you grow up seeing a lot of movies?

[Mitch Lowe]
Not really. I had a vivid memory of watching television after school… in those days it was Disney Sunday Night Movie. I love those. I loved the various movies that you would see on television, but not in the theater.

[Mio Adilman]
If it seems odd that the guy trying to change the movie theatre experience didn’t exactly grow up loving going to movie theatres, then you’re probably thinking the same thing as me. But there’s a pretty good lesson in Mitch Lowe’s story which we’ll get to in a moment. You see, that childhood love of watching movies on TV led Mitch to owning and operating a chain of video stores in California.

[Mitch Lowe]
I spent about 13,000 hours working behind a video store counter, working one on one with customers learning how they think of entertainment. That really formed the core of my understanding of the customer.


[Mio Adilman]
Mitch took all that frontline video store experience, and a bunch of trade association data, and wound up at a company you probably subscribe to.

[Mitch Lowe]
I was one of the founding executives at Netflix, and I was the COO and president for eight years at Redbox.

[Mio Adilman]
I didn’t realize this but Netflix became a subscription service way back in 1999. And Mitch was part of the team that figured out how much people were willing to pay per month to rent DVDs by mail. DVDs used to come to your house in the mail. This is important. Remember it for later. Mitch also helped create something called Cinematch.

[Mitch Lowe]
I was able to connect the dots between the customer experience and then the large data trends. One of the things I saw and this is what we brought to Netflix is that people really wanted someone who looked like them and might be like them recommend something to them... and it turns out we used a system called collaborative filtering. What that essentially is is you rate a bunch of films and then we find a bunch of people who rated those same films the same way and then we look at films that someone else rated highly that you haven't seen. we would recommend those to you because the assumption was they were like you in that you had similar tastes.

[Mio Adilman]
Data personalization. Netflix paid engineers millions of dollars to better understand their customers to better tailor what they offered them. Later, when the company started streaming, the data really started pouring in.

[Mitch Lowe]
The movie theater only knows who about 25% of the people are who belong to loyalty programs or belong to Fandango and none of those groups share that data, so they're in little pods all over.

[Mio Adilman]
I know this word gets used a lot, but Netflix really disrupted the customer experience of how we consume movies. Just ask Dave Buckmaster, the movie fanatic we heard from at the beginning of the show.

[Dave Buckmaster]
Yeah, I think that the streaming services, kind of, just gently eroded my interest in going to the theater.

[Mio Adilman]
But then, as Dave and basically everyone else remained glued to the small screen, Mitch Lowe made a pretty funny discovery. He had left Netflix, then run Redbox, a DVD vending machine business, left there too. Then, with time on his hands, for some reason he started going to film festivals.

[Mitch Lowe]
What I found is the theater experience is really, really cool. You can totally immerse yourself. You can be swept away by the story. Unlike today watching on your phone or on your computer, you've got all these distractions, your phone is ringing, and you really go deep into the story.

[Mio Adilman]
Mitch discovered the magic appeal of this thing called watching a movie in a theatre.

[Mitch Lowe]
I loved that experience and then I started seeing all these amazing films by independent producers and directors that never got into the theater... It almost was painful to think about all the people who will never see these great films. It reminded me of the time at Netflix where we were able to find that straw in the haystack of a person who would love that small film out in the whole atmosphere of millions and millions of choices.

[Mio Adilman]
In hindsight, this would become a major revelation. Mitch basically realized that all of the new customer experiences he had helped develop in the home entertainment industry weren’t being adopted by the movie theatres. And it wasn’t just about the data personalization. As Brent Lang at Variety points out, by now, consumers were getting used to a broader choice of subscription services.

[Brent Lang]
And it makes total sense, You use subscription models for all kinds of things. I belong to Amazon Prime, I belong to Spotify, I belong to Netflix. Why would I not want a monthly subscription service for something else that I enjoy going to?

[Mitch Lowe]
The reason people like that is that if they don't like one thing, they can switch to something else and no one feels like there’s added cost to that freedom, that freedom of kind of switching channels… and that's missing at the movie theater.

[Mio Adilman]
Mitch thought that offsetting the financial risk of potentially seeing a bad movie would encourage people to check out more movies. And this would really benefit the filmmakers of all those indie films Mitch rediscovered at film festivals. Brent Lang agrees.

[Brent Lang]
It sort of liberates people, right?...if you're not sure you're a big Wes Anderson fan, it's no skin off your back if you don't like the movie.

[Mio Adilman]
Good idea, right? Well, not so fast. The movie theatre companies didn’t agree. So when MoviePass launched in 2011, they weren’t exactly welcomed by the theatre chains.

[Brent Lang]
Well, in this particular case, it's having the disruption foisted upon them, unwillingly, by an outside party. I think that's why there's a lot of controversy surrounding MoviePass. It's not as if AMC said, "You know what? This subscription thing seems to be really hot right now. Let's introduce it to our customers."

[Mio Adilman]
If you think about it, this would be like if Uber Eats went into the food delivery business without the cooperation of the restaurants. This lack of cooperation made it hard for MoviePass.

[Mitch Lowe]
The big challenge was, how do you deliver a ticket?

[Mio Adilman]
At one point the MoviePass was a cardboard card. Another point they were buying discounted AMC tickets at Costco. Then they tried emailing the code on those discounted tickets. Really awkward stuff. And even after they figured out the credit card system, they couldn’t settle on a monthly subscription fee. Thirty dollars a month. Fifty. One hundred for a premium membership. This went on for like six years. By the beginning of 2017, MoviePass only had 20 thousand subscribers. And that’s when the founders turned to Mitch Lowe.

[Mitch Lowe]
The thing that I was trying to learn in my first nine months at MoviePass was, who really wants to go more often? And then what would you have to offer them to get them to go more often?..And so, what I discovered very quickly is it's the 89% of moviegoers who are only going four times to five times a year. That's the group that is declining the fastest, but really, if you gave them the right deal, would come back… and that’s where the $9.95 price point came in.

[Mio Adilman]
$9.95 for one movie a day at a theatre. Just like Netflix, the $9.95 subscription model removed the risk of a bad movie for people.

Now if Repeat Customer the podcast was instead Repeat Customer the movie, this is the part where the perennial underdog finally overcomes a big hurdle. Just like Rocky. After slugging it out in dirty boxing clubs, he gets a shot at the title with Apollo Creed. This is MoviePass’s shot.

Cue upbeat music.

Cue action sequence.

And in that action sequence…
In the second half of 2017, MoviePass goes viral. Everyone starts downloading the app.
Over a million subscribers sign up in just four months. The company is on fire. Lots of buzz. People are going back to theatres. This company could. Go. All. The. Way. And then...

And then, just as quickly, the lowly startup that wanted to revolutionize the customer experience of going to the movies takes a big hit.

[Mitch Lowe]
Unfortunately, we grew so fast that we could not keep up with demand.

[Mio Adilman]
The problem? MoviePass’s own customer experience isn’t built to scale. Aaaah! They couldn’t print cards fast enough to meet demand. So people who signed up to the app were paying the monthly fee. But couldn’t get into the theatre. And then, when they called to complain: more waiting. I read somewhere they only had nine customer service reps when this happened.

[Mitch Lowe]
We disappointed hundreds of thousands of customers who waited a month and a half to get their card to use the service. When we did, we weren't able to support them with all the challenges of kind of like, "Okay. How do I use this service? It's different from anything I've used before." So, a huge number of challenges from underestimating demand.

[Mio Adilman]
People were pissed.

And if this is the biopic of Mitch Lowe’s life, this is the montage set to sad music of Mitch walking the streets of New York as he contemplates what could have been.

In reality, Mitch is at MoviePass’s offices working his ass off trying to rectify the situation.

[Mitch Lowe]
You know, often times, I would think, why in the world are you swearing at me and calling me the scum of the earth..and then I started realizing, "Holy cow, they really want this product... we've really got something people really, really want if they're going to go to that degree of getting upset at me."

[Mio Adilman]
Now, this is not an uncommon challenge for companies enjoying, if enjoying is even the right word, enjoying an unexpected spike in business. But how do you make sure that this doesn’t happen to you as you scale your business? Well, I asked my friendly customer experience advisor Nate Brown for some pointers. Nate runs the CX Accelerator, a customer experience blog and online community.

[Nate Brown]
If they had more clearly outlined and set expectations with me around how long I would have to wait and exactly what that activation process would look like, I would not have had to engage with support. I would have been able to use self-service at that point, I think that's the biggest lesson in terms of anticipating where the pain points are going to be for your customers, is how can you direct them to the best resolution path? And hopefully, ideally, when we talk about effort reduction, that's going to be some form of self-service, where they can get the answers they need.

[Mio Adilman]
After many very turbulent weeks, MoviePass somehow accomplished what must have seemed impossible. They recovered from the sort of customer service nightmare that might have sunk other companies. And not only did they recover and correct course, they kept on improving the experience, even as the subscriber count climbed closer to two million.

[Nate Brown]
It's awesome that they built everything right into the really great UI that they have through the app. I was blown away by the fact that I was able to engage with customer service through a chat window, right inside of the app and not have to go outside of that. I mean it's just awesome, what they've done with that. Thinking about the ability for other brands to replicate that model, it's cool to think about how much energy they put into making it easy to refer friends because they knew that when people started to do this together, that it would be something where habit patterns would change, and people would engage with the service more. I mean how likely are you to go see a movie by yourself? Not as likely ...you just click a button to refer a friend, right through the same app that you're using to buy the ticket.


[Mio Adilman]
So MoviePass recovers from a customer experience disaster, and gets back to the business of transforming the way we see movies. It definitely changed the way Dave, our MoviePass superfan watches movies.

[Dave Buckmaster]
I will still see some of the big blockbuster releases per year. But now, I get more excited about some of the smaller indie films that are opening up in my city.

[Mio Adilman]
Remember, sitting in that film festival Mitch Lowe really wished more people could see overlooked indie films. MoviePass now claims that indie films promoted or recommended on their app double their theatrical audience. This is huge for independent filmmakers.

[Dave Buckmaster]
There are a lot of films that I wouldn't have given a chance before and now I do. I have found some gems and it's pleasantly surprising… and what I have chosen to do afterwards is maybe try to dissect that film a self engaging with friends who also have Movie Pass that go and see the same kind of films that I do. So it's really open up this social dialog between us and it's just been really refreshing.


[Mio Adilman]
And to me, this social aspect of moviegoing is a bit of a surprise. Dave, he started a MoviePass Club on Reddit.

[Dave Buckmaster]
There's even people on our Subreddit that are talking about Movie Pass meetups and that has happened in certain cities in LA and New York where they're saying, "Hey, I'd like to go catch films with other people that have the same interest as me," and they'll post there and they'll meet up. We had one in LA not too long ago.

[Mio Adilman]
This is starting to feel like a happy ending in the movie about MoviePass. Like, in the MoviePass movie we’ve been imagining, this is the part where our hero Mitch Lowe, having accomplished the impossible, is walking down a sun dappled street, birds are chirping. He passes a group of friends walking into a movie theatre. He looks at the camera, smiles, and walks off into the sunset.


But no! This movie is a suspense thriller. About finding the right business model to support a new customer experience.

What most people don’t realize is that every time they use their MoviePass, Moviepass pays the full ticket price. So when people headed back to theatres in droves it started costing the company a ton of money. At the ten dollar a month price point, MoviePass says they need at least 5 million subscribers to stay afloat. And they can’t all be seeing 25 movies a month.

They’re at 3 million subscribers so far, and they’re confident they’ll reach that magic 5 million number. But some industry experts question whether this will be enough. And while some movie chains are cooperating with MoviePass, AMC is still resisting.

Whatever happens, though, Brent Lang at Variety thinks there’s something to this new customer experience that MoviePass created.

[Brent Lang]
Movie Pass has done something that is worthy of some respect, which is that they've introduced a new model into an old, somewhat antique business. They've introduced this idea of subscription service into cinema going. And I don't think that's going away, whether or not Movie Pass survives.

[Mio Adilman]
I agree with Brent. As MoviePass continues to experiment with and adjust their business model, other subscription services are entering the market, and even AMC has started to offer their own version of a subscription.

So, instead of a full-on happy ending, maybe we’re gonna have to wait for the sequel. And while we do, Mitch Lowe is continuing to think of other ways to improve the movie theatre customer experience.



[Mitch Lowe]
I am a total believer in the future of it as long as the content owners and the exhibitors start to follow the trends of consumers. There should be binge Thursday at a movie theater, where you can watch the entire Game of Thrones over a four-week period. Theaters should mix it up a bit and have sporting and gaming and short-form content and two-hour movies… but then making the transaction very simple, like why should people have to walk up to a movie theater and pull out their wallet. They should be able to just walk in. Like the Amazon Go store prototype in Seattle, we should be able to identify them and say, "Okay, you're going to get a bill at the end of the month.” You should be able to order your concessions and whatever you want to eat on your phone, pay for it on your phone. Those are the kinds of great customer experience things, I think, we all can see in the future.

[Mio Adilman]
And that’s a wrap for now...roll credits.

In this episode of Repeat Customer: You heard from Mitch Lowe of MoviePass, Brent Lang of Variety Magazine, Dave Buckmaster of the MoviePass Club subreddit, Nate Brown of the CX Accelerator, and me, Mio Adilman.

Okay, you’ve been listening to Repeat Customer by Zendesk. A show about how customer-focused companies create great customer experiences. We post a new episode every two weeks.



If you're looking to elevate your company's customer service game, check out zendesk.com. Because the best customer experiences are built on Zendesk. 

And you can learn more about this podcast at zendesk.com/repeatcustomer.



Thanks for listening.