MoviePass, a service allowing subscribers to see multiple movies in theaters for a flat monthly price, is about to try a new model: surge pricing.
Similar to the way ride-hailing services such as Uber and Lyft up their ride prices when demand is higher, MoviePass will add a surcharge to see films when demand is higher, such as during a movie’s opening weekend.
The new pricing will affect only monthly subscribers. MoviePass users on the company’s annual plan won’t have to pay the surge, Chief Executive Mitch Lowe told Business Insider.
MoviePass currently charges $9.95 a month for a plan that gives customers admission to a movie a day, and it offers a $7.95 plan that gets users three movies a month. MoviePass’ service is limited to participating theaters, and 3-D and Imax movies are not included in those plans.
The average price of a single movie ticket last year was about $9.
MoviePass pays full price to theaters for movie tickets and hopes to earn money by collecting its customers’ user data. It has said it is running low on cash, raising concerns about the stability of its business model.
Lowe told Business Insider that the surge fees would start at $2.
MoviePass came to prominence in 2016 and has drawn criticism from movie theater chain AMC, which has said MoviePass charges too little. The theater chain fears audiences will become used to paying the low price and that if such deals stop being offered, they’ll stop going to movies.
AMC announced its own similar subscription service just a day before news broke of MoviePass’ surge-price plan. AMC’s $19.95-a-month service will allow customers to see three movies a week and offers premium viewing formats such as Imax and 3-D at no extra charge.
MoviePass owner Helios and Matheson Analytics Inc. saw its stock close Friday at 31 cents a share, down nearly 7%. It’s down 95% this year so far.
MoviePass said it plans to keep its $9.95 model and add options such as upgrading to 3-D and Imax showings and offering the ability to pay extra to bring a friend.
Michael Pachter, an industry analyst at Wedbush Securities, said the surge plan proves MoviePass needs to change.
“It validates that MoviePass has it wrong with the current model,” Pachter said.
And with AMC now offering the same service at what he called a more sustainable model, Pachter said MoviePass could have trouble keeping up.
“MoviePass is unsustainable right now,” he said.
Sustainable or not, movie studios are concerned with subscription services at theaters and how they’re discounting prices. Studios and theaters share box office revenue.
“Studios are in a position like Cartier or Louis Vuitton are in, they don’t want to see their product cheapened,” Pachter said. “But there’s not much they can do.”
Pachter expects more theaters will offer their own subscription plans, which are already common in Britain and are gaining traction in the U.S.
“Before AMC did it, it happened with Cinemark when they offered a movie a month. And AMC purchased (British theater chain) Odeon, which was offering a similar service for £20,” he said. “They’ve seen it work.”
3 p.m.: This article was updated to include an analyst’s reaction to MoviePass’ surge pricing plan.
This article was originally published at 10:40 a.m.