Nation & World

AMC finds a subscription 'sweet spot' to avoid MoviePass's fate

MoviePass, a U.S. movie ticket subscription app, is seen on a mobile phone in this photo illustration in New York, U.S., May 15, 2018. REUTERS/Mike Segar/Illustration
MoviePass, a U.S. movie ticket subscription app, is seen on a mobile phone in this photo illustration in New York, U.S., May 15, 2018. REUTERS/Mike Segar/Illustration

AMC Entertainment Holdings Inc. snapped a 3-day decline Tuesday after the movie chain said its Stubs A-List program has more than 800,000 members but noted fewer new movie-goers signing up each month.

The monthly movie program, which allows members to see as many as three films on the big screen each week, has found a “profitability sweet spot” that could help it avoid the same fate as MoviePass, B. Riley analyst Eric Wold said in a note to clients.

Shares gained as much as 2% in early trading, but remain 38% below last September’s high.

Although Stubs A-List subscribers have already surpassed AMC’s expectations, the number of members added per day has declined to an average of 1,200 from nearly 5,000 in the program’s first weeks.

“The slowdown in average membership additions per day indicates that the program is attracting more than the casual moviegoer, but not one that was likely to exploit the program,” Wold said. It’s a welcome difference from MoviePass’s growth, which “was driven mostly by consumers recognizing an opportunity to exploit -- which ultimately led to the demise of the program as it was known.”

The average number of movies watched per month by members has also fallen, to 2.6 in March 2019 from 4.7 in July 2018, Wold wrote.

The more casual movie-lovers in the program will help AMC generate at least $170 million in annual recurring revenue from the membership fees -- or $340 million when including popcorn and other concession purchases and full-priced tickets for members’ theater buddies.

Analysts are broadly bullish on AMC, with Bloomberg data showing seven recommendations to buy, five hold-equivalent ratings and none to sell. The average analyst price target is $18.09, implying a potential return of almost 37%.

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