MoviePass was a disaster. Can MoviePass 2.0 avoid a similar fate?

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DC Studios co-chairman James Gunn was characteristically blunt yesterday in his assessment of the state of the Warner Bros. superhero franchise.

“The history of DC is pretty messed up,” Gunn said. “They were just giving away IP like they were party favors to any creators that smiled at them. And what we are going to do is we’re going to promise that everything from our first project forward is going to be unified.”

Is this the quote of the week?

Here’s our full report on everything Gunn and Peter Safran revealed about the high-stakes launch of their upcoming DC Universe (or DCU), including new Superman and Batman films.

A MoviePass comeback?

MoviePass’ demise was one of the entertainment industry’s most spectacular flame-outs ever — a textbook example of how a promising idea in theory can turn disastrous. So why is its founder going back for more?

Call it an attempt at a redemption story for an entrepreneur with something to prove.

Stacy Spikes wanted to shake up filmgoing by charging a $30-a-month subscription for access to movie tickets. But the firm faced resistance from theater operators and money problems. Eventually, Spikes lost the company to a new CEO, Mitch Lowe, and Ted Farnsworth, the leader of Helios and Matheson. Farnsworth’s firm bought MoviePass, dropped the price to $9.95 per month and ran it into the ground.

The Securities and Exchange Commission sued Lowe and Farnsworth in September, accusing them of making fraudulent statements about the business. Lowe and Farnsworth settled Federal Trade Commission allegations in 2021. They did not respond to requests for comment.

Spikes’ new book, “Black Founder: The Hidden Power of Being an Outsider,” describes his rise as one of the few Black entrepreneurs in entertainment and tech, his unsuccessful efforts to save his original vision for MoviePass and his eventual stab at a comeback after acquiring it out of bankruptcy.

The new MoviePass, which has 10 employees and is backed by (wait for it) a crypto-focused gaming software and investment firm, expanded its beta rollout with what he hopes will prove to be a more rational credit-based system, with pricing that varies depending on usage and location. Spikes, 54, is aiming for a full launch before summer.

This conversation has been edited for length and clarity.

Many are skeptical that MoviePass can stage a successful comeback. How will MoviePass 2.0 avoid the fate of MoviePass 1.0?

I actually think it’s not that hard. The $10 price point was ... just dumb. There’s no way to offer a subscription plan where you don’t control the cost and you make it cheaper than a movie ticket. How do you make that work? I don’t think it’s that hard to avoid the fate of Mitch and Ted. Just don’t set “unlimited” at a $10 price point. Voilà, you’ve avoided disaster.

Do you have the support from the theater chains this time? Have you talked to Adam Aron, the CEO of AMC Theatres?

I called Adam personally, I left two voicemails and I sent two emails and I never heard back from him. I did reach out to Regal and had a great conversation with them, and they’re kind of dealing with their own headaches right now. I had a great conversation with Mark Zoradi right before he left Cinemark. We’ve got 25% of theaters that have already signed on with us. That’s totally different from before, and I think COVID had a lot to do with that.

When we were doing our listening tour, the general consensus was, “OK, subscription is out of the bag.” I think in time, people will get past the territorial-ness — and I think some of that had to do with the approach that Mitch and Ted took in how they pushed it out. They kind of used sharp elbows, and that is not how we worked. We were all about being Switzerland. Whatever helps drive traffic to all theaters, that’s what we’re about.

How will you compete with theater-operated subscription services, like AMC Stubs A-list and Regal Unlimited, which offer similar programs?

If you can only go to one theater, it’s not really a subscription plan. It’s a loyalty program. We’re really a true subscription service, where you can go to any theater you want. What the consumer has to weigh is, “Do I want to be able to go to any theater, or do I really only want to go to one? And then what’s the price point?” We did a Google poll nationwide, and we found that 75% of customers said, if prices were equal, they’d rather have a plan where they can go anywhere. In our historical data, the average customer went to three different theaters, and they went to different types. They had one where they went to the summer blockbusters. They had the art-house theater. And then they had somewhere in between. That’s what the higher-end user does. That’s where we feel we’re slightly different in the marketplace.

The last half of the book reads a little like a not-very-funny version of the HBO show “Silicon Valley,” where you think things are going well, and right out of the gate, there’s resistance from theater owners, even at the $30 price point. Did that give you an ominous feeling?

You know, to be honest with you, I wasn’t completely shocked in the sense that I’ve worked in the industry long enough to know it’s not that easy. It’s Hollywood. I know how siloed the thinking can be. And so, was I shocked by that? No, but what I really appreciated was [AMC’s then-CEO] Gerry Lopez took the meeting. He sat down with me and he said, “Let’s create a test.” And he said, “I’m worried about cannibalizing Friday and Saturday. If you can prove to me that you can drive traffic in other parts of the week, great, but if it can’t, if I see that it cannibalizes Friday and Saturday, I’m probably not going to go forward.”

I love when people say, “Let’s see the data and let’s work together to make something great for consumers.” And what we’ve tried to always do is look at ourselves as a software solution for the industry. We know how to get there. But having to deal with a certain mindset is the biggest hurdle, more than the technology itself. The technology’s there. We’ve seen mathematically that if you get 30% of moviegoers to become subscribers, you will double the annual size of the box office. The business model is, studios are spending the same money to reacquire the customer over and over. And that’s a very big problem with the studio model right now.

It’s hard to buy those projected box office numbers when we’re not even back to $10 billion yet domestically.

But still, you’ve seen the 2023 slate. It’s amazing. There’s a lot of good stuff coming.

Could you have done anything differently to keep the company alive while still remaining in control?

You don’t ever want to end up in a situation where you kind of have to sell the controlling interest. But we kept running into this glass ceiling of fundraising. What really proved to me that there was this invisible ceiling was when I noticed that how much money they were able to raise just weeks after we basically sold the company, and how much it was valued. They were at $2 a share when they announced they were acquiring. They went up to $38 a share. If you imagine they had done the $10 price point as an introductory offer or something, the company would have been successful, it would have had nice growth and we wouldn’t be having this conversation.

I rephrased the question you’re asking in my mind. The question that I heard was, “Where were you to blame?” Because the CEO is responsible at the end of the day. And I don’t know what I technically could have done differently. We rang every doorbell. There was just so much headwind on the movie industry. You needed enough gravitas in the marketplace to get above that cloud layer. It had been five years and we just weren’t really able to get above that. For the sake of the company and fans, I had to be open to an acquisition.

But is there anything you yourself could have done? The reason I ask is because you frame the book as a cautionary tale and as a way to leave bread crumbs for entrepreneurs coming up behind you.

If I had any naivete, I believed that maybe those ceilings weren’t going to apply to me. I was a person who had been in the industry. I was a person who had a very successful track record. I believed I could get up that hill. And so I think if you know that the ceiling is there, you could behave differently and you could have prepared for that. I don’t think it’s racism. I think it’s a bias of what you think a successful founder looks like or what’s the pedigree of where they come from.

There haven’t always been a lot of Black tech founders or venture capital resources for Black entrepreneurs. That changed with some of the dedicated funds that sprung up after George Floyd’s murder. What happened to that momentum?

The math is what it is. Black founders in the U.S. raised 1% of the $215.9 billion in venture capital funding last year. You should check out these articles that came out in the last three to six months in TechCrunch, stating that the diverse funds have dipped in 2022. Post-George Floyd, the numbers went up, and they’ve drifted back down.

When you first presented the new MoviePass last February, I was confused by how you said blockchain technology would play a role. There’s a lot of doubt about anything crypto-related right now.

Yeah, I can explain that. So if you remember when “The Matrix Resurrections” came out, the most recent one, they did commemorative NFTs. And so there is a very big collectible commemorative market around movies. There always has been. We think that that world will move into digital and you will be able to get collectibles, and you will be able to secure them on the blockchain. We still 100% still believe that that’s a real thing. That is something coming, but it’s a phase two, phase three, when we get the basic service up, and then we make that capability.

So that’s not happening for a while, then.

I don’t know the exact timetable, but 100%, that’s going to happen.

Why did you want to write a book about your experiences?

I had never seen a book by a tech founder of color. I felt I had a responsibility to not only the diverse community but a broader responsibility to write down what happened. When I was coming up, I read Richard Branson’s books. I read David Geffen. I read Sam Walton’s book. I remember reading Sumner Redstone’s book.

And the thing that dawned on me was there were no people of color in any of these books, and I felt I had a responsibility to write down that story I had, whether it was a cautionary tale of “here’s how not to lose your business” or it was a tale of “here’s if you’re an outsider and here’s if you don’t have the right skin tone to play in the game.” I just felt that I needed to do that. You need to pay it forward and lay some bread crumbs for people coming behind you.

Stuff we wrote

— CNN boss Chris Licht on restoring trust and why he deleted his Twitter account. Licht is adding Bill Maher on Friday nights, and that may not be the only comic coming to CNN. But newsgathering is still the priority.

— How ‘crunch’ time, low pay are fueling a revolt among video game workers. Amid complaints about the brutality of crunch times, claims of discrimination in the workplace and calls for fair and transparent pay, more video game workers are seeking to unionize.

— Ticketmaster gets a bipartisan grilling on Capitol Hill. It was only a matter of time before a politician awkwardly quoted Taylor Swift at last week’s Senate Judiciary Committee hearing on Ticketmaster, Live Nation and the U.S. ticketing market.

— Why this top Hollywood agent thinks streaming deals fall short and a strike may be looming. United Talent Agency CEO Jeremy Zimmer is pushing for streamers to share more of their revenue with actors, writers and other talent. The push comes as the entertainment industry, including UTA, evolves.

— With ‘1619,’ ‘Summer of Soul’ and ‘The Plot,’ Disney’s diverse storytelling brand is making waves. Under the Disney umbrella, Onyx Collective — a new content brand that centers on creators of color — aims to expand the storytelling universe with a collection of top filmmakers.

— ICYMI. Randall Emmett, Ambyr Childers settle domestic violence restraining order dispute. Former Fox News employee sues over sexual abuse under New York state survivors law. Rupert Murdoch abandons News Corp.-Fox merger after investors push back. Conservative news network Newsmax on the verge of being dropped by DirecTV.

Number of the week

Comcast says losses from its streaming service Peacock will peak in 2023 at about $3 billion. What passes for good news in streaming is that the end of the bleeding is somewhere on the horizon. The service grew to 20 million paying subscribers in the most recent quarter. It also lost $978 million during that time.

Best of the web

— ‘Westworld’ and ‘F-Boy Island’ are coming to a free streamer near you. (Reuters)
— The hottest red carpet in Hollywood is the ... American Legion? (LAT)
— What became of the Oscars streaker? (The New Yorker)
— It’s not just the Oscars that fail Black women. It’s the entire awards ecosystem. (LAT)
— Guess Who’s Using Your Netflix Account? You Might Be Surprised. (Wall Street Journal)

Film shoots

Production in the Los Angeles area continued to climb toward normal levels last week following the holidays, according to data from FilmLA.

Finally...

It’s been a while since I’ve paid much attention to “WTF With Marc Maron,” but the podcast is in awards season mode and some of the recent conversations have been very strong, including Brendan Fraser, Sarah Polley and Todd Field. Lock the gates!