LOS ANGELES – At a cinema in San Francisco, about 100 people recently showed up for a free screening of “Transformers: Dark of the Moon” and a presentation of a kind of Netflix for movie theaters.

The service, called MoviePass, would allow consumers to watch all the movies they want for a $50 monthly fee, using their smartphones to download codes that could be redeemed for tickets at theaters. With the backing of AOL Ventures, the New York startup had planned a national rollout of the service this fall with online ticket firm MovieTickets.com.

But before a single pass was sold, AMC Entertainment Inc. and other theater chains blasted MoviePass, saying they were blindsided and would not honor the pass.

“Plans for the program were developed without AMC’s knowledge or input,” Stephen Colanero, AMC’s chief marketing officer, said in a statement.

The proliferation of steep discounts on movie tickets is causing much anguish in the exhibition industry.

In theory, theaters stand to benefit from promotions if they bring in more customers who buy lots of popcorn, soda and other high-profit concessions. And with most promotions, theaters still get the full ticket price because third parties cover the cost of the discounts.


Even so, some exhibitors fear the heavy marketing of low-priced tickets through discount services such as Groupon, LivingSocial and DailyCandy will erode their business by encouraging moviegoers to wait for a bargain before trekking to the megaplex.

Some draw parallels to the effects that low-cost online video-rental companies Netflix and Redbox have had on the slumping DVD business.

“There is always a worry about devaluing your product,” said Patrick Corcoran, spokesman for the National Association of Theatre Owners.

Exhibitors can ill afford that, given that attendance — the number of tickets sold — is down about 5 percent this year compared with the same time in 2010 and has been flat for much of the last five years.

Exhibitors have also expressed alarm that studios’ plans to release movies via video on demand just eight weeks after their theatrical release will further erode their business.

For some theater owners, it’s a matter of control. “I just don’t want third parties setting our ticket prices,” said Ted Mundorff, chief executive of Landmark Theatres, the chain co-owned by Dallas Mavericks owner Mark Cuban. “We want to run our own business.”


Representatives of AMC, Regal and Cinemark all declined to comment. Some of the large chains do sell blocks of discounted tickets to Web retailers like Pasadena, Calif.-based Goldstar and offer their own rewards programs. AMC, for example, recently launched a program called AMC Stubs: Customers who pay an annual fee of $12 receive rewards they can use toward tickets and concessions, based on how much they spend in the theater.

Not surprisingly, movie ticket deals offered through websites like Groupon and DailyCandy are popular among consumers, especially in the current economic climate, when people are cutting back on discretionary spending and ticket prices are rising. The average ticket price in the U.S. was $8.06 in the second quarter of this year — the highest level on record — according to the theater association.

Industry executives argue that going to the movies remains a relatively inexpensive form of entertainment and that ticket prices, when adjusted for inflation, are still lower than what they were in 1970. Still, some industry analysts believe that rising ticket prices, largely fueled by surcharges from 3-D films, are helping drive down movie theater attendance and making consumers more hungry for deals like MoviePass.

“It’s something that could be very popular for consumers, but I’m not sure about exhibitors and studios because it’s changing the economics of the industry,” said Wade Holden, an analyst with the research firm SNL Kagan. “They don’t want to see customer expectations of pricing become lowered.”

Studios are barred under federal antitrust laws from being directly involved in setting ticket prices.

But that hasn’t stopped them from using ticket promotions to help market their movies.


Meanwhile, the owners of MoviePass haven’t abandoned their plans. The company recently partnered with Hollywood Movie Money, which provides promotional movie tickets and has long-standing relationships with the major theater companies in the U.S., said Stacy Spikes, a former Miramax executive and co-founder of MoviePass.

As for the flap with AMC and other exhibitors in June, Spikes said AMC executives did not return his calls when he left messages to discuss the program.

He said executives at MovieTickets.com assured him that he did not need theater owners’ approval before launching a test. AMC officials declined to comment.


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