Dealflicks' net gain: Internet startup makes offers moviegoers can't refuse--discount tickets every day!
Imagine that an alert pops up on your phone, letting you know about a special promotion at a theatre near you. It’s Tuesday evening, and you have nothing to do. Why not see a movie?
Many other industries use promotions and dynamic pricing to incentivize consumers—airlines, Priceline, and even startups like the taxi-finding app Uber. Movies, for the most part, have consistent pricing. Tickets cost a little less during the day than at night. Seniors, students and kids may get a break on the price, as do people who show up on a theatre’s designated weeknight. But for the most part, a movie costs what it costs.
Dealflicks wants to change that. By “putting butts in empty seats,” the startup (www.dealflicks.com) offers a winning proposition both for consumers and its theatre partners. While watching The King’s Speech a few years ago in an empty theatre, co-founder Sean Wycliffe saw a problem: vacant seats. If he could come up with a way to fill the 88% of movie theatre seats that were empty, he could make theatre owners and moviegoers happy. It took him over a year to create the current incarnation of Dealflicks, which has signed up over a hundred theatres and is now accruing clients at a rate of one new theatre a day, according to Wycliffe.
The way it works is this. A theatre owner will put together different packages—like a movie ticket and a large popcorn. They’ll choose how much they want to discount the package, and when they want the deal to run. Then they wait for the consumers to roll in. Maureen Kistler, who is in charge of marketing and operations for Camera Cinemas in San Jose, Calif., praises the ease of the process. “The guys will even train your staff with the redemption process,” she states. “They were very accommodating.” They respond quickly to e-mails and cut checks regularly—quicker than the quarterly checks she’s received from daily deal sites. Currently, Kistler estimates the two locations running the deal are only attracting a few people a week, but she liked the idea of getting in early on something that might end up big. “It’s a new, smart thing, and another way to try to get people in theatres,” she says.
Jenny Song, the general manager for Venture Cinemas in Duluth, Georgia, only runs deals for her theatre during the weekdays. Because they are a value theatre, they have no problem filling seats during the weekend. She sees Dealflicks as an antidote to the higher prices that have accompanied digital conversion and 3D. “Going to the movies is becoming more of a hassle than it’s worth. Weekdays are always slow and we have plenty of lost revenue from seats not sold. So Dealflicks' objective to help fill those seats is a great idea that is hard to pass up.” Her most popular deal provides 40% off two movie tickets, two small bags of popcorn and two small drinks, which has become popular for “girls’-night-out dates.”
Dealflicks’ current redemption process involves showing confirmation on a smartphone or a printout, but that process will change when their iPhone app, which includes a swipe-to-redeem feature, launches in March. An Android app is planned for later this year. “You can do a lot on mobile to drive traffic,” Wycliffe notes, including push notifications and geo-targeted results, which will help improve the user experience. By the end of the year, Dealflicks expects to have at least 500 theatres signed up, but their goal is double that: 1,000 theatres. To help them achieve their goals, they brought on two consultants, each with over 20 years in the distribution business. They are helping facilitate discussions with major players. “We know they can most likely deliver because they have been in the industry for a long time,” Wycliffe says.
Wycliffe learned the value of having seasoned knowledge of the industry through almost a year of trial and error. Coming from a background in selling phone service and cell-phones, he thought his know-how in business development would make cracking the industry easy. However, everything from figuring out how to work around distribution fees to getting in touch with people who actually made decisions took time. He changed his business plan, or “pivoted” in tech-speak, multiple times. His original idea, back in early 2011, was for the company to work like Priceline or Hotwire, where consumers wouldn’t know the theatre or showtime before purchasing. He realized that his exhibtion partners didn’t care about keeping the showtime or theatre secret, the way a hotel would. They were interested in managing the discounts in other ways.
As mentioned, in the current model, theatre owners can choose when to run the deal, how much of a discount to offer, and how to package the deals. “We offer them complete, full flexibility. We say: Look, think of us as a platform, a marketplace,” Wycliffe explains. Dealflicks offers theatre owners a chance to engage in price discrimination. Customers who are sensitive to how much movies cost can use Dealflicks to plan their movie outings. Wycliffe also hopes his company can provide incentives for patrons to increase the number of times they see movies per year. “Movie ticket prices are rising like crazy with 3D and IMAX. There’s a whole demographic that is already going to hit that, but Dealflicks works with people who maybe see a movie or two a year. If we send a little push notification, saying, ‘This movie is coming out,’ we can take that person who sees one or two movies a year and turn it into someone who sees ten to twenty movies a year.”
Another roadblock Wycliffe ran into as he was developing Dealflicks was understanding that theatres are limited in how much they can discount. Exhibitors have to pay a percentage of the ticket price back to the distributor, either with a flat arrangement or a percentage that decreases every week of release. “We technically don’t get involved in that process,” Wycliffe explains. “From our theatre relationships, we’ve found out that people are usually in one of two arrangements. When they partner with us, they pretty much know what they can and can’t do.” Kistler, for example, can’t discount movies that come from one studio, and must wait two weeks after a movie comes out before she can offer discounts on the titles from other studios.
In part due to the distributor fees, Dealflicks takes just 10% of the sales made through the program. “We get a lot of pushback from investors and others saying, ‘Hey, you should take more,’” he says. But he doesn’t see the 50% model of daily-deal companies like Groupon as “long-term and sustainable” for most theatre partners. “You very rarely see a movie theatre run a Groupon because of the distributor fees. If you have to pay out to a distributor at full price, you’re at a loss on pretty much every ticket sale. That model becomes very difficult.”
Last year, Dealflicks had a couple of coups. One, they found out about the industry tradeshows and made the rounds of CinemaCon, ShowEast, and most of the regional NATO shows, including ShowSouth, the Geneva Convention and CineShow. “When we found out about the whole world movie theatre owners live in, that was great for us,” Wycliffe notes. The shows finally put them in touch with the people who could say “yes” to Dealflicks. “I had to make enough friends in the movie industry to figure out how the whole thing works, and what they would be able to do and what they couldn’t do,” he says of the process.
The second coup was making it into 500 Startups, a startup accelerator in Silicon Valley. They invested in Dealflicks and mentored the founders. “We learned a lot about marketing and distribution, so our customer acquisition really took off.” The accelerator also helped put Wycliffe in touch with other investors, helping them raise another $200,000. Including early rounds that raised $65,000 from friends and family, Dealflicks has raised a total of $315,000 in funding. They also recently hired three full-time employees in addition to Wycliffe’s two co-founders, Kevin Hong, VP of business development, and Zachary Cancio, chief technology officer.
The plans for Dealflicks are big. “We’re focusing on building our apps out, raising money, and doing customer acquisition. A year from now, we’re hoping we’ll be a household name.” They don’t have much competition, with one notable exception: Moviepass. The all-you-can-watch “Netflix for movie theatres” is already an industry name. Yet Moviepass’ initial 2011 launch alienated exhibitors, who saw the idea of unlimited movie tickets as a potential threat to the business. By working directly with exhibitors and distributors, Wycliffe has so far avoided any of those pitfalls. Personally, Wycliffe has other hesitations with Moviepass’ product. “As a consumer, I personally haven’t used them yet, because I always go see movies with my girlfriend, and using Moviepass, I need to get two, so it’s $80 a month. I’m busy most days, so I might have one day a month to see a boatload of movies, but you can only see one in a day. You can’t stack it. For me it would be tough to get value out if it,” Wycliffe reflects. He prefers his product, with its “à la carte” option.
Another big difference between the two companies is their size and scaling. “They started big. A lot of people knew about it. We’re figuring out as we go, and once we feel comfortable, we’re going to the next level.” The fact that Dealflicks has taken a couple of years to get off the ground and cycled through other co-founders and business plans is something Wycliffe now sees as an advantage. “We wanted to start small, with one movie theatre, then three, four, five. Now we’re at one hundred.” That doesn’t mean he doesn’t have grand plans. “Next year, maybe we’re pushing for 2,500 to 3,000, and after that go international. It’s a different kind of growth pattern.”
To grow that big requires involvement with the industry’s players, and Wycliffe confirms the company has been talking to “a few of the top five chains,” but doesn’t plan to do any big partnerships until the mobile apps are launched and are running smoothly. They’ve also had conversations with distributors about promoting specific films, similar to how there have been Groupon and Living Social specials for movies like One for the Money, which may have limited theatrical prospects. While Wycliffe see Dealflicks as a way to help out releases that might not be testing well, he’s also brainstormed other strategic opportunities. One is to offer a “last week” discount for someone to see a blockbuster in theatres during the end of its theatrical run. Another is offering a discount for a movie after a competitor comes out and steals its momentum.
Occasionally, Wycliffe has talked to people worried about the potential for Dealflicks to devalue the theatrical experience. His answer? There’s not much of a difference between physical coupons and mobile discounts. “Two decades ago, someone would use an Entertainment Book. Now, you can buy AMC tickets at a discount at Costco, or go online. The big guys have done this, they’re currently doing this, and they always will do this. The question is, what medium are you using?” Wycliffe observes. Dealflicks can offer theatres the opportunity to run discounts, no matter their size. “The smaller players, we let them know it might be tough to get into the Entertainment Book because you have one location, and they will never let you get in with one theatre, and Costco will never let you do it. But we’ll let you do it.”
The after-theatrical market has been filled with new companies, including Netflix, Redbox, Hulu and Amazon Prime, but the same hasn’t been true of the theatrical market. Wycliffe sees his company as a way to energize and innovate the moviegoing experience, which he strongly believes in. “People want to get out of the house and do something with their friends, humans are social,” Wycliffe says. “I watch Netflix, but that’s not all I do. You want to see a movie, but also want to do something. We don’t think that the industry is dying. We think there are empty seats, which give us ways to drive more revenue.”