What they do: Dealflicks partners with theaters to fill empty seats by selling discounted movie tickets and concessions, 24/7/365 with no convenience fees. Why it’s a big deal: $40 billion dollars are spent every year on movie tickets, popcorn, and soda, but 88% of movie theater seats are empty. Until Dealflicks, there has never been a way for movie theaters to sell their excess inventory of tickets for lower-performing showtimes. Now, theaters are able to get butts in seats and customers can get up to 60% off on movie tickets and concessions.
2014 Revenue: $1,351,171, December Revenue: $149,566
193,000 users in December, growing 45% Month-over-Month
$2,000,000 annual revenue run rate
Selling over 50,000 movie tickets per month
Over 500 theaters signed on as of Jan. 31
Just signed Carmike Theaters - #4 theater chain in USA
Movie theater market: $40 Billion
Why investors us
$2,488,650 since our founding
88% of theater seats are empty every day, and Dealflicks aims to fill all of them. We love that the founders do whatever it takes: they started Dealflicks from a minivan they drove around the country to sign on their first theaters. Since then, more than 500 theaters have signed up, including Carmike Theaters, the #4 largest in the country. No wonder they booked $1,351,171 in revenue last year.
When Wycliffe was 21, he was flying high. The company he and his brother were running was doing really well, they bought a million-dollar house, and he was ripping around LA in a shiny new Ferrari.
But when their main client went bankrupt, Wycliffe found himself at an impasse. He went back to UC Berkley to finish his degree — he had dropped out two years earlier when the company took off — and learned valuable lessons in humility and the budgeting.
When Wycliffe started Dealflicks, he knew the company would have to be efficient if it was to be successful, but co-founder and head of sales Kevin Hong took bootstrapping to the max when he traded his Acura TSX for his father’s Toyota Sienna, and turned it into the ultimate sales vehicle: the Dealflicks ManVan.
Hong spends most of his time criss-crossing the country in the ManVan, meeting with theater owners and signing up clients ever since. He also sleeps in it, on a full-sized mattress that he shares with a fellow sales rep, to save money.
“Sometimes we get a lot of flack,” Hong says — but it’s worth it. “Our sales guys work really hard, and sleeping in a van in a Wal-Mart parking lot is not always glamorous.”
Still, it makes for a good story — and one that has paid off, big time.
Hong solidified Dealflicks’ first sale by driving to Gardena Cinema in Los Angeles, meeting with the owners face-to-face, and at one point surprising them with his mother’s homemade scallion pancakes. Since then, more than 500 other theatres locations have also signed up — the vast majority resulting from similar face-to-face interaction, but not all involving Hong’s mother’s now somewhat famous pancakes.
What has happened at Dealflicks since you last fundraise in May?
The last 6 months have been fantastic here at Dealflicks. The entire team worked hard to complete the iPhone and Android Apps, the mobile website, and acquire 500+ theaters before the new year! We know we’ve gotten a handle on theater acquisition now because we just partnered with Carmike Theaters (#4 largest chain in America, 253 locations). Now everyone at Dealflicks has shifted focus to user acquisition for 2015. We’re excited to double our revenue by Spring and go ahead with a Series A this coming Summer.
What's new about what you're making? How is it different?
Until Dealflicks, there has never been a way for movie theaters to sell their excess inventory of tickets for lower-performing showtimes. Now, theaters are able to get butts in seats and customers can get up to 60% off on movie tickets and concessions.
Why did you pick this idea to work on?
I've always loved watching movies - comedies, dramas; good ones, bad ones; opening night, five weeks in; etc. - so when I saw The King's Speech a few days after it came out and noticed the theater was empty, I had the idea for Dealflicks. After seeing that over $40 billion dollars were spent every year on movie tickets and concessions, and that 88% of seats were empty (in fact, 95% of seats are empty after opening weekend), I knew there'd be an opportunity to do something big here.
How big is the market?
Over $40 billion dollars are spent every year worldwide on tickets, popcorn, and soda. 30% of those sales happen during opening weekend. Our initial focus is on the $28 billion of tickets, popcorn, and soda that are sold after that.
Who are your competitors? How are you different?
We have several competitors across the market, but no one is as easy and cost-effective for both customers and theaters as Dealflicks.
Fandango/Movietickets.com - only sell full-priced tickets, they charge convenience fees, and they do not sell concessions. Dealflicks sells movie tickets and concessions, and our deals are up to 60% off with no convenience fees.
Costco Discount Tickets - tickets are sporadically available, and customers must physically purchase in advance. Also, Costco tickets are good for any showtime, and theaters can't sell inventory for specific showtimes. Dealflicks tickets are always available, and customers can purchase at the last minute using their mobile devices with one-click. We also allow theaters to pick and choose which showtimes they make available, they can selectively discount tickets based on demand.
Daily Deal sites - movie ticket deals are very rarely available on daily deal sites. Because daily deals are also valid for any showtime, and theaters can't focus on selling inventory for specific showtimes. Theaters also lose money with daily deals. To meet typical site pricing, theaters must discount their tickets at least 50%, and daily deal sites routinely ask for 50% of revenues. This pricing scheme is a lose-lose for theaters since they owe studios ~50% of all ticket sales.
Dealflicks solves all these issues. We allow theaters to pick and choose which showtimes and movies they want to make available. Theaters choose the price point. And we never run out of inventory.
How do you make money?
We take a percentage of revenues that we generate for our theater partners, anywhere from 10-20%.
What have you learned in the past 6 months?
First, we learned that theaters make more money when they offer decent discounts for their customers on more showtimes, even if it's just a limited amount of inventory per showtime. We went back to our theaters with the data and now 80% of those we spoke with are giving better discounts and including more showtimes.
We also learned that we can help our theaters quite a bit by managing social media accounts for them. We handle posts and interactions, and in return get a better revenue share and more exposure for Dealflicks. Our goal is to both grow their following and simultaneously let their users know about Dealflicks, a win for both of us.
Can you explain the fluctuation in your growth over the last year?
Movie theatres have pretty seasonal demand depending on the time of year, and we’ve seen the same trend with our business. In the summer theaters are full, studios release their biggest films and kids have the free time for movies. Summer 2014 was fantastic for us, and just as September is the worst sales month of the year for theaters, we saw a drop in sales as well. September accounts for only 4% of yearly ticket sales industry wide, while June, July, and August each account for 12%-15% of yearly ticket revenue. The dip in our growth curve was a result of this industry-wide seasonality. See this article on Five Thirty Eight for a decent synopsis of industry demand cycles.
What other marketing channels are you exploring?
There are a bunch of hyperlocal sites where consumers go to find deals, and we’ve started to figure out how introduce their users to Dealflicks. We're doing more promotions with our theater partners, and we're starting to test and iterate on various CPC/CPA/CPM platforms.
Are there other ways you think you can make money?
There are a number of things theatres need help with that we can provide them. I mentioned the fact that we have started managing social media for some theaters, and we have begun experimenting with different ways to monetize it. We also collect a ton of data about moviegoers, and it will turn into a revenue stream down the line. Theaters want to know who their customers are, and we plan to revenue share with theaters in exchange for this data. Several studios, including Warner Brothers, have expressed interest in paying us outright for our dataset. But we don’t plan to monetize this until we’ve amassed a large enough dataset - I expect we’ll have that critical mass by the end of 2015.
How have your margins evolved over the last two years?
Our prices have increased dramatically since our first few theaters. Initially we gave Dealflicks to theatres for free so we had more deals to offer to users, and as we’ve scaled we’ve raised our prices. Throughout 2013 we charged a 10% revenue share to theaters and most of 2014 saw a 15% rev share. In October we started on-boarding new theaters at 20% margins. We’ve also retroactively upped the rev share to at least 10% for all existing theaters, and will bring that number to 15% this year.
How much does it cost you to acquire users?
Right now we pay about $4 for every new user, and with a life-time value of ~$21 we have a lot of room to pay more if we have to. We’ve finally just finished most of our products: iPhone, Android, mobile website, and a handful of other features. Now our product team is focused on conversion and finding more cost effective way to acquire users, so we expect our cost-per-user to continue to fall.
Do customers use Dealflicks more than once?
Yes, and our retention is only getting better. Last year ~40% of our purchases were from repeat customers, and this year 60% of revenue is from repeat customers. We’ve gotten the product to the point where users keep coming back, which is why our new focus is on user acquisition.
Have you met your goals this last year? What hasn’t gone well?
We have 2 customers that we need to satisfy: theaters and moviegoers. We met our goal for theater acquisition with 500 locations signed up before the new year, and we’re on track for 500 more in 2015. Focusing on theatres meant that we didn’t sell the number of tickets we hoped for. Thankfully, our theater acquisition process is now seamless and will continue to get better so we’ve shifted our focus to acquiring users. Soon user acquisition will be on par with theater acquisition.
How much revenue can you drive to a theater?
Depending on the type of theatre, we can increase revenues by 3-10%.
What is your churn for theaters?
97% of our theaters have stayed with Dealflicks, and the ones that have left have generally done so because they shut down.
Which theaters are you after next?
We just partnered with Carmike (4th largest chain in the country), and we’ve been speaking with the other top 4 chains as well. With 6000 theaters across the US, there's a bunch of theater chains out there that we're excited to partner with in 2015.
How much do you need to grow before a Series A round?
Right now our annual revenue run rate is $2 Million, and from what we are hearing, we should be able to land a Series A once we’ve doubled it. We plan on getting to $4M by late Spring and closing our first institutional round in Summer 2015.
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