MoviePass Worked Out Great (bloomberg.com) 118
Matt Levine, writing for Bloomberg: Is there a Harvard Business School case study of MoviePass yet? I feel like there are a lot of lessons to be learned from the MoviePass story, but maybe that's wrong. Maybe all of the lessons are just "if you do the opposite of normal business things, it will work, but only for a while." Maybe business school students should actively avoid learning that lesson. Anyway Jason Guerrasio has a big story on the rise and fall of MoviePass at Business Insider today. The basics of the story -- MoviePass was a business that charged people $9.95 a month to see unlimited movies in theaters, and then paid the theaters full price for the tickets, losing money on each transaction and eventually falling into a huge and comical financial hole -- were familiar to me, and probably to you, and it's not like we didn't already know it was weird. But I learned a lot from this article about how weird it was.
For instance, under founder Stacy Spikes, MoviePass charged $50 a month for its service, but couldn't get enough subscribers to break even. Then it was acquired by Helios & Matheson Analytics, whose chief executive officer, Ted Farnsworth, came up with the idea of charging much less: "Why Farnsworth settled on $10 is unclear. Several people told me he wanted a price that would grab headlines. ... But in July 2017, the MoviePass board agreed to the deal. And on August 15, the price drop went into effect. Thanks to word-of-mouth buzz and press attention, within two days subscriptions jumped from about 20,000 to 100,000. MoviePass had transformed from a scrappy startup trying to keep the lights on to a disrupter in the making."
What an amazing sentence. It went from being "a scrappy startup trying to keep the lights on" (bad) to a buzzy "disrupter in the making" (good) by giving up on trying to keep the lights on. The trick is not to make enough money to cover your costs; it's to stop trying. Losing a lot of money is better than losing a little money; it has more panache, attracts more attention, certainly gives you that attractive hockey-stick user growth. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. Annual income twenty pounds, annual expenditure three hundred million pounds, result unicorn.
For instance, under founder Stacy Spikes, MoviePass charged $50 a month for its service, but couldn't get enough subscribers to break even. Then it was acquired by Helios & Matheson Analytics, whose chief executive officer, Ted Farnsworth, came up with the idea of charging much less: "Why Farnsworth settled on $10 is unclear. Several people told me he wanted a price that would grab headlines. ... But in July 2017, the MoviePass board agreed to the deal. And on August 15, the price drop went into effect. Thanks to word-of-mouth buzz and press attention, within two days subscriptions jumped from about 20,000 to 100,000. MoviePass had transformed from a scrappy startup trying to keep the lights on to a disrupter in the making."
What an amazing sentence. It went from being "a scrappy startup trying to keep the lights on" (bad) to a buzzy "disrupter in the making" (good) by giving up on trying to keep the lights on. The trick is not to make enough money to cover your costs; it's to stop trying. Losing a lot of money is better than losing a little money; it has more panache, attracts more attention, certainly gives you that attractive hockey-stick user growth. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. Annual income twenty pounds, annual expenditure three hundred million pounds, result unicorn.
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Because its a quote. from Charles Dickens. Who was British
huh (Score:1)
I finally get what Scott Adams means when he says that Dilbert is a dialed down version of the business world.
And Then? (Score:5, Insightful)
I feel like the plan probably was to lower the price and get subscribers (and realize the loss) and then slowly increase the price and leverage the (now much larger) user base to negotiate better deals with cinemas. If you have no users you're fucked no matter what you do. Once you have users you have the option of changing the parameters and get to positive EBIDA.
If that didn't happen then it was more a case of not following through on the plan rather than having no idea what to do in the first place.
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And then, you cash in and sell to whoever wants to buy the latest hottest disruptor so they deal with actually turnign a profit.
At least, that's what I thought the plan was, but they screwed up by selling to Helios & Matheson Analytics before dropping the price.
Re:And Then? (Score:4, Insightful)
Movie Pass:
Step 1: Give away tons of movie tickets below cost to get market share!
Step 2:
Step 3: Profit!
Uber:
Step 1: Sell rides below cost using other people's car/labor to get market share!
Step 2: mumble mumble autonomous cars mumble homeless person speed bump mumble...
Step 3: Profit!
Except I am wrong. Back in the dotcom era there was the promise of Step 3. Nowadays a business plan is so Y2K. The profit pretext has been dropped, and somehow investor money keeps pouring in. I don't get it.
Re:And Then? (Score:5, Informative)
Movie Pass:
Step 1: Give away tons of movie tickets below cost to get market share!
Step 2:
Step 3: Profit!
Uber:
Actually, there was a "step 2", in fact several.
A. Collect data to monetize.
B. Cut deals with the theaters for volume discounts
C. Slowly raise the price
The problem is that "A" didn't bring in enough money, "B" didn't happen, and "C" was not possible since they were still trying to grow their base.
They also didn't account for people sharing their passes. This was against the rules, but people did it anyway. My spouse joined MoviePass, and she, my daughter, and several of my daughter's friends all put it to use. We likely cost them $100 per month or more. MoviePass tried to rein this in by tying it to the physical presence of the phone, but we bypassed that by tying it to a burner phone that we could lend to friends along with the membership card.
They also tried to restrict sharing by making a rule that you could only see a specific movie once. But that was also easy to bypass by buying a ticket for one movie to get into the Cineplex, and then actually seeing another movie once you were inside.
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Jerks like you pulling crap like that is why we can't have nice things....
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They also didn't account for people sharing their passes. This was against the rules, but people did it anyway. My spouse joined MoviePass, and she, my daughter, and several of my daughter's friends all put it to use. We likely cost them $100 per month or more. MoviePass tried to rein this in by tying it to the physical presence of the phone, but we bypassed that by tying it to a burner phone that we could lend to friends along with the membership card.
Note to self: Do not trust ShanghiBill on the Honor System.
Updated note to self: Do not trust ShanghiBill.
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He thinks "The Fed" is all private banks
Umm...you might want to do some investigation in this area amigo.
Search for "The Money Masters" on youtube.
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When you convince yourself that willingness to engage in fraud means you're smarter then everyone else (first the victim, then everyone with scruples), the limit on the amount of effort you'll put it into it goes up significantly.
When we were cavemen, violence was the ultimate way to prove your status. Now there are millions of subtle ways you can be an absolute piece of shit to other people and call it a "lifehack".
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You bought a burner phone just to defraud MoviePass?
No. My spouse defrauded them, not me. Also, she already owned the burner phone, so it wasn't a new purchase.
Re: And Then? (Score:1)
ShanghaiBill has, once again, publicly admitted to committing fraud. He thinks it makes him seem smart because he "beat the system". He doesn't care that is shows him to be dishonest and a thief.
Time to shift some goal posts and do a little rationalization and history revision now, Bill, eh?
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D. cut deals with theatres to ban people who don't use your service from participating (this is the movie industry we're talking about. They are a bunch of cutthroats, the whole lot). Then after this, do A and C.
E. once you've grown big enough to have significant volume to invest in other areas (that are profitable), do this. Jill Bloe with her lemonade stand can't just up and decide to compete with netflix (or shapeshift.io
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The local cinemas around here actually do offer unlimited viewing for a monthly fee. There are restrictions on times so you can't go to the busiest showing, but who wants to be in a hot room full of noisy moviegoers anyway?
They probably had little interest in undercutting their own monthly passes and sharing the profit with MoviePass.
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Those plans mostly happened AFTER MoviePass.
In the UK they were happening long before MoviePass. One in the town I used to live in offered it at least a decade ago.
Re:And Then? (Score:4, Insightful)
The best way to keep investors away is to have an actual product and a real business plan that calls for controlled growth with a good chance of a reasonable profit over time.
Investors want expensive chairs, chimps in superbowl commercials and losing money on every transaction so you can make it up in bolume. If you can likewise rope in "contractors" that don't know they're actually employees and get them to make a similar bet, all the better.
There are some real business plans out there and some real investors, but they have a hard time getting together because of all the noise.
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Why not both? :-)
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I don't get it.
I do. The "Fear of Missing Out".
Wall Street disconnected from reality almost 25 years ago, during the dot-com boom. These days, give a day-trader or similar such investment entity a hundred opportunities to choose between
A) The business with a solid foundation, a realistic business plan, and a proven track record that will provide steady, reliable growth
B) The half-baked idea with nothing but "disruption imminent!" buzz surrounding it
and they'll go with B Every. Single. Time. They're so afraid of missing
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I feel like the plan probably was to lower the price and get subscribers (and realize the loss) and then slowly increase the price and leverage the (now much larger) user base to negotiate better deals with cinemas. If you have no users you're fucked no matter what you do. Once you have users you have the option of changing the parameters and get to positive EBIDA.
If that didn't happen then it was more a case of not following through on the plan rather than having no idea what to do in the first place.
I think their plan was data. The app and the movie tickets were just the way to gather that data. Just like Facebook's product is really data and ads, and the Facebook app/website is just a way to gather data and display ads. MoviePass basically wanted the "data of datenight". Where people go before/after a movie, what they do, where they eat. They could then turn around and sell this data to advertisers or to restaurants/etc to sell ads. Their goal was to try and stay afloat until that data ecosystem
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I think this is a big part of the failure. As you noted, the cinema chains would not (perhaps could not) negotiate lower prices.
https://podtail.com/en/podcast... [podtail.com]
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Its more would not. AMC has their own all you can eat plan (A List) that I use. But they're in a better position to do it- they can cut price to cost and make money off concessions. What costs a third party $20 may cost them $10, and it works as a loyalty program. The third party had to pay for the theater's profit and had no ancillary revenue yet.
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Perhaps it was a brilliant plan to get venture capitalists with more money than sense to pay for people's movie tickets.
In which case, it seems that it was reasonably successful.
Bad plan (Score:3)
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Maybe it was a plan to get venture capitalists with more money than sense to buy people's movie tickets.
If that's the case, it seems like it was moderately successful.
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Oh, damn. Duplicate post. Someone mod that into oblivion for me.
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Worst case, if you can't find a buyer for the company: you enjoy the salary you've been paying yourself, declare the business bankrupt (your personal assets are legally protected), and use the money you paid yourself to begin your next disruptive startup. Continue every couple years as needed until you feel like retiring to your tropical island.
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and then slowly increase the price and leverage the (now much larger) user base to negotiate better deals with cinemas.
Presumably, sure. But it was public knowledge that it was a numbers game and the clock was running out. Why would theaters give themselves a bad deal when they could just run out the clock and get a generous boost in ticket sales in the meantime?
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Unicorn farts... (Score:3)
21st century business plan (Score:5, Insightful)
2.) hire a good marketing person (the less they know, the better for everyone)
3.) Tout your "idea" around the VC community until you stumble up someone with more money than sense
4.) Bleed 'em.
5.) Spend the money on more marketing, advertising, media "presence" - not on tech. or maturing the product
6.) Do whatever you can to make the customer base look impressive
7.) Hope that Google, Amazon, Facebook or someone else will buy you out.
8.) Profit!
9.) Retire - or start again.
Price cut made no difference (Score:3)
Not only did the change make no difference whatsoever to the income, but it shows just how shallow, uncritical and generally clueless the media is in reporting these things. While the company might - might - have created some buzz, was it really "buzz" or just the sound of termites gnawing away at their bank account?
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As someone above pointed out,
there is a big difference between 20,000 subscribers and 100,000 subscribers when it comes to negotiating contracts with movie theatres. If I have a databank of 100,000 people, all interested enough in going to the cinema to pay a subscription, i can do all sorts of marketing, analytics, and the like to get those people into your cinema's seats, buying your concession stand food (where I imagine margins are quite good).
Except, lets not talk about 100,000. What if they could ha
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there is a big difference between 20,000 subscribers and 100,000 subscribers when it comes to negotiating contracts with movie theatres.
True, but assuming your larger userbase sees the same number of movies per person, you have to negotiate a whopping 80% discount just to stay where you were, because you're buying five times as many tickets.
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there is a big difference between 20,000 subscribers and 100,000 subscribers when it comes to negotiating contracts with movie theatres.
True, but assuming your larger userbase sees the same number of movies per person, you have to negotiate a whopping 80% discount just to stay where you were, because you're buying five times as many tickets.
No, you'd expect the 20,000 paying $50 to see lots of movies to get their money's worth. 100,000 paying $10 each would likely to possibly see fewer movies per month.
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Plus, once you get people locked in to a subscription, at scale, you will get folks who use the service little, floating those people who use a lot.
They might have thought so, but this in no way works like a gym membership and it will probably increase moviegoing for most subscribers.
Well not NO difference... (Score:2)
It didn't make _no_ difference; it presumable qunitupled their expenses...
Disruption is a powerful weapon... (Score:2)
But like any weapon, can just as easily be used on yourself as others...
If you are using Disruption, watch where you are aiming that thing.
SNL Change Bank Skit (Score:1)
Did it really? (Score:2)
What an amazing sentence. It went from being "a scrappy startup trying to keep the lights on" (bad) to a buzzy "disrupter in the making" (good) by giving up on trying to keep the lights on. The trick is not to make enough money to cover your costs; it's to stop trying. Losing a lot of money is better than losing a little money; it has more panache, attracts more attention, certainly gives you that attractive hockey-stick user growth. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. Annual income twenty pounds, annual expenditure three hundred million pounds, result unicorn.
MoviePass/Helios&Matheson is currently trading at .0018. That's a pretty small unicorn. Their net income is current at -145000000.
Not good for consumers in the long run either (Score:4, Interesting)
Hey, I got about 27 movies for a $89 annual fee two black friday's ago -- and that's in the first seven months before they started restricting. That's a great deal, and certainly a better one than the $20/month I'm paying for AMC (soon to be $22). So I had a one-a-day, any-movie-I-want contract for a year, and they pretty much just said, "the terms have been changed. Pray I do not do so again" (and yet they did). Limited per month. Limited access to first-run. Limited access to each theater it seemed. Basically, you couldn't go see a movie for months there. It got better for a bit, but not much, and I bailed.
But once they stopped letting you drink from the firehose, suddenly going out to the movies wasn't worth $10-14 a ticket, because I'd already paid for "unlimited" and expected about a value of maybe $4 to see a first-run blockbuster (that I could no longer get into).
They were terrible business people, and if they had started to make real money, there's a lot of angry subscribers who'd have been all over them for breach of contract -- not worth suing a company with no money.
Business model (Score:1)
I think Moviepass was just an attempt to replicate the gym membership subscription plan for moviegoers.
The hope was that you'd subscribe but not use the membership.
Micawber (Score:2)
I think I read about this earlier today (Score:2)
This sounds suspiciously like MMT - Modern Monetary Theory.
Hate to tell you but... (Score:2)
"if you do the opposite of normal business things, it will work, but only for a while."
What MoviePass did was not the opposite of normal business things. Make your product cheap or, better, free, lost money fast, gain users fast, is pretty much today's business plan.
MoviePass's only problem was that they couldn't "monetize" their user base, i.e. sell people's information for other companies to mercilessly exploit to sell them crap.
smelloscope (Score:1)
The lesson is simple (Score:2)
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The "We lose a little money on every sale, but we make up for it in volume!" business model does not work!
That's why they went for the "lose a LOT of money on every sale" model. That's disruption right there.
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and increased expenses by a factor of 5
More people who see fewer movies. Probably an increase in expenses of 2. Still not helpful on the same revenue, of course, in terms of long term sustainability.
Why pay the theater full price? (Score:1)
FTFA: "MoviePass was a business that charged people $9.95 a month to see unlimited movies in theaters, and then paid the theaters full price for the tickets".
As far as I know it's concessions, not tickets, which are responsible for the majority of profits for the movie theaters. A 2009 Time article claims that theaters make 85 cents of the profit for every dollar spent at the concession stand. A movie theater is a bit like a Vegas casino in that regard - offer relatively cheap accommodation and plenty of fr
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Those fuckers don't negotiate.
They don't even actually make any money. See "hollywood accounting."
But that's why theaters have to make money on concessions. The ticket money goes to the movie studios.
Forget-me-not (Score:2)
It's a case of actuarial science -- lose some now and wait until quiescence when most people use it less than they pay to get, once the novelty wears off and people don't want to see most movies anymore.
My new startup sells $20 bills for $10 (Score:2)
Why limit the fun to just moviegoers? Now anyone can buy crisp, legal, $20 bills -- as many as you want -- for just $10 each, for as long as my investors' money holds out.
I'll have a giant userbase in no time!
Endgame (Score:2)
The endgame is that the people in charge wrap the company up and go off to get high paid jobs as consultants because the morons that hire them remember the name from some Forbes article they read. At most they'll think of them as "those guys that tried something radical but were just unlucky" instead of "those guys whose business model was to piss away all the company money while paying themselves a good salary and then bail."
The Uber Strategy apparently (Score:2)