If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets.
For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense!
I am trying to wrap my head around what MoviePass is trying to do - especially given the number of friends I have who say they would easily be willing to pay 2x or 3x for the service. The data they are gathering cannot be more valuable than the cost of a movie ticket.
I have to imagine they were making a play at building up a huge enough audience to strongarm theaters into lowering their rates. Well the joke is on them - everyone knows that they have no bargaining power. Plus, signing up was so hard, their audience is skewed towards power users and people persistent in their cheapness.
An emergency loan with no change to the service whatsoever? They are really having a deer in the headlights moment.
An emergency loan with no change to the service whatsoever? They are really having a deer in the headlights moment.
Reminds me of a startup I worked with once.
The goal wasn't to make a viable product. It was to make a big splash and get bought.
10 Start a product/service
20 Make a big hype and get lots of publicity
30 Get bought by some larger company that sees you as a threat/opportunity
40 Founders get big cash payout, everyone else gets the shaft
50 GOTO 10
It's crazy. The data is basically worthless. I honestly don't know if they will survive for more than a few months.
I was just thinking, what could they possibly do to survive as long as possible?
They could introduce incentives to reduce the number of movies people saw a week? Maybe some kind of credit system, where customers built up points towards a premium membership.
They could also start taking the most expensive users of their platform. For whatever reason they could. Ban users sharing accounts. Introduce friction somehow. Get them to reenter their payment info.
The customer data is mostly worthless but it's scary. They could weaponize it. Announce to high use customers that they're going to sell non premium customer data. Might scare off some privacy minded customers.
Strong arm theaters somehow? Send customers to certain theaters and away from others by dangling credits toward premium or some other incentive structure
Becoming movie payola was the way I thought they would go. They could be an avenue for studio to discount tickets to specific films without some of the problems of traditional couponing. This could either just drive buzz, or could allow studios to goose opening weekend sales by paying MoviePass to push films, as well as reimbursing MoviePass the ticket cost.
The gist of it is, they're hoping to grow so big that movie theaters will have no choice but to negotiate with them, to share part of the revenues they bring theaters from people who normally don't come watch movies on a whim anymore.
Maybe hoping to make their money back when people let their subscriptions idle during the off season for movies...but this is most attractive avid movie goers so I don't see this working. People who don't go to movies all the time likely won't get it.
It’s the dumbest thing I’ve ever seen and I’m still bullish on subscription commerce in general. A multi-brand theater pass doesn’t make much sense. Chains are much better off offering their own subscription. I’ve heard theaters pay distributors per ticket sold (not per screening or day) so it doesn’t have the dynamics of a perishable good. I don’t understand who would lend it money or buy its shares at this point.
I listened to a podcast from the CEO about what their ultimate objective would be. The idea is to at one point have MoviePass be sponsored or paid ( or get a cut) of recommending things aside from the movie experience. For example, you'd get a deal with Uber to get to the theater or a list of great restaurants to try close to the cinema. Package an overall experience. I also think the data collected from movies that people are most interested in seeing would be of great use to publishers ( Box-Office seems to already help satisfy that). Problem is I think their cash burn rate won't allow them to get to that stage soon enough and I can't really see a light at the end of the tunnel for them especially considering AMC has started its own similar experience.
I was under the impression they were trying to have a big enough block of customers to take to the studios and try to get a percentage. As if their service would have sufficient numbers to sway debuts and over all movie numbers.
> The data they are gathering cannot be more valuable than the cost of a movie ticket.
Yeah, but they think they can get the loss low enough that it becomes feasible to overcome that with data. And it goes beyond just knowing what movies someone is watching.
For example, they know the exact location and time of where people are going to be (the app requires location to work). So MoviePass can use that info to upsell their customers to restaurants/etc around the theater and even transportation there and back. Create packages around this.
> You can't charge less than the marginal cost, it doesn't make sense!
You can if you are dumping to achieve a monopoly and/or monopsony where you will then have pricing power on one or the other side of the transaction you are in the middle of.
But that's a game you either win completely before you run out of money or die horribly; there's no glidepath to a sustainable but not dominant position. And MoviePass seems very close to the die horribly outcome.
> it's like borrowing money to buy more ingredients for a failing restaurant.
Well, they're gathering people's information & movie consumption habits as well. I could imagine a similar business losing money on the movie cost but making up for it by exploiting people's data. Not sure how "well" they're doing on that front though.
“...be more valuable than the cost of a movie ticket.”
That’s the gamble right there. You think a movie ticket is worth what the movie theaters is telling you. MoviePass is calling their bluff by undercutting them on their own service if they get enough of the market theaters will have to cut them a deal they can survive on.
But isn't the marginal cost of a movie seat pretty low for the overwhelming majority of showtimes? I think they're banking on eventually becoming a reseller of inventory the chains themselves can't move.
They still keep thinking that people will eventually treat it like they do gym memberships - buy them, but ultimately not use them. But there is a certain social expectation to have a gym membership and at least pretend you are doing something about your physical fitness. I have one through work and the last time I've been to that gym was over a year ago. But I can't be bothered to go to HR and actually cancel my account. But going to the gym sucks - and going to the movies does not. There is no reason to not use the movie pass once you have one. I'd be shocked if anything but an absolutely marginal percentage of their users were actually paying more than they were using.
First, they tried to strongarm AMC into getting a portion of ticket and concession sales [0]. When AMC said "lol no", MoviePass blocked AMC and tried to pass it off as AMC blocking MoviePass. They then lied about how much money they made AMC [1].
And then AMC turned around and did thier own subscription service. Yes it cost more, but it’s sustainable, you don’t have to jump through hoops to use it and I’m really enjoying it.
Was the entire play of MoviePass to pay for people's movie tickets until they make it and then jack up the prices + negotiate with cinemas for better deals? What was the "make it" condition?
Is this a common strategy?
It also loosely reminds me of the dotcom era strategy. It doesn't matter if we're not making any real money, we have a lot of users. Surely that can be converted into money somehow. We're worth billions of dollars because we have 300 million users!
Is this a common strategy? Are you kidding? The entirety of Silicon Valley is predicated upon and funded by this business model. Almost every service provided by a SV startup is subsidized.
Yeah, they were hoping to sell user data, get partnerships with theaters or even businesses around. They even tried getting deals with specific movies. But yeah the whole SV strategy is disruption. Look at Uber for example.
What do you mean? This is literally B2C Strategy 101. If you even try to build a company that is profitable on day 1 or early in its life it gets labeled as a "Lifestyle Business" and VCs won't get near it.
Ouch. Now that MoviePass subscribers are aware of its impending demise, they're likely to use the service even more to squeeze out any remaining value before it goes kaput, further exacerbating their money woes.
I think the subscription model for theatres makes a lot of sense for all involved. Getting more people to the theatres (where they buy other stuff) and creating larger audiences who didn't previously visit theatres. The pricing and terms of MoviePass are unsustainable, but I think there will be more subscriptions for theatres that are tried.
In the UK, 2 of the biggest chains offer subscription passes... Cineworld, which is the one I use, allows me to see any movie at any cineworld (there's a 2 tier system for London, but ignore that for now) at any time for free based on me paying £17 a month. I live in London and the average cost of a ticket is roughly £12, if i see 2 movies a month i'm quids in. It seems insane that moviepass isn't operated already by one of your big chains (AMC? i guess). There's normally at least 2 movies I want to see a month, and even if there's not if i have nothing better to do i'd likely go and see something.
Lending $5 million to MoviePass at this point is probably as close as you can get to literally throwing your cash on a burning heap. Must be some term sheet!
Perhaps they are secretly working for major movie theater companies like AMC. The trick is to get more people to go back to movie theaters and then when they can no longer use their movie pass service they will still want to go to the movies.
You could imagine a big theater chain buying MP in a fire sale. If they pay $6M and the lender gets all of it, that's a pretty good deal for the lender.
If MoviePass fails, it's a failure of the Nash equilibrium due to stubbornness and lack of communication. MoviePass drives traffic to movies, benefiting both studios and theaters. Despite the existence of other subscription plans, if MP goes away, the majority of those tickets will never be purchased. MP could certainly have evolved into a sustainable plan, that restricted its users to seeing movies at off-times with low demand, at nearly 100% marginal profit to the theaters, even if those tickets were sold at a significant discount that MP could reasonably afford.
Instead, theaters, especially AMC, refused to negotiate and in doing so, shot themselves in the foot. AMC's subscription plan is especially attractive to high-volume users on which it will likely lose money, further, it encourages them to use their free tickets at peak times for the most popular movies in the most expensive formats. When an AMC subscriber in NYC reserves a seat for a Marvel film in IMAX on opening weekend, that's a $20+ ticket that AMC can't sell to a paying customer because the theater is sold out. AMC's profit margin is already quite thin, and getting worse, according to its financial filings. Its CEO is very full of himself but doesn't seem like much of a strategist.
A couple months ago there were optimist articles about how they'll "make it in the long run", having "enough money to keep going before being profitable". Cinemark even announced something similar.
Guess it didn't last THAT long. I'm scared for other services with the same pricing scheme.
They just underwent a 250:1 reverse stock split and the stock is barely 10% of what it was after the split. It's lost over 60% today alone. This company is going bankrupt and quickly.
You would no doubt be surprised. High risk lending is a thing in the Bay Area at least, I attended one of the VC lunches and at my table was a person who did that for a living for hedge fund. Sort of like really really big payday loans, but with worse terms.
He mentioned that one of the most unusual notes they had written was backed by obligations on future projects by the CEO of the company, so if the company folded and the CEO went on to start a new company the hedge fund could convert that defaulted note into a percentage share of the next company. Very creative stuff.
Generally, collateral - often including stuff owned not by the company, but pledged extra by the owners.
Also e.g. "Proceeds from a planned stock sale must also be used to repay the debt." - so they're betting that the company won't fold until a stock sale and it will manage to sell at least a $5+ million of stock; a reasonable "greater fool" bet can be made here when you earn a tidy profit if someone else pays for the company and lose the money if it turns out that you're the last one in the line and there's no greater fool than you.
A lot of startups has not sound business ideas. Rather they have been fueled by cheap below real market central bank interest rates seeking higher return than zero.
My wife and I are so frustrated by the movie going experience in the US. In Taiwan, everyone is permitted to bring food and drinks to the theater and that's pretty common. In the US I'm forced to pay an absurd amount of money for awful junk food. No thanks, I want to drink tea while I watch a movie. We always have to smuggle in drinks because the theater just doesn't provide any good options.
None of the movies is the US are subtitled. I am a native English speaker, but I really prefer to watch every movie with subtitles. Reading the dialogue while I hear it helps me remember the content of a movie, helps to understand what characters are saying while there are explosions going on in the background, let's me lower the volume for the sake of those around me, and so on.
And then there's the friggin' cell phones... but I suppose this isn't really a US specific problem.
Why did 'opening a business without an ever working business model' become a thing? Investor-money can only take you so far if you can literally not ever become cash-flow positive.
In my mind moviepass is proof that the current pricing of tickets is too high. 5M people were willing to fork over $300M a year in subscription fees to go pay likely $20+/visit in concessions ($1.2B if they only go 1x a month).
Moviepass plan was to control as much leverage as they could in relation to the movie industry as quickly as possible. Betting they could borrow against this growth. They started producing their own films and doing all sorts of things to own that chunk of the ecosystem.
MoviePass can predict:
Who(subscribers)
What(movies)
When(what movie showing subscribers will attend)
Where(which theatre)
Why(Netflix like recommendations)
How(um, non tech cliche use of “algorithm”)
And then MoviePass can bulk pre-purchase tickets at steep discounts to solve movie theatre excess capacity problem(if it is a problem).
With how tenuous things are now, I suspect MoviePass is NOT Netflix circa 2002.
[+] [-] legitster|7 years ago|reply
For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense!
I am trying to wrap my head around what MoviePass is trying to do - especially given the number of friends I have who say they would easily be willing to pay 2x or 3x for the service. The data they are gathering cannot be more valuable than the cost of a movie ticket.
I have to imagine they were making a play at building up a huge enough audience to strongarm theaters into lowering their rates. Well the joke is on them - everyone knows that they have no bargaining power. Plus, signing up was so hard, their audience is skewed towards power users and people persistent in their cheapness.
An emergency loan with no change to the service whatsoever? They are really having a deer in the headlights moment.
[+] [-] sf_rob|7 years ago|reply
The old joke is "Sure we have marginal losses, but we'll make up for it with volume!"
[+] [-] reaperducer|7 years ago|reply
Reminds me of a startup I worked with once.
The goal wasn't to make a viable product. It was to make a big splash and get bought.
[+] [-] MusaTheRedGuard|7 years ago|reply
I was just thinking, what could they possibly do to survive as long as possible?
They could introduce incentives to reduce the number of movies people saw a week? Maybe some kind of credit system, where customers built up points towards a premium membership.
They could also start taking the most expensive users of their platform. For whatever reason they could. Ban users sharing accounts. Introduce friction somehow. Get them to reenter their payment info.
The customer data is mostly worthless but it's scary. They could weaponize it. Announce to high use customers that they're going to sell non premium customer data. Might scare off some privacy minded customers.
Strong arm theaters somehow? Send customers to certain theaters and away from others by dangling credits toward premium or some other incentive structure
[+] [-] jld|7 years ago|reply
Probably not enough to become profitable though.
[+] [-] wildpeaks|7 years ago|reply
The gist of it is, they're hoping to grow so big that movie theaters will have no choice but to negotiate with them, to share part of the revenues they bring theaters from people who normally don't come watch movies on a whim anymore.
[+] [-] acchow|7 years ago|reply
It worked for Uber tho. And now they've raised prices in markets where they are established.
[+] [-] surge|7 years ago|reply
[+] [-] pbreit|7 years ago|reply
[+] [-] fullshark|7 years ago|reply
[+] [-] londons_explore|7 years ago|reply
[+] [-] lechiffre10|7 years ago|reply
[+] [-] Shivetya|7 years ago|reply
[+] [-] Reedx|7 years ago|reply
Yeah, but they think they can get the loss low enough that it becomes feasible to overcome that with data. And it goes beyond just knowing what movies someone is watching.
For example, they know the exact location and time of where people are going to be (the app requires location to work). So MoviePass can use that info to upsell their customers to restaurants/etc around the theater and even transportation there and back. Create packages around this.
[+] [-] dragonwriter|7 years ago|reply
You can if you are dumping to achieve a monopoly and/or monopsony where you will then have pricing power on one or the other side of the transaction you are in the middle of.
But that's a game you either win completely before you run out of money or die horribly; there's no glidepath to a sustainable but not dominant position. And MoviePass seems very close to the die horribly outcome.
[+] [-] mehrdadn|7 years ago|reply
Well, they're gathering people's information & movie consumption habits as well. I could imagine a similar business losing money on the movie cost but making up for it by exploiting people's data. Not sure how "well" they're doing on that front though.
[+] [-] talltimtom|7 years ago|reply
That’s the gamble right there. You think a movie ticket is worth what the movie theaters is telling you. MoviePass is calling their bluff by undercutting them on their own service if they get enough of the market theaters will have to cut them a deal they can survive on.
[+] [-] acjohnson55|7 years ago|reply
[+] [-] gambiting|7 years ago|reply
[+] [-] Jasper_|7 years ago|reply
[0] https://deadline.com/2018/01/moviepass-lack-of-amc-theatres-...
[1] https://variety.com/2018/film/news/amc-blasts-moviepass-fals...
[+] [-] scarface74|7 years ago|reply
[+] [-] Waterluvian|7 years ago|reply
Is this a common strategy?
It also loosely reminds me of the dotcom era strategy. It doesn't matter if we're not making any real money, we have a lot of users. Surely that can be converted into money somehow. We're worth billions of dollars because we have 300 million users!
[+] [-] jondiggsit|7 years ago|reply
[+] [-] ChuckMcM|7 years ago|reply
[+] [-] ehsankia|7 years ago|reply
[+] [-] darwin142|7 years ago|reply
[+] [-] Axsuul|7 years ago|reply
[+] [-] ironjunkie|7 years ago|reply
As soon as people think it is going bad, they go to squeeze their money out, making it even worse.
[+] [-] chillydawg|7 years ago|reply
[+] [-] tompetry|7 years ago|reply
[+] [-] legitster|7 years ago|reply
That said, they really botched the strategy - they could have bootstrapped the whole thing and slowly come down in price.
[+] [-] tjbarkley|7 years ago|reply
[+] [-] JazCE|7 years ago|reply
[+] [-] haldean|7 years ago|reply
[+] [-] code4tee|7 years ago|reply
[+] [-] izzydata|7 years ago|reply
[+] [-] jessaustin|7 years ago|reply
[+] [-] listenallyall|7 years ago|reply
Instead, theaters, especially AMC, refused to negotiate and in doing so, shot themselves in the foot. AMC's subscription plan is especially attractive to high-volume users on which it will likely lose money, further, it encourages them to use their free tickets at peak times for the most popular movies in the most expensive formats. When an AMC subscriber in NYC reserves a seat for a Marvel film in IMAX on opening weekend, that's a $20+ ticket that AMC can't sell to a paying customer because the theater is sold out. AMC's profit margin is already quite thin, and getting worse, according to its financial filings. Its CEO is very full of himself but doesn't seem like much of a strategist.
[+] [-] mdrzn|7 years ago|reply
Guess it didn't last THAT long. I'm scared for other services with the same pricing scheme.
[+] [-] pc86|7 years ago|reply
[+] [-] slg|7 years ago|reply
[+] [-] ChuckMcM|7 years ago|reply
He mentioned that one of the most unusual notes they had written was backed by obligations on future projects by the CEO of the company, so if the company folded and the CEO went on to start a new company the hedge fund could convert that defaulted note into a percentage share of the next company. Very creative stuff.
[+] [-] PeterisP|7 years ago|reply
Also e.g. "Proceeds from a planned stock sale must also be used to repay the debt." - so they're betting that the company won't fold until a stock sale and it will manage to sell at least a $5+ million of stock; a reasonable "greater fool" bet can be made here when you earn a tidy profit if someone else pays for the company and lose the money if it turns out that you're the last one in the line and there's no greater fool than you.
[+] [-] acd|7 years ago|reply
Some startup founders are hustlers.
The children story by hc Andersen about the emperor without clothes. trying to convince he has clothes comes to mind. https://en.m.wikipedia.org/wiki/The_Emperor%27s_New_Clothes
There will be a shake down of real pegususes versus so called unicorns. One magical creature has wings the other does not.
Of course people will be attracted to services selling services below market rate but it is not long term economically sustainable.
[+] [-] christianmunoz|7 years ago|reply
Promissory Note: https://www.sec.gov/Archives/edgar/data/1040792/000121390018...
8-K Filing: https://www.sec.gov/Archives/edgar/data/1040792/000121390018...
[+] [-] clircle|7 years ago|reply
None of the movies is the US are subtitled. I am a native English speaker, but I really prefer to watch every movie with subtitles. Reading the dialogue while I hear it helps me remember the content of a movie, helps to understand what characters are saying while there are explosions going on in the background, let's me lower the volume for the sake of those around me, and so on.
And then there's the friggin' cell phones... but I suppose this isn't really a US specific problem.
[+] [-] ulfw|7 years ago|reply
[+] [-] brianbreslin|7 years ago|reply
Moviepass plan was to control as much leverage as they could in relation to the movie industry as quickly as possible. Betting they could borrow against this growth. They started producing their own films and doing all sorts of things to own that chunk of the ecosystem.
[+] [-] sspencer|7 years ago|reply
[+] [-] chriselles|7 years ago|reply
MoviePass can predict: Who(subscribers) What(movies) When(what movie showing subscribers will attend) Where(which theatre) Why(Netflix like recommendations) How(um, non tech cliche use of “algorithm”)
And then MoviePass can bulk pre-purchase tickets at steep discounts to solve movie theatre excess capacity problem(if it is a problem).
With how tenuous things are now, I suspect MoviePass is NOT Netflix circa 2002.