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  • Writer's pictureJames Spiro

The Rise and Fall of MoviePass: The Company Even Elon Musk Can’t Fix

MoviePass came onto the scene on June 30, 2011, and threatened to become the brand that created a much-needed disruption in the theatres’ operating model.

Staying in the movie subscription game for about six years and making no waves, the company took one of the biggest risks we have ever seen in the history of any movement shortly afterward.

You would think so too if you considered a leap from under $4 a share to more than $25 apiece of the same shares — and in less than a month! However, this came at a price — one that became too heavy to bear in the long run, and literally so.

Looking at the company today, it’s safe to say it’s now a shadow of its former self. Struggling to keep its head above water and having virtually no lifebuoy to depend on, it looks like the only way the company could go right now is down.

The question remains of how they got here. For a subscription service that held so much potential (it got more than 150,000 subscribers in two days) how did such a decline happen?

The Genesis (June 30, 2011 — August 15, 2017)

MoviePass started out as a basic subscription service which would allow its users to see movies in the cinema for $50 a month. However, things were moving so slow that as of December 2016, MoviePass could only boast 20,000 subscribers to its name.

On a year-on-year basis, the disappointing figures could be scaled down to suggest a capturing of 4000 new subscribers every year. It didn’t help matters that they were at loggerheads with AMC right from the day of launch.

Then came the year 2017 which signaled the start of a new dawn. Looking back on that year, it could now be said that it was the beginning of the end for MoviePass.

The Change Around (August 15, 2017 — November 17, 2017)

Having been supported by only Studio Movie Grill — a theatre-come-restaurant chain that took out a substantial stake of the company — MoviePass got the attention it deserved by after investments from Helios and Matheson in August 2017.

What followed would be a slashing of the subscription model to $9.95/ month and bumping up the number of movies a user could watch daily. Originally, it stated users could watch one film a day at participating theaters.

Three months after this investment, MoviePass would go on to roll out a yearly plan for subscribers, allowing them to pay an equivalent of $7.50/ month which cumulated in $88.95/ year.

This combination of moves attracted a lot of customers, as was to be expected. In fact, the company grew from a meager 20,000 subscribers to more than 600,000 users in just three months.

Where It Doesn’t Add Up

The problem with the new pricing model was, the company was fast losing money than it was gaining.

On a standard movie ticket, exhibitors like AMC would have to pay about 54% of the total price in ‘film rent’. The kind of model operated by MoviePass meant they had to pay the entire $10.

Mathematically, they have lost a few cents on a user seeing a single movie already. Couple that with the fact that they increased the number of movies that can be seen by each subscriber daily and their losses go through the roof.

Justifying the style of operation, Mitch Lowe — who became the CEO of MoviePass due to being one of Netflix’s co-founders — commented that Movie pass “[bears] the risk of over-usage and [gets] the benefit of under-usage.” — Think of it as a gym: additional memberships bring in more money, even though members may not visit every day.

The only flaw in this plan was, many people ported to MoviePass just to benefit from the over-usage. Taking Lowe by his own words, that meant they bore more risks than reaped benefits. People were investing the money, so they made the effort to reach their own quota to hit their targets of attendance.

However, it seemed like the company was looking to reap benefits from more than just under-usage. Considering their biggest investor (Helios and Matheson) class themselves to be a big data company, it’s not surprising the movie subscription service would harvest user data and sell to those interested.

Lowe flew too close to the sun with this information when in March of 2018, had a slip of tongue.

Admitting at an industry event that the app monitors how users get to the movies and checks in on where they go afterward, users were startled at what could be possible monitoring without their express permissions.

That forced a quick update to the app just two days after that misstatement. This update promised to disable unused app location capability and was soon followed by an apology letter from Lowe himself.

The Beginning of The End (February 10, 2018 — May 8, 2018)

For a company that was yet to make a profit, the logical thing to have done would be to raise the prices and find a way to push the excess overhead users. MoviePass went the other way around, pushing down their subscription plan to $6.95 per month instead.

More than a month later, on April 13, 2018, the company made the bold move of taking away what the users loved and giving them a grossly unequal deal. In print, users were limited to watching only four movies per month (instead of one per day) and had to pay $29.95 over the course of three months.

That works into a few cents less than $10 a month — a price higher than the initial offering. To spice up the deal, MoviePass offered a month-long trial to iHeartRadio services.

They would soon reverse to their one ticket per day model, declaring that they had to run the earlier plan in a bid to promote iHeartRadio.

If anything, the promotion did nothing for their revenues which were already in the red as of the May 8, 2018, SEC filing. From the declared reports, the company had some $15.5 million worth of liquid cash and was spending way more than that ($21.7 million) daily.

The Very End? (June 13, 2018 — August 6, 2018)

Lowe initially claimed that MoviePass will begin to turn a profit when it reached a minimum of five million subscribers. Just over a month after the SEC listing report, MoviePass reached three million in subscriber numbers — still a far cry from the profitable model they were expecting.

Now having to pay for more movie tickets, the company made a half-hearted attempt to add some merchandise (mugs, shirts, and the likes) to its official website. Not even such a bold move could save them from an eventual crash of the app on July 26.

They quickly took out a loan of $5 million to get back on track the next day.

What followed was a series of outages and movie blockages on the platform, so much that the latest installment of the Mission Impossible and Avengers franchise was affected. They blocked people from using their membership on big blockbusters which were their main appeal. The final straw was raising the process from $9.95 to $14.95/ month on the 31st of July.

If there is one thing customers don’t like, it is companies raising prices on them. There was surely no way the 5 million subscriber dream was happening this way. To salvage the already messy situation. MoviePass reversed to the initial price offering while keeping users limited to three tickets per month — confused yet?

What Next for MoviePass? (Present Day)

One thing that is sure at this point is that MoviePass is far from a profitable company. If anything, they are in more debt than they would have envisioned at the start of their charade.

With the current ticket-limiting model, it does look like some thinking is being done in the corridors of power. On paper, they will be able to slow down the rate at which movie watchers burned their pockets by around 60%.

To become a profitable venture though, the company might have to look into its leadership model and change things up. Having been affected by a myriad of bad decisions, this is the time to bring in analysts and consultants.

MoviePass is at that stage in its life where it has to go back to the drawing board, rack up innovative ideas, and work towards implementing them. After all, when you have hit such rock bottom as this, what else is there to do?

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