MoviePass: A Tale of Risk, Growth, and Failure
Have you ever dreamed of watching as many movies as you want for a low monthly fee? That dream became a reality when MoviePass entered the scene in 2011.
Founded by Stacy Spikes and Hamet Watt, MoviePass allowed its subscribers to watch an unlimited number of movies at participating theaters for a flat fee. However, the company’s innovative business model also led to its downfall.
In this article, we will explore the history and business model of MoviePass and the reasons behind its failure.
Founding of MoviePass
Stacy Spikes and Hamet Watt founded MoviePass in San Francisco as a way to democratize movie-going. MoviePass aimed to provide affordable entertainment to people who love watching movies, regardless of their budget.
The original model was simple: subscribers could pay a monthly fee and watch as many movies as they wanted at any of the participating theaters. However, the early days of the company were challenging.
Spikes and Watt faced a lot of opposition from movie theaters, and it was difficult to convince them to partner with MoviePass.
Original Business Model
Despite facing opposition from theaters, MoviePass managed to expand its reach. MoviePass initially offered all-you-can-eat movie subscriptions at a monthly fee ranging between $25 to $50 per month.
The company aimed to change the movie-going experience by encouraging its subscribers to go to the movies more often. MoviePass subscribers could select the movies they want to watch, reserve their seats through the app, and pay via their monthly subscription.
By the end of 2012, MoviePass had over 20,000 active users and was considered a promising start-up.
Changes in Subscription Plans
MoviePasss popularity continued to grow, and in 2017 the company changed its subscription plans. It moved from its initial subscription plans to a $9.95 monthly fee for watching unlimited 2D movies.
Soon, AMCs noticed a decline in their customers, and thus it discontinued the partnership. Despite this, MoviePass continued to grow and expand over the next year.
It added IMAX and 3D movies to its subscription packages, with additional surcharges, but this only led to a downward spiral.
How MoviePass Worked
The MoviePass concept revolutionized the movie-going experience, and it was straightforward to use. Subscribers could buy a MoviePass card, which was a MasterCard debit card, and then use the Android or iOS app to reserve tickets for a movie of their choice.
The process involved users won choosing a showtime and movie at one of the participating theaters, and MoviePass would wire the full purchase price to the user’s card. The subscriber would have to pay the subscription fees, and they could use the card until the subscription was renewed.
However, the heavyweight of e-ticket service and also the payment gateway led to unwanted strain on the company’s budget. MoviePass’s Struggle and Bankruptcy
MoviePass’s pricing strategy was unsustainable, and they gobbled up thousands of unsatisfied customers.
The company could not keep up with its expenses and quickly ran into financial problems. Delayed card sending, poor customer support, and competitors like AMC Stubs A-List and Cinemark Movie Club only made matters worse.
Over a period of time, user complaints piled up, customer support got worse and despite the changes in business models and price points, the problems persisted. The infamous Helios & Matheson Acquisition of MoviePass hit rock bottom, with the company unable to pay vendors past due amounts leading to bankruptcy and the permanent suspension of the service.
Brief History of MoviePass
MoviePass made waves when it first started operating in San Francisco, where it attracted many customers. However, the company faced a lot of rejections and negative feedback from major networks that did not believe the company had a sustainable business model.
After the AMC partnership, the company found acceptance among cinemas, and its subscription grew. However, in pursuit of growth, they lowered their prices and subsequently found themselves to be running an unsustainable business model.
These poor financial decisions, combined with poor customer support, bankrupted the company.
Problems with Service and Competition
The business was plagued with customer complaints due to horrendous customer service, a decrease in the number of participating theaters, delayed card sending, and a lack of new movie releases. The company also faced growing competition from AMC Stubs A-List and Cinemark Movie Club, which were matching MoviePass’s prices and offering better benefits without the strain on their budgets.
Suspension and Permanent Shutdown
Only three years after it had grabbed attention around the world, MoviePass announced the permanently closed business in 2019. The company had amassed the participation of around 225,000 moviegoers but in time had bitten off more than they could chew.
Helios & Matheson filed for bankruptcy less than a year after acquiring the service.
Conclusion
The case of MoviePass is a classic combination of entrepreneurial risk, corporate greed, and inept management. While the initial idea was innovative and served a necessary industry, the lack of feasibility evidence or venture capitalist funding’s blinded ambitions, resulting in a company primed for failure.
MoviePass was a perfect example of the phrase ‘a little knowledge is dangerous’. The company’s failed business model has left a legacy in itself describing the cost benefit analysis necessary for every business to thrive.
MoviePass’s Ownership and Mission Statement
After its initial success, MoviePass was acquired by Helios & Matheson, a data analysis company, in 2017. This acquisition was supposed to provide MoviePass with the necessary bandwidth to expand its services while Helios & Matheson invested in infrastructure upgrades.
This buyout also led to the formation of MoviePass Ventures, a subsidiary of Helios & Matheson that focused on investing and partnering with independent filmmakers and co-acquiring equity stakes in their related films. MoviePass Ventures aimed at aligning the interest of the company with independent filmmakers and distributors to deliver enhanced performance and embrace the traditional theatrical window.
MoviePass’s Mission Statement
MoviePass aimed to provide affordable entertainment to movie enthusiasts who love watching movies, regardless of their budget. The company’s mission statement was to change the movie-going experience by encouraging its subscribers to go to the movies more often and provide significant value to theater owners and distributors.
The investment in infrastructure upgrades in 2017 was a step in the right direction towards realizing this mission statement. The company’s primary focus was to provide value to both the customers and theater owners and distributors by increasing audience attendance while delivering a sustainable business model.
Revenue Streams and Financial Struggles of MoviePass
To understand MoviePass’s financial struggles, one must understand how the company generated revenue. The primary revenue source for MoviePass was monthly subscription fees.
The company offered unlimited access to theaters within its network in exchange for a monthly fee, which ranged between $9.95 to $50, depending on the plan. Besides subscription fees, MoviePass also earned revenue from advertising.
The company leveraged user data to target ads to its customers, which drove revenue. Additionally, MoviePass also generated revenue by selling data to distributors for commercial analysis.
Focus on Data
MoviePass’s primary focus was on its data analysis. With millions of subscribers, MoviePass could gauge the popularity of a movie, predict viewer trends and buying behavior, and build an incredibly rich dataset.
MoviePass aimed at commercializing its dataset by partnering with studios and events to provide them with insights that would inform their decisions. The focus on data strategy had a compelling impact on the company’s revenue initially.
MoviePass’s Inability to Make Money
Despite the attractiveness of their data, MoviePass was unable to monetize it. Moreover, the company’s rapid expansion gave moviegoers access to unlimited movies, which led to a surge in users.
However, in the end, this made the costs too high, and the company found it challenging to keep up with the costs. With the subscription model that put a high demand on the cash-flow, MoviePass fell into the red and kept operating at a loss.
The company was unable to secure a breakeven point with its operating costs or find a sustainable revenue stream. Its acquisition by Helios & Matheson provided short term relief, but it was only a matter of time before the inevitable loss of cash came knocking once more.
MoviePass’s main competitor, AMC Stubs A-List, also jumped into the subscription model, but they managed to price their services correctly and sustainably. MoviePass’s failure to do so only escalated the competition and made it worse for the company.
Conclusion
The acquisition by Helios & Matheson ushered in new focus for MoviePass. With the launch of MoviePass Ventures, MoviePass secured a promising pathway for growth.
However, the focus on investment came with overlooking the vital concern for a sustainable revenue model. The company’s lack of revenue streams, competition, and mismanagement led to a spiraling financial collapse.
Although MoviePass’s mission statement and unique offerings were appealing to moviegoers initially, the inability to generate profits halted the company’s growth and eventually led to bankruptcy.
MoviePass and Its Customer Base
MoviePass’s primary customer segments consisted of moviegoers and film enthusiasts. By offering its subscription-based service, MoviePass aimed to increase attendance rates at theaters and provide data insights for studios, distributors, and movie theaters.
MoviePass’s value proposition was simple: subscribers could watch unlimited movies for a low monthly fee. Additionally, MoviePass provided a simple source of data on customer film preferences, which could be leveraged by studios and movie theaters in developing marketing strategies.
Channels
MoviePass’s primary channels were its mobile app, website, and the app store. The company also provided physical cards to its subscribers, and a strong presence on social media to promote the service.
MoviePass also leveraged advertising to attract new subscribers and establish partnerships.
Customer Relationships
MoviePass engaged its customer through various channels, including invite-only launches, a robust FAQ section, customer support, and a rating system for subscribers to rate movies. Although the initial customer experience was pleasant, as demand surged with the low pricing model, over time, customer service deteriorated.
Revenue Streams
MoviePass generated revenue through monthly subscriptions and the sale of data to studios and distributors. However, the company’s pricing model was unsustainable, leading to losses instead of profits.
Key Resources
MoviePass’s key resources were its platform, contracts with studios, customer information, and data. The company had accumulated a vast amount of data, which was expected to transform the movie industry.
Key Activities
MoviePass’s key activities included operations, customer care, platform development, agreements with distributors, and data analysis.
Key Partners
MoviePass relied on key partnerships to operate; these included their parent company, MasterCard, movie theater chains, and affiliates.
Cost Structure
MoviePass’s main costs included ticket discounts, customer service, product development, card fees, legal expenses, administrative costs, IT infrastructure, and staff. MoviePass’s Competitors and SWOT Analysis
MoviePass’s main competitors included AMC Stubs, Regal Unlimited, Cinemark Movie Club, Alamo Season Pass, and Arclight Membership.
These competitors offered similar subscription-based services to MoviePass. However, these companies priced their services in such a way as to be sustainable.
SWOT Analysis of MoviePass
MoviePass was poised to change the movie industry with data-driven insights into customer film preferences and a subscription-based model that would’ve increased attendance rates at theaters. However, the company’s weakness outweighed its strength.
The service was affordable and provided abundant access to movies. Yet, it was limited in the facilities it could provide, leading to its demise.
The risks associated with data exposure and the rise of streaming services were causes of fear towards the continuation of the company. Lastly, while MoviePass depended on key partnerships to operate, competition from industry giants made it hard to gain a competitive edge.
Conclusion
MoviePass applied an innovative business model to the movie industry; however, it eventually failed to establish a sustainable profit model. The subscription-based model, which aimed to increase attendance rates at movie theaters, significantly reduced the value of movie-going and put considerable pressure on the financial position of the company.
Resulting in bankruptcy. However, MoviePass generated valuable data insights that could have revolutionized the movie industry with its data-driven model.
In summary, MoviePass was a groundbreaking and ambitious venture that aimed to transform the movie industry. Its subscription-based model allowed movie enthusiasts to watch unlimited movies for a low monthly fee, while providing valuable data insights to studios and distributors.
However, the company’s unsustainable pricing model, financial struggles, and inability to monetize its data ultimately led to its failure and bankruptcy. MoviePass serves as a cautionary tale, highlighting the importance of a viable revenue model and strategic decision-making in sustaining a business.
The rise and fall of MoviePass demonstrate how disruptive ideas must be accompanied by sound financial execution to succeed in a competitive industry.