After more than a year of struggles, the beleaguered movie ticket subscription service MoviePass is shutting down.
An announcement sent to subscribers and posted on the company’s website last week explained:
“Over the past several months, MoviePass worked hard to relaunch its groundbreaking subscription service and recapitalize the company. While we were able to relaunch the service for some of our subscribers with an improved technology platform, our efforts to recapitalize the company have not been successful to date. As a result, it pains us to inform you that effective at 8 a.m. E.T. on September 14, 2019, we must interrupt service for all current MoviePass subscribers. MoviePass will be providing subscribers with appropriate refunds for their period of service already paid for. Subscribers will not need to request a refund or contact MoviePass customer service to receive a refund. Subscribers will not be charged during the service interruption. At this point, we are unable to predict if or when the MoviePass service will continue.”
Put simply, once high-flying MoviePass is no more.
The rise and fall of the company will no doubt be talked about for years, but it’s not too early to start exploring the lessons it offers. Here are seven every company can learn from.
Disruption can be overrated
Narratives around the effects of disruption on established businesses often overestimate the power of disruptive models. Obviously, there are industries in which major players have been hurt or even eclipsed by upstarts, but there are also plenty of case studies showing that disruptors aren’t unstoppable either.
MoviePass was a disruptive company but not all disruption is created equal. Early observers who predicted success for MoviePass frequently based those predictions on subscription-ification economy hype but they overlooked fundamental challenges and problems with MoviePass’ specific model, demonstrating the power of secular trends to mask the realities of particular industries and businesses.
Economics matter
When it comes to the problems associated with MoviePass’ model, one of the biggest that wasn’t given enough attention early on was actually the most glaring: economics. Put simply, the economics of MoviePass’ model didn’t work. Even with modifications to its original offer — that subscribers could see a movie a day for just $9.99/month — there was virtually no realistic prospect for MoviePass to build a profitable, sustainable business.
This fact isn’t a matter of hindsight either. MoviePass was built on the assumption that if it used its access to capital to rapidly amass a huge subscriber base, unit economics be damned, it would gain enough leverage to demand a profitable arrangement with the movie theater companies it had disrupted. In addition to discussions of sharing in revenue from ticket sales, MoviePass also suggested it might be able to wrestle a portion of revenue from concession sales.
Movie theaters, however, didn’t give in and instead warned consumers that MoviePass’ model was unsustainable and would ultimately deliver disappointment. When MoviePass tried to flex its muscle with movie theater chains, it found that it actually wasn’t in a very strong position.
That MoviePass’ economics were initially given a pass by many members of the media isn’t surprising. In recent years, the use-capital-to-capture-the-market-and-turn-a-profit-later model has been popularized by mega-disruptors like Uber. There are, however, significant differences between disruptors like Uber and disruptors like MoviePass. MoviePass was using its capital to pay for a service sold and delivered by third parties (theaters). Uber, on the other hand, built its own network of drivers to serve customers and thus it theoretically has a fighting chance at adjusting its cost structure to become profitable.
Put simply, Uber built something of value that it controls totally, even if it has lost money doing so. MoviePass simply lost money buying movie tickets at a cost higher than the price it was effectively reselling them for.
Taking stuff away from customers can be really difficult
MoviePass lured consumers with a proposition that was way too good to last and in the end, the changes it had to make to try to survive proved unpalatable for its subscribers. While it’s possible that if MoviePass’ deal was less amazing — eg. it charged $19.99 for three or four movie tickets a month — it never would have amassed a subscriber base that totaled some 3m at its peak, the amount it had to take away from subscribers in an effort to right its ship sparked multiple backlashes and led to massive attrition.
The lesson: even though it’s possible to make changes to offerings, massive reductions in what customers receive are likely to be very difficult to pull off without massive attrition, especially if those reductions occur rapidly.
Data is valuable, but extracting value isn’t always easy
MoviePass expected that the data it collected from its subscribers, including data about their moviegoing preferences and even their movements before and after going to the movies, would prove immensely valuable. Among other things, MoviePass touted that its data would give it the ability to build an ad business to help drive moviegoers to see films, go to restaurants, etc.
While MoviePass’ data certainly had value, its relative failure to monetize it in a meaningful way, as evidenced by its financial results, demonstrates that turning data into gold is often easier said than done.
“Pivot” is not a smart Plan B
The best startups are generally fast-moving and use rapid feedback from their businesses to improve. Sometimes, this involves pivoting to new products and business models when the existing ones aren’t working.
MoviePass attempted to do this with MoviePass films, a television and film production and financing company it acquired. The logic: by investing in movies that it could then help drive its subscriber-base to see, it could profit.
But there was never any indication that MoviePass had established a competitive advantage that would make it more successful in deciding which movies to back, and with its core service failing, it lost the ability to promote the movies it financed to millions of subscribers for free.
The lesson: Plan Bs should be thoughtful pivots, not costly darts that are dependent on Plan A.
Disruptors can help identify new business models and sources of demand for established businesses
MoviePass proved to major movie theater operators that there is significant demand for subscriptionbased offerings in their market. Even though these firms can’t offer a too-good-to-be-true deal like $9.99/month for one movie ticket per day, MoviePass’ success at acquiring customers, even in an economically-unsustainable fashion, provided movie theater majors with significant intelligence about the market which undoubtedly helped them craft appealing subscription offerings of their own.
The best defense is sometimes offense
Even though they actually profited from MoviePass, the largest theater operators vocally opposed MoviePass. One of the company’s biggest critics was AMC Theaters, which even initially sought to see if there was a way it could block its moviegoers from using MoviePass at its locations.
In the end, however, MoviePass’ demise was accelerated when majors like AMC Theaters went on the offensive and launched their own subscription services, taking advantage of the far more favorable economics of their businesses to create offerings that were appealing enough to consumers but also economically sustainable over the long haul.
Indeed, AMC Theaters now counts over 785,000 subscribers to its $19.95/month ticket subscription service, AMC Stubs A-List, and expects to reach 1m subscribers earlier than expected. Most importantly, it touts that Stubs A-List is profitable.
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