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> The king of money-losers, of course, is Amazon, which went years without turning a profit. Instead, it plowed billions of dollars back into its business The

• worldsayshi 8y ago
  But MoviePass "could also choose to raise prices ever so slightly". It seems very likely it would not work. What's the categorical difference between the two business models? Guess it's the fact that when MoviePass tries to change prices it will force every user to opt in all over again. Opting in is part of the everyday user interaction for Amazon.
  • Mindwipe 8y ago
    MoviePass doesn't have to raise prices ever so slightly to be a viable business. It has to raise prices by significant integer multiples. (And heck, Amazon don't even need to raise prices, they could be very profitable just by investing in growth less. But their investors are clearly happy with the current state of affairs).
    • walshemj 8y ago
      Not really could just have tiered prices 6.99 for weekdays before 5:30, 9.99 after - and say 12.99 at the weekends/holidays. For example my local VUE in the UK I can get a ticket on Mondays for less than $6 full price is $16 I suspect that its the paying up front for a year when a substantial majority of its customers wont goto the cinema
      • TylerE 8y ago
        I think you are misreading the business model. The MoviePass price is per month. There is NO cost per viewing. You could in theory see up to 31 movies for your single $10 payment.
        • walshemj 8y ago
          But normal people wont they will see 1 or 2
          • TylerE 8y ago
            I live in an area with a cheap cost of living and even if I only went to one movie a month a MP is still about a buck cheaper.
        • jessaustin 8y ago
          I can't think of a month in which I wanted to see three movies in current release...
          • basementcat 8y ago
            If you live in a city with many independent theaters showing limited releases and foreign films, 31 movies per month isn't enough to scratch the surface. PS. Staff at indie theaters tell me that 70-80% of tickets are purchased with Moviepass cards.
        • pwinnski 8y ago
          jessaustin, I don't often see more than a movie or two per month, but back when I had a MoviePass (before they cut the price so low!), I found myself seeing movies I wouldn't otherwise have bothered to see. When the marginal cost is zero, it becomes a lot easier to drop by a theater and see what's playing, and even walk out if the movie's no good, feeling no sense of loss. I was paying $40/month for MoviePass, and most months they still lost money and me, and I saw a lot of movies in a theater that I would normally have waited to see at home.
        • 8y ago
    • TylerE 8y ago
      Raising prices may even make things worse, as it will just narrow their customer base to those that are most expensive to service.
      • r00fus 8y ago
        How are higher-paying customers more expensive to service?
        • michaelchisari 8y ago
          More likely to use their service regularly. At $10 you have a certain percentage which will go once a month. At $50 you only attract the people who go twice a week.
  • lrem 8y ago
    Amazon was making profit on every incremental sale, but invested more money than the sum of that profit.
    • dmode 8y ago
      This is the key. Amazon was profitable in the unit economics, Moviepass is not.
• tribune 8y ago
  Plus Amazon is Amazon. They've essentially been saying to investors for years "sure, we could make more money for YOU, or give YOU dividends, but WE can do better with your money than YOU could." It's worked, of course, enabling them to grow into the gargantuan enterprise they are today. A smaller company without that proven track record wouldn't get such a license from investors for long.
  • ryanwaggoner 8y ago
    Wasn't Amazon doing that in their early days, when they didn't have a track record?
    • dalore 8y ago
      And didn't the share price reflect that at the time, which has now grown considerably now that the market has more confidence in them.
    • TylerE 8y ago
      Sort of? I mean unlike 99.9% of the first wave of DotCom startups they managed to avoid actually going bankrupt.
      • scarface74 8y ago
        They got lucky and secured a line of credit right before the bust.
        • johnvanommen 8y ago
          That was a dark time. I was living and working near Seattle, and there were basically seven big employers for techies: * Microsoft * Boeing * T-Mobile * WaMu * Amazon * Concur * Real Networks And three of the seven were in severe financial distress. It was like, "hmmm is it time to leave Seattle?"
          • voxadam 8y ago
• Ensorceled 8y ago
  Exactly, "years without turning a profit" is very different than "years burning through rounds of investor cash without hope of ever turning a profit".
  • xkjkls 8y ago
    Exactly! Cash flow =/= profit.
• Bucephalus355 8y ago
  Raising prices would solve lots of problems for Amazon. They’d lose some market share, reducing the monopoly accusations. Most likely companies are going to face increasing pressure to do something about inequality levels, so maybe a $5 / hour (hopefully more) pay raise for their 28k a year warehouse workers could also be in the store.
  • user5994461 8y ago
    Not sure how many workers would be impacted but it could cost more than a billion dollar per year. Salary is probably is primary expense of Amazon, like any large company.
  • scarface74 8y ago
    Are Amazon's prices really that much lower than Walmart's? I shop at Amazon for the convenience and selection, I rarely do a price comparison. In other words is price really thier competitive advantage? On the other hand, I don't think AWS is the low cost leader for equivalent services. I use AWS because of the breadth of services.
  • CamTin 8y ago
    I'm not a lawyer, but I think if you are accused of being a monopoly, suddenly increasing your prices is a bad legal strategy because it proves you have pricing power, which is the classic sign of a Sherman-style monopoly that regulators like to break up.
• mc32 8y ago
  Yeah, I wouldn’t be surprised if they ended up the way CyberRebate ended up way back when they’d reimburse your purchase 100% on marked items (supposedly they’d take the money reinvest and then make enough to reimburse you completely..., ha!)
• gabriel34 8y ago
  It is not just that Amazon could or could not turn profits at will. Turning a profit (paying dividends) or reinvesting is a decision every investor relations team must make, simplifying the subject it is based on whether you predict your company will get the investor more money (by stock price growth/future dividends) than if he invested in other equaly risky set of assets. I don't believe this is the case for Moviepass.
  • kgwgk 8y ago
    It’s funny to think of IR departments deciding on one of the most strategic capital allocation issues at any company (or maybe you consider that the CFO is part of the investor relations team, that wouldn’t be completely wrong but it’s not the usual definition).
    • gabriel34 8y ago
      Yes, IR doesn't make the actual decision. That was said to me by a IR I knew in a previous company. Granted the decision making was obviously above his head and included other strategic decisions and the intents of the key stockholders, to say IR makes this decision is an exageration, but he produced the data to support and justify that decision. How much is that number flexible I guess depends on market regulation.
• djrogers 8y ago
  No, I think the key difference with Amazon is that they aren't losing money on each individual transaction - ie selling everything at a loss. Amazon's non-profits were due to aggressive reinvestment, not pricing.
  • pwinnski 8y ago
    Exactly! It's the difference between losing money on a macro-level and losing it on a micro-level. You can't lose money on every transaction and make it up in volume, as the old joke says. But you can make money on every transaction and choose to invest it in expansion, so that you lose money overall.
    • jwhitlark 8y ago
      It appears that moviepass is mostly an arbitrage play,where amazon is not....
      • doingmything 8y ago
        I wouldn’t even call it arbitrage. There is usually some gain in the difference in price with an arbitrage
        • ShabbosGoy 8y ago
          It’s not arbitrage, it’s “let’s burn all our runway til the next round”.
    • mjevans 8y ago
      There's a key flaw in the wording that might lead to confusion if trying to explain this to someone new to investing. Amazon stopped making /losses/ rather quickly. They /invested/ in the health of their business and future opportunities instead of delivering profits to outside investors. Arguably, a better structure for incorporation does exactly that; it provides benefits to it's employees and the community it serves.
    • 8y ago
• wvenable 8y ago
  I also think there is a key difference between re-investing in the business and simply bribing customers. I'm sure Amazon sold plenty of products at a loss but they also ruthlessly cut costs and found places where they could truly make money. I feel like a lot of startups are simply using investor money to give unreasonably inexpensive products to customers. For software companies, there is often a point where growth simply makes you profitable because your costs are relatively fixed. For my own B2B startup, we had plenty of graphs that showed at exactly the point where we no longer subsidizing our customers businesses and instead making a profit. Sadly we ran into a few road blocks and ran out of cash before hitting that golden mark. But, when your costs rise linearly to the number of customers you have, then you can never achieve profitably through growth alone.
  • ergothus 8y ago
    My Amazonian friends commonly mock or complain about the Amazon "frugality" practices that mean things like no mechanical pencils, just wooden ones. I believe "frupidity" is the in house nickname for this.
• samfisher83 8y ago
  Building out warehouses does not hurt earnings. The whole point of accounting is to try to match revenue with cost. If you build a warehouse you don't expense it one time. It gets expensed over time. If they develop software than that is treated as expense or buy movies that gets expensed. Their core retail business is not that profitable. It goes from 0-3%. Its pretty much the same as walmart or any other retailer. AWS is more profitable than their entire retail business.
  • Zombieball 8y ago
    If true, wouldn’t that just be a sign that AWS is not reinvesting fast enough?
    • lmm 8y ago
      Reinvestment is only good when there are profitable investments to be made. AWS already dominates its market; maybe investing more wouldn't help it make any more money, in which case it would be better to start paying dividends.
  • mabbo 8y ago
    In one quarterly earrings reports, Amazon as a whole earned $500m- of that, AWS earned $600m of it.
• stcredzero 8y ago
  > The king of money-losers, of course, is Amazon, which went years without turning a profit. Instead, it plowed billions of dollars back into its business Because Amazon isn't about making short term profits. Amazon is about becoming the middleman for as much of the economy as possible by facilitating the transformation of the economy into its network/computation intermediated version. Amazon isn't so much a money loser as it is an economy absorber. It has been that since before day zero. That idea predated the notion that Amazon would sell books.
• basch 8y ago
  there is a very solid argument that what Amazon is doing IS an antitrust issue. http://www.yalelawjournal.org/note/amazons-antitrust-paradox http://www.yalelawjournal.org/note/amazons-antitrust-paradox
  • quickben 8y ago
    Except it is not, because US is near full employment, so bribes go long way to avert the looks. Until a solid recession hits, and double digit unemployment is in, corps like Amazon will never be on the quartering table by the masses.
• pasbesoin 8y ago
  Amazon already is very profitable. For a certain group of people. And on the backs of other people. It's a matter of how you define profit. Or rather, whose profit you're looking at. (And, ergo, what profit is actually driving the business forward.)
• slg 8y ago
  It is even more basic than that. Amazon, Uber, Netflix, and almost any other successful and established business creates value. MoviePass is not creating value and is simply trying to purchase its way into being a middleman between theaters and theater goers. If their pricing structure ends up showing the slightest chance of generating more revenue for the theater industry as a whole, there is nothing stopping the theaters themselves from adopting the pricing structure themselves and cutting MoviePass out.
  • Operyl 8y ago
    And some are even beginning to experiment as it is, such as Cinemark’s Movie Club.
  • reboog711 8y ago
    As a Moviepass subscriber, they create a lot of value for me. I can go to any movie I want at any local theater. That is a lot better than subscribing to five different plans, one for each theater.
    • dingo_bat 8y ago
      Well you can just subscribe to the theater closest to you. Why would you want to go to the ones across town?
      • kelnos 8y ago
        This may not be common outside urban areas, but I have theaters from 4 different chains all within a 40 minute walk, and I've visited them all within the last few months. If I were asked to pick just one to subscribe to, I'm not sure how I'd choose.
        • pas 8y ago
          Why don't you buy the tickets online whe you want to go to the cinema? what do you get by subscribing? how much would it cost?
• xkjkls 8y ago
  Actually the biggest key is a distinction between profitability and cash flow. Amazon has been cash flow positive since 2001. Sure, it spent huge number of years burning cash building it's revenue from $2 billion in 2001 to $200 billion today, but because they have a structure where they don't have to pay their suppliers until close to 3-4 months after the collect from their customers, they can sustain that without needing to raise outside cash. That's a huge distinction, if you start having to raise more debt or equity in order to fund your growth it's going to negatively impact the long term free cash flow per share of your business and will make it harder for your to generate outsized returns.
  • maoistinquisitr 8y ago
    Amazon makes weird non-GAAP claims. In terms of GAAP, Amazon had negative free cash flow of $4.2 billion in Q1.
    • xkjkls 8y ago
      I'm talking on a yearly basis, not a quarterly basis. Due to the seasonal nature of their business, I'm sure the quarterly numbers are more choppy. I think the general point, that they've been able to self-finance this enormous growth (save for some certain real estate purchases or acquisitions), stands.
      • kgwgk 8y ago
        “Self-finance” may not be the best term to use, given that their asset growth of $90bn (from $40bn in 2013 to $131bn in 2017) is mostly coming from the increase in liabilities (equity has increased less than $20bn, from $10bn to $28bn). Long-term debt was $3bn in 2013, increasing to $8bn in 2014 and $25bn in 2017. Capital leases have also gradually increased from $2bn in 2013 to $8bn in 2016 and $13bn in 2017.
    • mediaman 8y ago
      If you are referring to the cash flow statement, which I think you are, there are no "weird non-GAAP claims" involved. Their latest 10Q shows GAAP pretax income of $1.9 billion. If you're referring to total change in cash which was -$4.2 billion, that's because they reduced their accounts payable by $10.2 billion from paying all the suppliers after the holiday season. Looking at the consolidated statement of cash flows of a seasonal business very, very easily leads to misunderstanding the business. Operating cash flow was $18 billion for the year ending 3/31.
• CoolAndComposed 8y ago
  > The key difference with Amazon is that Amazon could choose to be profitable at any time Wait what? No. They were a loss leader because they kept doubling down on a bad business models until they made headway on the reseller market to push themselves as an online retailer, which brought them out of the red. Only after the massive success of AWS, did they solidify as the most successful retailer because THAT got reinvested. Notice, Google tries to follow this EXACT model, as it has for decades. It has little profit to show for chasing this fable-strategy because it doesn't work. Grabbing Doubleclick was a minor misstep (there were far superior companies to choose from), but at least they got youtube and were able to keep the boat floating (with a little Ad Tech dust). Riding their search engine product as far as it will go and then building an ad network on top of their search+youtube is where Google has settled. Amazon has been looking into advertising for the last couple years and will probably be less successful than Google without a big new thing, which is unlikely to come from this mythic "reinvestment". Why does this fairytale story about Bezos keep getting pushed? Successfully keeping a company running is not the same as him being nigh prescient about how to manage the resources.
• johnvanommen 8y ago
  Nearly all of the most profitable Internet companies are platforms: * eBay is a platform for sellers to connect with buyers * Many think that Amazon is a online retailer, but it's not; it's a platform. A huge percentage of the items sold on Amazon are owned by small businesses who are leveraging Amazon's platform (website, warehouses, logistics, delivery.) If eBay had been more ambitious, eBay could've replicated what Amazon has done. * Facebook is a platform for people to connect with other people * even Google is a platform; it's basically taken the entire Internet and added ads to it. The Internet itself is Google's content, and that content was created by other people And that's why MoviePass is doomed. If MoviePass had become a platform where movie theaters could unload excess inventory, then it could succeed, but the current model is simply selling movie tickets at a loss.
• sudhirj 8y ago
  > Amazon, which went years without turning a profit. This is semantics. If I make $100 on a $60 spend, and then choose, like Amazon, to reinvest the $40 in the knowledge that it will improve efficiency next year, my "profit" is technically $0, but my company is not worth a lot more than $40. If like MoviePass, I spend $100 (of borrowed money) on revenues of $60, with no clear explanation of how I've added $40 of value to the company, that's a bit of a red flag. Saying "I'll figure it out eventually" is a bit touch and go.
  • neilwilson 8y ago
    In accounting it is known as contribution. Any sale that covers its variable costs is worth making. Your sink costs are sunk and your investment costs are optional.
• thatthatis 8y ago
  In the state of Washington you pay Business tax on revenue.
• myaccountforhn 8y ago
  It seems to me that Amazon the business doesn't really need to turn a profit as long as it's stock price stays high because then its investors are still making money. Now the thing that Amazon has for it that Moviepass does not is that Amazon gets to collect user data and use that to sell more for itself. Moviepass seems to get to collect user data, however it doesn't own the theaters so it must find partnerships with the bigger theater chains. They're hedging that they can create such a large user base and show that they can bring a lot more traffic to theaters and with that increased traffic (and lower ticket price for the customer) will sell more concessions. For Moviepass to work ticket prices must go down (at least for them) while theaters still make more money because of larger concession sales.