19 ms·
MoviePass couldn’t afford to pay for movie tickets on Thursday
- mdrzn 8y agoA 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.
- calyth2018 8y agoIt's eye-opening that there are companies that forgets about cash-flow and profitability...
- gorbachev 8y agoUber, Spotify...plenty of other examples, I'm sure.
- okmokmz 8y agoSoundcloud as well. They have something like 175 million users but almost shutdown last year
- ianamartin 8y agoIt's not just that they forget. They are actively encouraged to not think about these things. It's not the startup way, so don't do that. The rules for SV-funded companies are this: 1. Get big no matter what. 2. Play as fast and loose with the rules as you need to in order to accomplish 1. 3. Never think about profitability. Profitability slows growth. All 3 can be summarized as: Never think about anything that slows growth.
- tjbarkley 8y agoI believe AMC is doing a subscription service where you can see up to 3 movies a week for $20/month.
- neverfones 8y agoThey also have a service where you can watch any movie on Tuesdays for $5, for $12 a year. I prefer that service, and have renewed for 3 years.
- pc86 8y agoDoes this service have a name?
- mttjj 8y agoAMC Stubs https://www.amctheatres.com/amcstubs https://www.amctheatres.com/amcstubs I've been a subscriber for a few years. They waive online ticketing fees and you get $5 vouchers for every $100 spent (among other perks). It's been worth it for me.
- berbec 8y agoThe base model of stubs is free. You still get $5 Tuesdays.
- Analemma_ 8y agoI mean, in the case of MoviePass, their pricing was so obviously stupid that people sort of assumed that they MUST have a trick up their sleeve to make it work, because no one could be that dumb. And it turns out, they don't (or maybe they did but it didn't work). Not everyone is playing 9D chess.
- Cerium 8y agoCinemark's movie club sounds reasonable though. You get a ticket a month for $9. The tickets accumulate and multiple can be used at once [1]. I've been considering it since every couple months my wife and I like to see a movie. [1] https://www.cinemark.com/movieclub https://www.cinemark.com/movieclub
- slg 8y agoOn what terms would you actually lend MoviePass $5m? It would seem surprising at this point if MoviePass makes it to September.
- ChuckMcM 8y agoYou 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.
- gorbachev 8y agoWhat are the chances the CEO will disclose those terms to prospective employees of his new companies? Near zero? That's a serious landmine for employees who get part of their comp as stock options. Edit: edited to reflect what I actually wanted to say (future companies instead of current company)
- ChuckMcM 8y agoAbsolutely but once you're in the situation where you are securing high risk debt financing you're employees should already reset the future value of their stock to $0. While I don't know if it is a hard and fast rule, it has been true in my experience over the last 30 years in the bay area that when a company is doing this sort of move to survive it has never left any value in the common stock.
- gorbachev 8y agoI actually meant the employees of future companies of that CEO. Poorly drafted comment on my part.
- Waterluvian 8y agoWas 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!
- ChuckMcM 8y agoI think of Moviepass as the pets.com of 21st century VC madness. That said, they clearly had a great pitch, I'd love to see their series A pitch deck.
- Spooky23 8y agoI guess the upside is that they will fail fast!
- mi100hael 8y agoI'm not sure 7 years and a mostly-acquisition counts as "fast." Quite frankly it's impressive their charade has lasted this long.
- vonzeppelin 8y agoThey were a lot more expensive until recently though.
- stuckinarut 8y agoDid they have VC? They are a part of a publicly traded company.
- jondiggsit 8y agoIs 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.
- code4tee 8y agoLending $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!
- izzydata 8y agoPerhaps 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.
- jessaustin 8y agoYou 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.
- tjbarkley 8y ago24% premium on a loan that will last them until August 1 is insane. I don't think they're going to make it past August or September at this point.
- sspencer 8y agoI would love to see the terms for that emergency 5 million in cash. Probably eye-watering interest rates.
- jld 8y agoVia Bloomberg... "Terms of the loan are onerous. Investment firm Hudson Bay Capital Management can demand repayment of more than $3 million of the loan on Aug. 1, and the rest on Aug. 5. Proceeds from a planned stock sale must also be used to repay the debt. If Helios and Matheson Analytics fails to pay, it will be subject to a 15 percent annualized late fee until it makes good on the obligation. If the company is 48 hours late in its payment, Hudson Bay can require the company to repay the debt at 130 percent." https://www.bloomberg.com/news/articles/2018-07-27/moviepass-parent-borrows-6-million-to-end-service-interruption https://www.bloomberg.com/news/articles/2018-07-27/moviepass...
- Thespian2 8y agoOof!
- pc86 8y agoI've never had a physical reaction to reading loan terms before. That is painful, I have to wonder if they have any plan to turn it around using this money or if it's literally a Hail Mary to buy just a little more time.
- deleted 8y ago[deleted]
- paulmd 8y agoEasy peasey, just take out another loan to pay the first one /s
- arzt 8y agoTerms here: https://www.sec.gov/Archives/edgar/data/1040792/000121390018009741/f8k072618ex4-1_helios.htm https://www.sec.gov/Archives/edgar/data/1040792/000121390018...
- noja 8y agoHow many movies a month does their average customer watch? Is there a small group of users costing them the most money?
- alew1 8y agoI’ve seen 30 since signing up at the end of November. Not sure how typical that is, but my friends with MoviePass also see a bunch!
- chillydawg 8y agoGotta love a bit of wealth redistribution. Let's just hope they don't turn into a horrendous monopoly and force very anti consumer behaviour.
- chaosbutters314 8y agoWith moviepass, I got once a week plus get a large popcorn discounted because of all the points I get from free movies and buying a popcorn. Movies in my area are $13 so even going to 1, I win
- tompetry 8y agoI 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.
- legitster 8y agoAgreed. I think their general conceit is that people enjoy the movie-going experience, but they are put off by the price. There is truth to this. That said, they really botched the strategy - they could have bootstrapped the whole thing and slowly come down in price.
- AmericanChopper 8y agoI’m not sure how you could bootstrap this idea. The only way to undercut the theatres is to lose money.
- humanrebar 8y agoProvide childcare, undercutting babysitters.
- legitster 8y agoIf 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.
- acchow 8y ago> You can't charge less than the marginal cost, it doesn't make sense! It worked for Uber tho. And now they've raised prices in markets where they are established.
- slivym 8y agoUber has a network effect, so it's naturally monopolistic. Cinema passes have a network effect too (you only want the pass if the cinemas near you have it), but firstly it's much much weaker because you literally only need your local cinema, and secondly that's a network effect that helps the actual cinema, not a random middle man like moviepass.
- organsnyder 8y agoUber has a network effect, but it's not exclusive—hence the larger number of drivers driving for both Uber and Lyft. I don't see Uber's position as being very entrenched at this point.
- citrablue 8y ago
- clircle 8y agoMy 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.
- izzydata 8y agoOver the last 20 years I often have food and / or drinks in my hands when I walk in. No 16 year old ticket taker is ever going to make a fuss about it, because they certainly don't care. It is odd how deeply rooted in everyone's mind it is that there will be a huge scene if you try and sneak in food.
- avree 8y agoMost American movie theaters allow outside food/drink, so long as it doesn't give off a noticeable odor and isn't alcoholic. The myth about needing to sneak in your food is just that—a myth.
- itbeho 8y agoI wouldn't say it's a myth. It's been a while but I recall being in a theater (San Luis Obispo, CA) and witnessing a manager ask a person to throw away his smuggled snacks or leave the theater. He declined to do both and the police arrived and escorted him out.
- HeavenFox 8y agoProbably a regional thing. Every NYC-metro movie cinema I've been to check your bag before you enter, and I've seen them actively stop people from bringing in outside food and drink before.
- gambiting 8y agoThey 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.
- jonknee 8y agoAnd a critical difference, your gym doesn't lose actual money any time you visit. They may not want everyone to visit all the time, but it doesn't drain their bank account anytime you enter the door.
- tjbarkley 8y agoThey lose a little money on equipment maintenance over time, but it's nothing like going to a movie.
- stephengillie 8y agoCareless weight lifters can cause significant damage to a facility. Some users indeed can cost more than their membership. Especially if it causes the gym's landlord to raise the rates, or force an additional damage deposit, on the next lease renewal.
- kristianc 8y agoI’d imagine even a moderately engaged gym user would lose the gym money on every visit, in staffing costs alone. The marginal cost of each user rises too, as people that are unable to get on machine are more likely to churn. It is however usually outweighed by the huge numbers of people who simply do nothing with their subscription.
- christianmunoz 8y agoLinks from the SEC website about this $5m loan: Promissory Note: https://www.sec.gov/Archives/edgar/data/1040792/000121390018009741/f8k072618ex4-1_helios.htm https://www.sec.gov/Archives/edgar/data/1040792/000121390018... 8-K Filing: https://www.sec.gov/Archives/edgar/data/1040792/000121390018009741/f8k072618_heliosmatheson.htm https://www.sec.gov/Archives/edgar/data/1040792/000121390018...
- ironjunkie 8y agoFrom the Promissory note: > the principal amount of Six Million and Eight Hundred Thousand Dollars ($6,200,000) Is this a gross mistake? Or am I missing something ?
- arzt 8y agoNo, this is what's termed an "Original Issue Discount" in debt parlance and allows for a lender to earn interest without a cash coupon on the loan. Basically they give them $5mm, but the "par value" of the loan is $6.2mm. So MP actually owes $6.2mm, but only got $5mm in cash up front.
- jmgao 8y agoI think they were referring to the "eight (2)".
- Axsuul 8y agoOuch. 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.
- chillydawg 8y agoClassic bank run. I mean, I don't wish anyone ill, but it would be quite amusing to watch it all burn down.
- ironjunkie 8y agoAlso known as a "Bank Run". As soon as people think it is going bad, they go to squeeze their money out, making it even worse.
- Jasper_ 8y agoFirst, 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]. [0] https://deadline.com/2018/01/moviepass-lack-of-amc-theatres-coverage-1202269412/ https://deadline.com/2018/01/moviepass-lack-of-amc-theatres-... [1] https://variety.com/2018/film/news/amc-blasts-moviepass-false-statements-profitability-1202678478/ https://variety.com/2018/film/news/amc-blasts-moviepass-fals...
- scarface74 8y agoAnd 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.
- ProfessorLayton 8y agoIn the end consumers got a subscription service from a major theatre for a lot less than buying individual tickets, something I doubt would have happened if it weren't for Moviepass. Competition is good for consumers.
- polskibus 8y agoIsn't it dumping though? That's very bad for competition in the long run, lack of which is bad for consumers.
- dwighttk 8y ago>it’s sustainable Is it? 3 movies/week for $20/month is about $1.67/ movie. I think it is just around until movie pass kicks the bucket (at least at that price)
- scarface74 8y agoAMC doesn’t show 12 different movies in a month. At most, they probably have a turnover of 5-6 movies per month. As I said earlier, the price they pay for the studio for each movie a subscriber sees is around $4-$6. They still make a lot of money on high priced concessions.
- JazCE 8y agoIn 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.
- haldean 8y agoThere's an AMC equivalent now, 3 movies a week (in the nice Atmos theaters, too) for $20/mo: https://www.amctheatres.com/amcstubs/alist https://www.amctheatres.com/amcstubs/alist
- pc86 8y agoThey 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.
- cwyers 8y agoHow is this a business?!?!?
- listenallyall 8y agoIf 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.
- chrisseaton 8y ago> MoviePass drives traffic to movies Does it? Were those people going anyway? Would they go if they had to pay one cent more? They’re just a middleman aren’t they? How are they driving anything or adding any value? > that's a $20+ ticket that AMC can't sell to a paying customer But the subscribers are paying customers aren’t they? Do you mean they can’t sell it to another paying customer? So you’re just saying they can’t sell things twice?
- BOBOTWINSTON 8y agoIt is an anecdotal response to your first point, but since you didn't place a threshold I'll say it anyway. I have two friends who I'd describe as average theatre goers. Maybe a movie every 2 - 3 months. Since using MoviePass they both average about two movies a month during 2018. I am not sure how sustained that behavior will be, but at atleast in this early stage it is lasting. As for the second point, he is arguing they never sell the ticket once. AMC does not get the money if the subscriber does not attend the film. So by fighting with MoviePass (as they have been), they never sell the ticket once.
- brianbreslin 8y agoIn 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.
- ulfw 8y agoWhy 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.
- tiatia123 8y agoTheaters make their money on drinks and food, no? What bothered me in the US is that I can't buy a beer in the cinema. I always had to bring my own :-)
- cuckcuckspruce 8y agoCinemas around here allow people to purchase beer no problem.
- btian 8y agoI can buy beer at Bay Area Century cinemas
- acd 8y agoA 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. 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 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.
- casabarata 8y agoI wonder how long their business model will survive. The bigger they get the less sustainable their model gets. Which runs counter to what a business is all about.
- tylerchilds 8y agoCancelled my account today since it renews shortly, but definitely going to keep my card as a nostalgic trophy to look back on ten years from now.
- chriselles 8y agoI could possibly imagine MoviePass working IF: 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.
- shalmanese 8y agoOh god, get ready for the onslaught of endless thinkpieces on "What the failure of Moviepass reveals about the nature of Silicon Valley".