8 ms·

It is a great deal. The problem is that MoviePass persisted for so long with a model that made no financial sense whatsoever, and now their customers have gotte

by untog 8y ago

It is a great deal. The problem is that MoviePass persisted for so long with a model that made no financial sense whatsoever, and now their customers have gotten used to it. There's no way to sell this as anything other than a giant downgrade.

ProAm 8y ago
> MoviePass persisted for so long with a model that made no financial sense whatsoever You can say that about almost every start up discussed on HN
- cm2012 8y ago
  That's not really true. MoviePass is an outlier in its crazy business model that loses money on every customer. Most other start-ups just have high cap ex but make marginal profits per sale.
  - jrs95 8y ago
    Funny enough I worked at a ecommerce clothing “startup” that had upwards of $75 million in sales but wasn’t profitable
    - CamelCaseName 8y ago
      ...how? What was the game plan? Why would they do this?
      - mrguyorama 8y ago
        Happened all the time in the dotcom bubble: "We lose money on each sale but we'll make it up in volume!"
        vanadium 8y ago
        Having started my career at the start of the dot-com boom (and later bust), that was damn near every startup I came across. Our little agency ended up moving into eTour's space in Atlanta (VaHi) when they departed. Nice movie theatre built into the space.
      - LyndsySimon 8y ago
        Customer acquisition? In some cases it might make financial sense to lose a small amount of money per customer if the cost per acquisition is more than the amount they're losing. Network effect? I'm not sure this would apply to a clothing retailer, but there are lots of services out there that have a marginal cost per customer but can't effectively monetize until they have a sufficiently large customer base and therefore have access to enough data to be marketable. Exit strategy? A company with x million customers, even if unprofitable and unsustainable in its current state, is worth more than a company with x/n customers that is marginally profitable in many cases. As for this case in particular... I don't know. I suspect that a case could be made that the money they're losing has them in the media enough that they're basically paying for advertising by being unprofitable. I doubt I would have ever heard of MoviePass if not for them being constantly in the news.
      - cm2012 8y ago
        The CLTV is high in fashion - people return to shops they like over and over. If they're in high growth, they're spending a lot in marketing to get new customers acquainted with the brand.
      - deleted 8y ago
        [deleted]
    - 27182818284 8y ago
      Facebook wasn't profitable until what, like year 8 of their existence? Similarly SpaceX now is being awarded more than 50% of all commercial space launches, but burned money in the beginning.
      - LargeWu 8y ago
        SpaceX is trying to develop a new kind of rocket, with insane upfront R&D costs. MoviePass is trying to sell movie tickets for less than they paid for them. I don't think those are similar at all.
        gnicholas 8y ago
        This is facially true. But I don't think MoviePass would describe their service this way. They would say they are gathering unprecedented amounts of personal data about movie preferences, which can be worth millions to movie studios and TV production companies that want to know what type of content will attract viewers. Framed this way, it is more understandable that they would need to burn cash in order to get the ball rolling on data collection. Still, it's not rocket science and probably could have been done much more cheaply (just offering subscription coupons or something).
        throwaway2048 8y ago
        is said personal data harvesting going to be worth multiple dollars per movie somebody watches? somehow i doubt it.
      - compsciphd 8y ago
        SpaceX lost money on R&D, they didnt lose money on the launch itself. i.e. every actual customer increased the money in their bank account.
- peter303 8y ago
  I recall Jet.com (now owned by Walmart) tried to meet to meet or beat Amazon prices without the efficiencies of Amazon. So it was burning through VC capital losing money on most sales. I dont know if the model have changed under Walmart.
- compsciphd 8y ago
  It's not about profitabity. It's about marginal revenue per usage. If amazon initially dropped ship books to you that they ordered from Borders for $12 and sold to you for $10, they would have gone bankrupt. Amazon generally made money on each individual order. Planet Fitness isn't burning money every time you go into their gyms. MoviePass assets decrease every single time any user makes use of them. AMC A-List can possibly survive, MoviePass can't as is. MoviePass has to demonstrate a model where the marginal revenue per usage is > 0 or that the total cost of a user is easily managable to be under their monthly subscription cost. I'm not convinced either are possible. I'm a happier customer because I know what I'm getting and have seen 100+ movies on my costco annual subscription, but have zero expectations for them to survive.
ISL 8y ago
Let me try.... "We know you're bummed, but you've gotten a great deal from us in the past. We continue to offer a great deal, one that is sustainable enough that we can continue to offer you great deals in the future. Thank you for your understanding -- go see some great movies! Love, MoviePass "
- remus 8y ago
  Just playing devil's advocate... "Why did you offer me a service that was unsustainable in the first place? I just want the keep paying the same for the same product you've sold me for the last x months."
  - superflyguy 8y ago
    Why did you sign up to an unsustainable service in the first place? It's not a big deal if they change the price. Pay up or leave, I don't see any problem here at all. In the UK phone companies are allowed to raise prices during the duration of a fixed price fixed duration contract.
    - drivingmenuts 8y ago
      As an end-user, am I responsible when you create a business with an unsustainable business plan? I think even the most educated consumer would look at that and think "great deal to be gotten while I can". Moviepass probably shouldn't have any right to complain if they lose users, but users should definitely complain because they are being screwed, at least until the new plan becomes the new normal.
      - Flowsion 8y ago
        How are you being screwed?
        drivingmenuts 8y ago
        Moviepass has changed the terms of the original agreement when signing up with the service. Just because they can do so and legally doesn't make it any less of a screwing. Just a legal one.
slg 8y ago
The model still makes no financial sense. This reduces their burn rate by pushing away their most costly customers, but it doesn't address the underlying problem. MoviePass isn't creating value. Subscribers might receive positive value from the service, but all that value is simply payments from investors to use the service.
- solarkraft 8y ago
  The idea has always been acquiring lots of customers (essentially by gifts) and then being able to negotiate hard with cinemas on that basis.
  - savanaly 8y ago
    But cinemas are hardly a monopoly-- so there really is no room for the price to go down. They are presumably already operating at long run minimum average cost, which is equal to price, and there's zero economic profit being made. I would guess that if a service like MoviePass can exist it's because it's increasing efficiency in some non-obvious way, like reducing transaction costs or enhancing advertising.
    - xivzgrev 8y ago
      In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. https://www.nasdaq.com/symbol/amc/financials?query=cash-flow https://www.nasdaq.com/symbol/amc/financials?query=cash-flow I would disagree that movie theaters are hardly a monopoly. You usually only have one in a given geographical area. In a major metro you may have more options within a short distance but even then they are usually not walking distance from one another. And even if there are multiple options in same locale they may be same company and still a local monopoly. For example in Chicago, there are 4 movie theaters in downtown area, 3 of them AMC.
      - savanaly 8y ago
        >In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. That's why I was careful to say "economic profit". On the books numbers are all well and good. But the only indicator I'll take as a sure sign that an industry is profitable in the economic sense is if the number of firms in the market is climbing (i.e. new people are scrambling to get in on whatever benefits they perceive there are to being on the supply side of the market). And movie theaters seem to be more or less in an equilibrium to me.
27182818284 8y ago
> so long with a model that made no financial The radical $9.95 model is just under a year old (11 months 22 days). I thought I would mention that because although MoviePass is much older, most folks only learned about it with the acquisition by Helios and Matheson and the subsequent drop in pricing which led to a surge of registrations. Honestly, they should have just capped the registrations. I think a gym-membership style could have actually worked for them. I was an excited evangelist and early adopter, but I quickly found myself not seeing more than one movie a month if at all. Just like all the gym memberships out there that rely on you signing up and then not coming back regularly.
- Sangermaine 8y ago
  No, the comparison doesn’t work. Gyms count on going to the gym being something people have to force themselves to do, and so often fail to do so. Seeing movies is different: it’s a fun activity people want to do.
  - Falling3 8y ago
    Additionally, I assume gyms are still profitable even if all of their members are making regular use of the service. The marginal cost of a single customer use is negligible. MoviePass cannot say the same.

by untog 8y ago

ProAm 8y ago

> MoviePass persisted for so long with a model that made no financial sense whatsoever You can say that about almost every start up discussed on HN

cm2012 8y ago
That's not really true. MoviePass is an outlier in its crazy business model that loses money on every customer. Most other start-ups just have high cap ex but make marginal profits per sale.
- jrs95 8y ago
  Funny enough I worked at a ecommerce clothing “startup” that had upwards of $75 million in sales but wasn’t profitable
  - CamelCaseName 8y ago
    ...how? What was the game plan? Why would they do this?
    - mrguyorama 8y ago
      Happened all the time in the dotcom bubble: "We lose money on each sale but we'll make it up in volume!"
      - vanadium 8y ago
        Having started my career at the start of the dot-com boom (and later bust), that was damn near every startup I came across. Our little agency ended up moving into eTour's space in Atlanta (VaHi) when they departed. Nice movie theatre built into the space.
    - LyndsySimon 8y ago
      Customer acquisition? In some cases it might make financial sense to lose a small amount of money per customer if the cost per acquisition is more than the amount they're losing. Network effect? I'm not sure this would apply to a clothing retailer, but there are lots of services out there that have a marginal cost per customer but can't effectively monetize until they have a sufficiently large customer base and therefore have access to enough data to be marketable. Exit strategy? A company with x million customers, even if unprofitable and unsustainable in its current state, is worth more than a company with x/n customers that is marginally profitable in many cases. As for this case in particular... I don't know. I suspect that a case could be made that the money they're losing has them in the media enough that they're basically paying for advertising by being unprofitable. I doubt I would have ever heard of MoviePass if not for them being constantly in the news.
    - cm2012 8y ago
      The CLTV is high in fashion - people return to shops they like over and over. If they're in high growth, they're spending a lot in marketing to get new customers acquainted with the brand.
    - deleted 8y ago
      [deleted]
  - 27182818284 8y ago
    Facebook wasn't profitable until what, like year 8 of their existence? Similarly SpaceX now is being awarded more than 50% of all commercial space launches, but burned money in the beginning.
    - LargeWu 8y ago
      SpaceX is trying to develop a new kind of rocket, with insane upfront R&D costs. MoviePass is trying to sell movie tickets for less than they paid for them. I don't think those are similar at all.
      - gnicholas 8y ago
        This is facially true. But I don't think MoviePass would describe their service this way. They would say they are gathering unprecedented amounts of personal data about movie preferences, which can be worth millions to movie studios and TV production companies that want to know what type of content will attract viewers. Framed this way, it is more understandable that they would need to burn cash in order to get the ball rolling on data collection. Still, it's not rocket science and probably could have been done much more cheaply (just offering subscription coupons or something).
        throwaway2048 8y ago
        is said personal data harvesting going to be worth multiple dollars per movie somebody watches? somehow i doubt it.
    - compsciphd 8y ago
      SpaceX lost money on R&D, they didnt lose money on the launch itself. i.e. every actual customer increased the money in their bank account.
peter303 8y ago
I recall Jet.com (now owned by Walmart) tried to meet to meet or beat Amazon prices without the efficiencies of Amazon. So it was burning through VC capital losing money on most sales. I dont know if the model have changed under Walmart.
compsciphd 8y ago
It's not about profitabity. It's about marginal revenue per usage. If amazon initially dropped ship books to you that they ordered from Borders for $12 and sold to you for $10, they would have gone bankrupt. Amazon generally made money on each individual order. Planet Fitness isn't burning money every time you go into their gyms. MoviePass assets decrease every single time any user makes use of them. AMC A-List can possibly survive, MoviePass can't as is. MoviePass has to demonstrate a model where the marginal revenue per usage is > 0 or that the total cost of a user is easily managable to be under their monthly subscription cost. I'm not convinced either are possible. I'm a happier customer because I know what I'm getting and have seen 100+ movies on my costco annual subscription, but have zero expectations for them to survive.

ISL 8y ago

Let me try.... "We know you're bummed, but you've gotten a great deal from us in the past. We continue to offer a great deal, one that is sustainable enough that we can continue to offer you great deals in the future. Thank you for your understanding -- go see some great movies! Love, MoviePass "

remus 8y ago
Just playing devil's advocate... "Why did you offer me a service that was unsustainable in the first place? I just want the keep paying the same for the same product you've sold me for the last x months."
- superflyguy 8y ago
  Why did you sign up to an unsustainable service in the first place? It's not a big deal if they change the price. Pay up or leave, I don't see any problem here at all. In the UK phone companies are allowed to raise prices during the duration of a fixed price fixed duration contract.
  - drivingmenuts 8y ago
    As an end-user, am I responsible when you create a business with an unsustainable business plan? I think even the most educated consumer would look at that and think "great deal to be gotten while I can". Moviepass probably shouldn't have any right to complain if they lose users, but users should definitely complain because they are being screwed, at least until the new plan becomes the new normal.
    - Flowsion 8y ago
      How are you being screwed?
      - drivingmenuts 8y ago
        Moviepass has changed the terms of the original agreement when signing up with the service. Just because they can do so and legally doesn't make it any less of a screwing. Just a legal one.

slg 8y ago

The model still makes no financial sense. This reduces their burn rate by pushing away their most costly customers, but it doesn't address the underlying problem. MoviePass isn't creating value. Subscribers might receive positive value from the service, but all that value is simply payments from investors to use the service.

solarkraft 8y ago
The idea has always been acquiring lots of customers (essentially by gifts) and then being able to negotiate hard with cinemas on that basis.
- savanaly 8y ago
  But cinemas are hardly a monopoly-- so there really is no room for the price to go down. They are presumably already operating at long run minimum average cost, which is equal to price, and there's zero economic profit being made. I would guess that if a service like MoviePass can exist it's because it's increasing efficiency in some non-obvious way, like reducing transaction costs or enhancing advertising.
  - xivzgrev 8y ago
    In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. https://www.nasdaq.com/symbol/amc/financials?query=cash-flow https://www.nasdaq.com/symbol/amc/financials?query=cash-flow I would disagree that movie theaters are hardly a monopoly. You usually only have one in a given geographical area. In a major metro you may have more options within a short distance but even then they are usually not walking distance from one another. And even if there are multiple options in same locale they may be same company and still a local monopoly. For example in Chicago, there are 4 movie theaters in downtown area, 3 of them AMC.
    - savanaly 8y ago
      >In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. That's why I was careful to say "economic profit". On the books numbers are all well and good. But the only indicator I'll take as a sure sign that an industry is profitable in the economic sense is if the number of firms in the market is climbing (i.e. new people are scrambling to get in on whatever benefits they perceive there are to being on the supply side of the market). And movie theaters seem to be more or less in an equilibrium to me.

27182818284 8y ago

> so long with a model that made no financial The radical $9.95 model is just under a year old (11 months 22 days). I thought I would mention that because although MoviePass is much older, most folks only learned about it with the acquisition by Helios and Matheson and the subsequent drop in pricing which led to a surge of registrations. Honestly, they should have just capped the registrations. I think a gym-membership style could have actually worked for them. I was an excited evangelist and early adopter, but I quickly found myself not seeing more than one movie a month if at all. Just like all the gym memberships out there that rely on you signing up and then not coming back regularly.

Sangermaine 8y ago
No, the comparison doesn’t work. Gyms count on going to the gym being something people have to force themselves to do, and so often fail to do so. Seeing movies is different: it’s a fun activity people want to do.
- Falling3 8y ago
  Additionally, I assume gyms are still profitable even if all of their members are making regular use of the service. The marginal cost of a single customer use is negligible. MoviePass cannot say the same.