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> 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

by ProAm 8y ago

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.

> 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

by 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.