9 ms·

MoviePass Owner Sued by Shareholders as Business Model Falters

92 points by nimos 8y ago

gt_ 8y ago
Why does this resemble a bailout?
acjohnson55 8y ago
Damn. Been rooting for them. Theaters are practically vacant most of the time, so I'd think it would be a win-win. But the chains can't stomach sharing the power. Sounds like Movie Pass is all but done at this point.
- untog 8y ago
  > But the chains can't stomach sharing the power Who is going to willingly let a middleman get between them and their customers? That would be crazy. AMC have already introduced a similar plan, so customers still get a win out of it.
  - pat2man 8y ago
    Worked for Fandango...
    - moviegoerguy 8y ago
      Fandango is owned by NBCUniversal and WarnerMedia. They have an interest in the relationship to begin with. On top of that, they charge a convenience fee above what the theater charges for a ticket. Quite different from MoviePass.
      - deleted 8y ago
        [deleted]
- hanklazard 8y ago
  The chains are building their own subscription services that will be more limited, but likely with fewer glitches. AMC now has some sort of 3 movies / week for $20 per month. In the meantime, I’m trying to get a few last screenings in on my 1 yr MoviePass subscription!
- ian0 8y ago
  A long time ago I heard of a demo of a telco project in a mall's cinema. They sent a location based SMS to everyone in the mall giving away half price tickets to an otherwise empty screening starting in 15mins. And apparently it filled up. However that was years ago and I don't think anything came of it. Ive always imagined there was some business rationale for the cinema to keep the ticket pricing static and just take the hit on the empty screenings.
  - patio11 8y ago
    A buddy of mine similarly did digital signage for a mall in central Japan. The most important sign just aggregated Twitter accounts controlled by employees of the retail shops. By far the most successful emergent behavior: "Do you cut hair for a living? Do you not have someone's hair to cut in next 30 minutes? Tweet that the next person to walk in gets 10% off their haircut and it will show up on a sign that a hundred people pass every five minutes." (I suspect that many people who cut hair in Japan do so on the US model, where they are independent contractors of the shop who "rent a chair" as opposed to salaried employees. It is to their direct advantage to maximize throughput, in a way that it is not to the direct advantage of e.g. someone who works at McDonalds to maximize sales of burgers.)
SN76477 8y ago
I think MoviePass has been successful in showing that the industry needs a shakeup. I dont know what their monetization model was, I dont think they knew what it was.
- michaelchisari 8y ago
  But every industry can be shaken up if you're willing to give things away effectively for free with VC money. I don't know if that translates to proving an industry needs a shakeup.
  - Fomite 8y ago
    Exactly. It's easy to "shake up" and "disrupt" an industry by spending VC money like it's going out of style. "People like things given away at below market rates" isn't even a proof of concept.
    - indecisive_user 8y ago
      Alamo Drafthouse is testing its own subscription service and AMC already rolled theirs out. Now maybe it's just coincidental timing but moviepass certainly proved there's a huge interest in that model of movie tickets.
      - Mindwipe 8y ago
        Chain specific subscription services (at more sustainable costs than Moviepass) have been common outside the US for a number of years. Indeed, that's where Moviepass got the idea from. I don't think Moviepass proved much there.
  - cncrnd 8y ago
    Think of it not as a shake up, but as a wealth transfer from investors to the proletariat. It's like how Uber has been giving me $3 rides while it posts losses 1/3 of revenue. I should send VCs a thank you card, those loveable dummies!
kosei 8y ago
> MoviePass parent Helios & Matheson Analytics Inc. omitted and misstated its financial prospects in press releases when it touted a "sustainable" business model, the shareholders claim in lawsuits filed in Manhattan federal court. Is this for real? Any outsider could have seen that this model was unsustainable from the start, with the business buying tickets at full price and then selling them at an unlimited rate for $9.99. To claim ignorance here as an investor just seems negligent.
- smnrchrds 8y ago
  If the company actually made false statements, it would be illegal. They should have known better than to believe me is not a valid defence for securities fraud.
  - hn_throwaway_99 8y ago
    True, if they actually lied, but I think saying "we have a sustainable business model" wasn't necessarily false, even if lots and lots of people thought they had no chance of success. The only way they could have succeeded is if they received sweet deals with theaters, which never happened.
    - sokoloff 8y ago
      “Business model secured.”
  - kosei 8y ago
    Sure, if they falsified their books, that's absolutely illegal. But "they told me their business model was sustainable, and I believed them and gave them my money" doesn't seem like a reasonable argument either. If that's how those investors fund their companies, I've got this nifty bag of magic beans they might be interested in... For $1M, they'll grow $2M in beans, I promise!
    - smnrchrds 8y ago
      > For $1M, they'll grow $2M in beans, I promise! You are reinforcing my point. If you do that, it would be fraud, plain and simple. You would have to pay the investors back and you will spend a couple of years in prison. You can't show up to the court and say, but your honour, they should have known better. Well, you can, but it would not change the court's decision in your favour. Communications with the investors is not a place to play loose. If you say we are profitable and you are not, or we are sustainable and you are not, or we have a buyer lined up and you do not, you would find yourself in a world of trouble.
drawkbox 8y ago
In the end a service like MoviePass will be needed, noone wants one just tied to one theater chain most likely though it will be that way for a while if not indefinitely. It looks like this iteration of a movie service independent of movie theaters just won't be it. As it has been said, theaters are empty much of the time and they make major margins from their concessions. You'd think more of them would have gone for it. Maybe somehow they tie it to concessions sales in that you can get 19.99 a month or something if you aren't buying concessions but 14.99 or 9.99 with limited movies if you are buying concessions and that is tracked through the card. At that point it is a loyalty/rewards program and you could go to the theaters with ROI in that the customers you bring in are x% concessions buyers for x amount. Seems like an easier sell hooked to concessions sales. Theaters pay between 5-20k per film per week and make almost nothing from ticket sales, if not lose some depending on the distributor and if they are first run theaters. Theaters NEED concession sales more than ticket sales. It seems a service that allows free movies that ties pricing to concessions would do better. Or, we'll just be stuck with theater bound movie services which is essentially a local theater only rewards program.
- jrs95 8y ago
  Honestly nevermind being tied to one theater chain, I wouldn’t mind being tied to one theater. I go to the same one almost all of the time anyways. And even if I didn’t, there are enough AMCs around that it’s not much of a value add for me to have something that works at different chains.
  - mehrzad 8y ago
    Well there are no A24 movies at the AMC theaters near me, so I need at least one theater that plays independent movies and one that plays wide release. That's why Moviepass is still worth it for me. (disclaimer I have some shares)
  - swozey 8y ago
    I live in a city with Alamo Drafthouses and I refuse to ever visit an AMC/Regal/etc after moving here. I'm fine with them making their own monthly payment programs.
gremlinsinc 8y ago
A better business model: $19.99 per month. $2/matinee | $3/non-matinee. $1 in 'movie cash' for every $5 spent on concessions. spend 15 -- get $3...meaning the $3 is basically waived for a non-matinee. Edit to clarify: This would then be more friendly towards theaters, encourage more $$ in concessions, and make them possibly give more deals/lower costs to moviepass... I think it would be more sustainable.
- maksimum 8y ago
  At which point it's $26/mo if you go to see two movies. Hardly a deal even in LA or NYC.
paxys 8y ago
MoviePass (incorrectly) assumed it would be able to strike sweetheart deals with all theater chains, thus drastically reducing overall costs. It even sounds good in theory - why wouldn't the theater want to get paid for seats that would have otherwise gone empty and have more people inside buying concessions? It could even have worked - maybe five or ten years ago. Now the theaters themselves quickly realized the value of such a subscription model, and made the logical decision to cut out MoviePass entirely and just offer it themselves. It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies.
- devoply 8y ago
  > It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies. I personally doubt the longevity of Netflix. On it's own it's not much more than a cable channel, like say AMC. Its success depends on producing very good content... it has not mastered this at all. Over time most studios will back out of their deals with it.
  - exelius 8y ago
    It’s more like HBO, but yes, I agree. In fact, Netflix has largely become HBO while HBO was becoming Netflix, so they’re largely the same at this point. VOD services are here to stay, and the catalog shifting will continue in order to maximize value. Netflix is doing it at least as well as anyone else.
  - kumarvvr 8y ago
    > on producing very good content This is not necessarily true. Even moderately good content, catering to a specific audience will suffice. IIRC, NF has loads of user data and behavioural data to help it guide in production. Assuming an average, not fully satisfied consumer subscribes to NF for 1 year, that's 120 $ per consumer. Assume a show that takes 100 million to produce, say 3 seasons. To make the production break-even, NF will need around 840000 paying subscribers (currently it has around 125 million subscribers, so about 0.672% of its total subscriber base) , who don't even have to watch it in the first place. Now that's a very small number compared to the amount of paying subscribers currently on it's platform. To me it seems to be a very profitable model, at least for 10 - 15 years from now. Edit : Updated the math. Edit 2 : An average episode costs between 3 - 5 million. Lets take 5 million as the cost per episode. With 125 million subscribers paying 120 $ per year, Netflix can produce 3000 episodes. That's just for 1 year. Also, in India, many shows cost way less than 5 million USD. But I have seen NF splurge of shows (it is hiring top notch actors in India for it's shows, where traditionally and culturally, a movie star playing in a "TV" series usually means an end-of-career move, so it's a big thing to work on a NF show here in India)
vamshi4001 8y ago
They sent a confirmation mail saying that "I am in" as soon as I cancelled their subscription! Pretty lame they can't identify difference between an entry event and an exit event
- laken 8y ago
  Careful! If you got that email, you didn't fully cancel, and resubscribed. The app has a prompt on open telling you about the plan changes, even if you canceled. If you check "I agree," it un-cancels your subscription.

92 points by nimos 8y ago

gt_ 8y ago

Why does this resemble a bailout?

Damn. Been rooting for them. Theaters are practically vacant most of the time, so I'd think it would be a win-win. But the chains can't stomach sharing the power. Sounds like Movie Pass is all but done at this point.

untog 8y ago
> But the chains can't stomach sharing the power Who is going to willingly let a middleman get between them and their customers? That would be crazy. AMC have already introduced a similar plan, so customers still get a win out of it.
- pat2man 8y ago
  Worked for Fandango...
  - moviegoerguy 8y ago
    Fandango is owned by NBCUniversal and WarnerMedia. They have an interest in the relationship to begin with. On top of that, they charge a convenience fee above what the theater charges for a ticket. Quite different from MoviePass.
    - deleted 8y ago
      [deleted]
hanklazard 8y ago
The chains are building their own subscription services that will be more limited, but likely with fewer glitches. AMC now has some sort of 3 movies / week for $20 per month. In the meantime, I’m trying to get a few last screenings in on my 1 yr MoviePass subscription!
ian0 8y ago
A long time ago I heard of a demo of a telco project in a mall's cinema. They sent a location based SMS to everyone in the mall giving away half price tickets to an otherwise empty screening starting in 15mins. And apparently it filled up. However that was years ago and I don't think anything came of it. Ive always imagined there was some business rationale for the cinema to keep the ticket pricing static and just take the hit on the empty screenings.
- patio11 8y ago
  A buddy of mine similarly did digital signage for a mall in central Japan. The most important sign just aggregated Twitter accounts controlled by employees of the retail shops. By far the most successful emergent behavior: "Do you cut hair for a living? Do you not have someone's hair to cut in next 30 minutes? Tweet that the next person to walk in gets 10% off their haircut and it will show up on a sign that a hundred people pass every five minutes." (I suspect that many people who cut hair in Japan do so on the US model, where they are independent contractors of the shop who "rent a chair" as opposed to salaried employees. It is to their direct advantage to maximize throughput, in a way that it is not to the direct advantage of e.g. someone who works at McDonalds to maximize sales of burgers.)

SN76477 8y ago

I think MoviePass has been successful in showing that the industry needs a shakeup. I dont know what their monetization model was, I dont think they knew what it was.

michaelchisari 8y ago
But every industry can be shaken up if you're willing to give things away effectively for free with VC money. I don't know if that translates to proving an industry needs a shakeup.
- Fomite 8y ago
  Exactly. It's easy to "shake up" and "disrupt" an industry by spending VC money like it's going out of style. "People like things given away at below market rates" isn't even a proof of concept.
  - indecisive_user 8y ago
    Alamo Drafthouse is testing its own subscription service and AMC already rolled theirs out. Now maybe it's just coincidental timing but moviepass certainly proved there's a huge interest in that model of movie tickets.
    - Mindwipe 8y ago
      Chain specific subscription services (at more sustainable costs than Moviepass) have been common outside the US for a number of years. Indeed, that's where Moviepass got the idea from. I don't think Moviepass proved much there.
- cncrnd 8y ago
  Think of it not as a shake up, but as a wealth transfer from investors to the proletariat. It's like how Uber has been giving me $3 rides while it posts losses 1/3 of revenue. I should send VCs a thank you card, those loveable dummies!

kosei 8y ago

> MoviePass parent Helios & Matheson Analytics Inc. omitted and misstated its financial prospects in press releases when it touted a "sustainable" business model, the shareholders claim in lawsuits filed in Manhattan federal court. Is this for real? Any outsider could have seen that this model was unsustainable from the start, with the business buying tickets at full price and then selling them at an unlimited rate for $9.99. To claim ignorance here as an investor just seems negligent.

smnrchrds 8y ago
If the company actually made false statements, it would be illegal. They should have known better than to believe me is not a valid defence for securities fraud.
- hn_throwaway_99 8y ago
  True, if they actually lied, but I think saying "we have a sustainable business model" wasn't necessarily false, even if lots and lots of people thought they had no chance of success. The only way they could have succeeded is if they received sweet deals with theaters, which never happened.
  - sokoloff 8y ago
    “Business model secured.”
- kosei 8y ago
  Sure, if they falsified their books, that's absolutely illegal. But "they told me their business model was sustainable, and I believed them and gave them my money" doesn't seem like a reasonable argument either. If that's how those investors fund their companies, I've got this nifty bag of magic beans they might be interested in... For $1M, they'll grow $2M in beans, I promise!
  - smnrchrds 8y ago
    > For $1M, they'll grow $2M in beans, I promise! You are reinforcing my point. If you do that, it would be fraud, plain and simple. You would have to pay the investors back and you will spend a couple of years in prison. You can't show up to the court and say, but your honour, they should have known better. Well, you can, but it would not change the court's decision in your favour. Communications with the investors is not a place to play loose. If you say we are profitable and you are not, or we are sustainable and you are not, or we have a buyer lined up and you do not, you would find yourself in a world of trouble.

drawkbox 8y ago

In the end a service like MoviePass will be needed, noone wants one just tied to one theater chain most likely though it will be that way for a while if not indefinitely. It looks like this iteration of a movie service independent of movie theaters just won't be it. As it has been said, theaters are empty much of the time and they make major margins from their concessions. You'd think more of them would have gone for it. Maybe somehow they tie it to concessions sales in that you can get 19.99 a month or something if you aren't buying concessions but 14.99 or 9.99 with limited movies if you are buying concessions and that is tracked through the card. At that point it is a loyalty/rewards program and you could go to the theaters with ROI in that the customers you bring in are x% concessions buyers for x amount. Seems like an easier sell hooked to concessions sales. Theaters pay between 5-20k per film per week and make almost nothing from ticket sales, if not lose some depending on the distributor and if they are first run theaters. Theaters NEED concession sales more than ticket sales. It seems a service that allows free movies that ties pricing to concessions would do better. Or, we'll just be stuck with theater bound movie services which is essentially a local theater only rewards program.

jrs95 8y ago
Honestly nevermind being tied to one theater chain, I wouldn’t mind being tied to one theater. I go to the same one almost all of the time anyways. And even if I didn’t, there are enough AMCs around that it’s not much of a value add for me to have something that works at different chains.
- mehrzad 8y ago
  Well there are no A24 movies at the AMC theaters near me, so I need at least one theater that plays independent movies and one that plays wide release. That's why Moviepass is still worth it for me. (disclaimer I have some shares)
- swozey 8y ago
  I live in a city with Alamo Drafthouses and I refuse to ever visit an AMC/Regal/etc after moving here. I'm fine with them making their own monthly payment programs.

gremlinsinc 8y ago

A better business model: $19.99 per month. $2/matinee | $3/non-matinee. $1 in 'movie cash' for every $5 spent on concessions. spend 15 -- get $3...meaning the $3 is basically waived for a non-matinee. Edit to clarify: This would then be more friendly towards theaters, encourage more $$ in concessions, and make them possibly give more deals/lower costs to moviepass... I think it would be more sustainable.

maksimum 8y ago
At which point it's $26/mo if you go to see two movies. Hardly a deal even in LA or NYC.

paxys 8y ago

MoviePass (incorrectly) assumed it would be able to strike sweetheart deals with all theater chains, thus drastically reducing overall costs. It even sounds good in theory - why wouldn't the theater want to get paid for seats that would have otherwise gone empty and have more people inside buying concessions? It could even have worked - maybe five or ten years ago. Now the theaters themselves quickly realized the value of such a subscription model, and made the logical decision to cut out MoviePass entirely and just offer it themselves. It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies.

devoply 8y ago
> It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies. I personally doubt the longevity of Netflix. On it's own it's not much more than a cable channel, like say AMC. Its success depends on producing very good content... it has not mastered this at all. Over time most studios will back out of their deals with it.
- exelius 8y ago
  It’s more like HBO, but yes, I agree. In fact, Netflix has largely become HBO while HBO was becoming Netflix, so they’re largely the same at this point. VOD services are here to stay, and the catalog shifting will continue in order to maximize value. Netflix is doing it at least as well as anyone else.
- kumarvvr 8y ago
  > on producing very good content This is not necessarily true. Even moderately good content, catering to a specific audience will suffice. IIRC, NF has loads of user data and behavioural data to help it guide in production. Assuming an average, not fully satisfied consumer subscribes to NF for 1 year, that's 120 $ per consumer. Assume a show that takes 100 million to produce, say 3 seasons. To make the production break-even, NF will need around 840000 paying subscribers (currently it has around 125 million subscribers, so about 0.672% of its total subscriber base) , who don't even have to watch it in the first place. Now that's a very small number compared to the amount of paying subscribers currently on it's platform. To me it seems to be a very profitable model, at least for 10 - 15 years from now. Edit : Updated the math. Edit 2 : An average episode costs between 3 - 5 million. Lets take 5 million as the cost per episode. With 125 million subscribers paying 120 $ per year, Netflix can produce 3000 episodes. That's just for 1 year. Also, in India, many shows cost way less than 5 million USD. But I have seen NF splurge of shows (it is hiring top notch actors in India for it's shows, where traditionally and culturally, a movie star playing in a "TV" series usually means an end-of-career move, so it's a big thing to work on a NF show here in India)

vamshi4001 8y ago

They sent a confirmation mail saying that "I am in" as soon as I cancelled their subscription! Pretty lame they can't identify difference between an entry event and an exit event

laken 8y ago
Careful! If you got that email, you didn't fully cancel, and resubscribed. The app has a prompt on open telling you about the plan changes, even if you canceled. If you check "I agree," it un-cancels your subscription.