7 ms·

Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of

by pdeva1 8y ago

Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of business.

x220 8y ago
Moviepass doesn't get enough investment money to continue operating.
bdcravens 8y ago
Many reasons, but MoviePass was just a reseller at the end of the day, whereas Uber is a service business.
lozenge 8y ago
Uber has many services in many markets, many of which make money. They are just spending it as fast as they earn it. MoviePass is just one service and it loses money on every customer.
deleted 8y ago
[deleted]
mrep 8y ago
The main reason is unit economics. Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. They also need to spend money to market their service to customers once they have paid enough drivers to be available even when customers aren't requesting uber fares. If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees. TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining. Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.
- john_moscow 8y ago
  >Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. Is there actually some GAAP-compatible (hopefully audited) document outlining this, or is it purely self-declared?
  - mrep 8y ago
    Considering they are a private company and I don't work for them, no. There are 2 articles (probably same source) that you can read though [0, 1]. Also, while VC's scattershot their investments, I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS in a company that wasn't unit economically profitable in local markets [2]. [0]: https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b153 https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b... [1]: http://fortune.com/2016/06/16/uber-profitable-markets/ http://fortune.com/2016/06/16/uber-profitable-markets/ [2]: https://www.crunchbase.com/organization/uber#section-funding-rounds https://www.crunchbase.com/organization/uber#section-funding...
    - daniel_iversen 8y ago
      I assumed they weren’t really profitable anywhere and that they were (recently) waiting for self driving cars to make the business model work and explode!
    - mmt 8y ago
      > 21.7 BILLION FUCKING DOLLARS Looks like 8.3 of that is "Secondary market", which, IIUC, is old investors selling to new ones. This would explain why there are two Dec 28, 2017 rounds listed with different dollar amounts and the same lead investor. In fact, SoftBank is listed as the only investor for the non-secondary round on that date. Still, that's 13.4 billion dollars of actual new cash (and 3 very recent line items have no dollar values attached, meaning it could be significantly more), so your point stands.
    - wpietri 8y ago
      > I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS There's the legend about the Texas oilman who, wanting to distract his competitors, started a rumor that oil'd been found in hell. This worked for a bit, but eventually he heard the rumor enough times himself that he had to go check out hell for himself. I personally wouldn't be shocked to find out Uber never ends up really working as a business. Investors are herd animals, and hate missing out on a hot deal. By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked. But we now know it was a fraud, and not even a very good one. It's very hard to know if the unit economics for Uber work because there are a lot of things muddying the picture. Uber doesn't own the cars or employ the drivers, so capital costs and expenses are mostly on other people's books. Uber is getting a massive subsidy from investors, but it could also be argued that it's getting a massive subsidy from desperate and/or optimistic drivers who aren't properly valuing their cars, their time, their sanity, or their health. Uber is definitely getting a subsidy from society: they're creating large externalities in terms of pollution, congestion, and carbon emissions. And probably also in terms of short- and long-term draws on the social safety net. Over time, things tend to be properly priced, so Uber's unit economics will likely get worse. We just don't know how much worse. And even if the unit economics end up being positive, Uber has a lot of investors who expect a return. Given that they have a very shallow moat, will they be able to throw off enough profit to satisfy shareholders without competitors coming in and undercutting them? If they're going to give the same kind of return on capital as Apple, I'd guess that will take $1-2/ride on its own. That could be quite an advantage for a scrappy competitor.
dilyevsky 8y ago
At the peak I was seeing a movie ~once/month (it's more like 1/year now) but I commute almost every day.
- jameslevy 8y ago
  Also, you basically never need to go to the cinema to see a movie. On an almost daily basis, you need transportation in the same way that you need food and shelter.
addicted 8y ago
Moviepass’s biggest problem is they’re public. You can’t do unicorn economics as a public company.

by pdeva1 8y ago

Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of business.

x220 8y ago

Moviepass doesn't get enough investment money to continue operating.

bdcravens 8y ago

Many reasons, but MoviePass was just a reseller at the end of the day, whereas Uber is a service business.

lozenge 8y ago

Uber has many services in many markets, many of which make money. They are just spending it as fast as they earn it. MoviePass is just one service and it loses money on every customer.

deleted 8y ago

[deleted]

mrep 8y ago

The main reason is unit economics. Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. They also need to spend money to market their service to customers once they have paid enough drivers to be available even when customers aren't requesting uber fares. If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees. TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining. Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.

john_moscow 8y ago
>Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. Is there actually some GAAP-compatible (hopefully audited) document outlining this, or is it purely self-declared?
- mrep 8y ago
  Considering they are a private company and I don't work for them, no. There are 2 articles (probably same source) that you can read though [0, 1]. Also, while VC's scattershot their investments, I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS in a company that wasn't unit economically profitable in local markets [2]. [0]: https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b153 https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b... [1]: http://fortune.com/2016/06/16/uber-profitable-markets/ http://fortune.com/2016/06/16/uber-profitable-markets/ [2]: https://www.crunchbase.com/organization/uber#section-funding-rounds https://www.crunchbase.com/organization/uber#section-funding...
  - daniel_iversen 8y ago
    I assumed they weren’t really profitable anywhere and that they were (recently) waiting for self driving cars to make the business model work and explode!
  - mmt 8y ago
    > 21.7 BILLION FUCKING DOLLARS Looks like 8.3 of that is "Secondary market", which, IIUC, is old investors selling to new ones. This would explain why there are two Dec 28, 2017 rounds listed with different dollar amounts and the same lead investor. In fact, SoftBank is listed as the only investor for the non-secondary round on that date. Still, that's 13.4 billion dollars of actual new cash (and 3 very recent line items have no dollar values attached, meaning it could be significantly more), so your point stands.
  - wpietri 8y ago
    > I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS There's the legend about the Texas oilman who, wanting to distract his competitors, started a rumor that oil'd been found in hell. This worked for a bit, but eventually he heard the rumor enough times himself that he had to go check out hell for himself. I personally wouldn't be shocked to find out Uber never ends up really working as a business. Investors are herd animals, and hate missing out on a hot deal. By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked. But we now know it was a fraud, and not even a very good one. It's very hard to know if the unit economics for Uber work because there are a lot of things muddying the picture. Uber doesn't own the cars or employ the drivers, so capital costs and expenses are mostly on other people's books. Uber is getting a massive subsidy from investors, but it could also be argued that it's getting a massive subsidy from desperate and/or optimistic drivers who aren't properly valuing their cars, their time, their sanity, or their health. Uber is definitely getting a subsidy from society: they're creating large externalities in terms of pollution, congestion, and carbon emissions. And probably also in terms of short- and long-term draws on the social safety net. Over time, things tend to be properly priced, so Uber's unit economics will likely get worse. We just don't know how much worse. And even if the unit economics end up being positive, Uber has a lot of investors who expect a return. Given that they have a very shallow moat, will they be able to throw off enough profit to satisfy shareholders without competitors coming in and undercutting them? If they're going to give the same kind of return on capital as Apple, I'd guess that will take $1-2/ride on its own. That could be quite an advantage for a scrappy competitor.

dilyevsky 8y ago

At the peak I was seeing a movie ~once/month (it's more like 1/year now) but I commute almost every day.

jameslevy 8y ago
Also, you basically never need to go to the cinema to see a movie. On an almost daily basis, you need transportation in the same way that you need food and shelter.

addicted 8y ago

Moviepass’s biggest problem is they’re public. You can’t do unicorn economics as a public company.