MoviePass

What did it do?

MoviePass was a subscription service that gave members cinema tickets for a monthly fee. Subscribers received a prepaid debit card; when they checked in at a cinema through the app and picked a film, the ticket price was loaded onto the card. In 2017 the unlimited plan was cut to $9.95 a month, letting members watch one film a day.

Why did it shut down?

The company paid cinemas the full price of every ticket while charging subscribers just $9.95 a month, so every member who went to the cinema a few times a month deepened the losses. In May 2018 cash spending exceeded revenue by $40 million, and the parent company was forced into a constant search for fresh funding. After a service outage in July 2018, major releases were excluded, the unlimited plan was cut to three films a month and subscriber losses accelerated. By April 2019 paying subscribers had fallen to 225,000, more than 90 per cent below the peak. When efforts to raise capital came to nothing, the service was shut down in September 2019.

The story

In August 2017 American cinemagoers fixed their attention on a single price tag: one film a day for $9.95 a month. With the offer, the company, run by Netflix co-founder Mitch Lowe and newly majority-owned by data analytics firm Helios and Matheson Analytics (HMNY), aimed to turn the cinema ticket into a subscription product.

MoviePass had in fact been founded in New York in 2011 by Stacy Spikes and Hamet Watt. Subscribers were given a prepaid debit card; when they checked in at a cinema through the app and chose a screening, the ticket price was loaded onto the card. Backed by investors such as True Ventures and AOL Ventures, it experimented with different pricing plans for years, yet in December 2016 it had only 20,000 subscribers. The new price changed everything: subscribers rose to 400,000 in September 2017, 1 million in December and 2 million in February 2018, and passed 3 million in June 2018.

The problem was that the company paid cinemas the full price of every ticket. Every subscriber who went to the cinema a few times a month generated costs that easily exceeded the $9.95 they paid. In May 2018 cash spending exceeded revenue by $40 million, and in June the company projected a $45 million shortfall. After a service outage on 26 July, it borrowed $5 million to keep operating; auditors said they doubted whether the company could survive. Major new releases were then excluded, peak-time surcharges were introduced and the unlimited plan was cut to three films a month. By April 2019 paying subscribers had fallen by more than 90 per cent, to 225,000.

MoviePass shut down the service on 14 September 2019, announcing that its efforts to raise capital had come to nothing. Parent company HMNY filed for Chapter 7 bankruptcy on 28 January 2020 and ceased all operations. In June 2021 the service's operators agreed to settle allegations by the US Federal Trade Commission that they had restricted usage and failed to adequately protect user data. In November 2021, with the bankruptcy court's approval, the brand passed to co-founder Stacy Spikes, and it relaunched in 2022.

MoviePass is one of the most striking examples of why buying users with money is not growth. A subscription that scales on loss-making unit economics drains more cash from the till with every month that it looks like a success.

Lessons for founders

• Before setting a subscription price, work out what your heaviest user costs you; on an unlimited plan, the customer who uses it most carries the loss.
• Buying users with subsidies is not growth; track the contribution margin of every new subscriber weekly.
• Changing prices or rules repeatedly erodes trust; announce plan changes once, with a clear timetable.

Sources

1. MoviePass (Wikipedia)
2. MoviePass will shut down for good on Sept. 14 (CNBC, 2019-09-13)
3. MoviePass Parent Company Files For Bankruptcy (Variety, 2020-01-29)
4. MoviePass cofounder Stacy Spikes has bought the company back and is planning a relaunch (Insider, 2021-11-11)
5. https://www.wikidata.org/wiki/Q6926815
6. Wikipedia (English)

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