“Do I feel lucky?” Well do ya, punk? Why MoviePass’ subscription service failed

For all the success stories of the booming subscription industry, we cannot forget there are some high-profile failures of the model too. MoviePass, the cinema ticket subscription service, was once the stuff that dreams are made of; now it’s a business for ants. Adam Hughes performs the post-mortem on this now-bankrupt cinema subscription service to see what their mistakes could mean for other subscription businesses.

Last month, Helios and Matheson Analytics, the inauspicious parent company of MoviePass, announced it had filed for Chapter 7 bankruptcy. MoviePass ceased trading last September, putting an end to eight tumultuous years, with only a single employee left running its sister company, cinema listing dot-com-era stalwart Moviefone.

Once considered the next big thing in film, by 2019 the company was facing debts of $1.2 million  as it was accused of mishandling customer data, changing the passwords of users to prevent them using their service, and is currently under investigation for misleading customers.

Even a reassuring email from their Director of ‘Barketing' couldn’t help matters.

The case of MoviePass offers businesses more than a handful of lessons in how to (or rather, how not to) run a subscription service:
 

“… An offer he can’t refuse”

Many industry analysts saw bankruptcy as the foregone conclusion to an evidently unsustainable business model, introduced by former Netflix executive Mitch Lowe, when named MoviePass CEO in June 2016.

Lowe’s mission for the company was “to reenergize moviegoing to the movie theater.” To do this, he introduced an audacious offer for subscribers; for less than $10 a month, members could see a movie a day, with MoviePass footing the bill.

While cinemas ultimately make a profit by charging higher prices for tickets than the cost of renting films from distributors, MoviePass had to pay the full ticket price to the theatres. On average, the company was burning through $21.7 million a month on ticket costs, patently unable to raise subscription prices lest they scare off customers with sudden cost hikes.
 

“I wish I knew how to quit you”

What subscribers could and couldn’t see was subject to an at-times esoteric terms of service, that granted MoviePass free reign to change any aspect of the service: the one-movie-a-day plan was constantly mutating to only three or four movies per month, and those who jumped ship in mid-2018 then found themselves opted back in and being billed without their consent because they cancelled before a change in terms. Further policies, such as an Uber-esque surge pricing feature for popular releases, didn’t prove popular either.

By paying full price for every ticket their subscribers bought, MoviePass was heavily subsidising its sizeable 3 million-strong user base. The fundamental model that the service was built on was inherently unprofitable, and MoviePass knew it.
 

“A census taker once tried to test me…”

The MoviePass model was dependent on subscribers not fully utilising the service – no doubt aided by the mystifying terms and conditions – or forgetting that they were even subscribed. Helios and Matheson’s CEO even admitted as much. So much for “reenergizing moviegoing!”
Profit would have to come from elsewhere.

That would need to be from data gleamed from customers, no doubt encouraged by their data analytics parent company. A trove of user data that the company could sell on, not only to the film studios, but also to restaurants and taxi services; to quantify and capitalize on every family cinema trip, date night and weekend blockbuster debut was the real goal.

Ironically, MoviePass may have even jeopardised this proposition. With carte blanche to see any movie they wished cheaply, the subscription model encouraged users to see movies they may not have otherwise bothered with, throwing their data sets into chaos.
 

“Show me the money!”

Though many big tech start-ups can spend years comfortably languishing in unprofitability (we’re looking at you, Uber), MoviePass simply couldn’t acquire the critical mass necessary for the company to throw its weight around the industry and obtain the sweetheart deals with cinema chains that its business model depended on.

Other attempts at diversifying revenue streams failed too. An ill-fated shot at distributing its own films saw little in profit and plaudits, but while bad word-of-mouth may not dent the success of a VoD release much, few bothered to see Gotti, MoviePass’ 0% Rotten Tomatoes-rated release.
 

“… You can’t fight in here, this is the War Room”

MoviePass hoped that the power of its user base would be a bargaining chip with theatre chains and studios, but this was another gamble that didn’t pay off. AMC Theatres, feeling burned by its fraught partnership with MoviePass, suspended support for the service and launched its own subscription service, Stubs A-List, buoyed by the chain’s established infrastructure and distribution deals.

These limits on where users could go only compounded MoviePass’ ever-changing terms of service, highlighting mere intermediary status, and ultimately tarnishing its “cinema-agnostic” appeal. As it turns out, you shouldn’t try to disrupt an industry when you’re dependent on competitors to function.
 

“You can’t handle the truth!”

Looking back now, the morals of the MoviePass story may seem obvious; their long-term plan, to quantify and commoditise a night at the flicks as a subscription service, couldn’t be salvaged into a profitable venture, and any hope of shoring up the business were hampered by financial misadventures and partners-turned-competitors. The business model was as too-good-to-be-true for them as it was for subscribers.

In short, MoviePass was king of the world; they built it, and they came, but thought greed was, for lack of a better word, good. When they depended on the kindness of strangers, what they had was a failure to communicate – most of all, they needed a bigger boat. Their partners were mad as hell, and not going to take it anymore, and decided to have what they’re having. They were left shaken, not stirred, and now it’s hasta la vista, MoviePass!

“Well, nobody’s perfect.”

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