MoviePass’ Disruptive Subscription Model: Benefiting Competitors?

MoviePass’ Disruptive Subscription Model: Benefiting Competitors?

Led by entrepreneurs Stacy Spikes and Hamet Watt, an American subscription-based movie ticketing service, MoviePass was founded in 2011 and headquartered in New York City. MoviePass initially launched in beta and used to operate in voucher system. In 2012, the service switched to a mobile app. When launched at a price point of $50 per month to view unlimited number of movies, it received a lukewarm response.

After Mitch Lowe (earlier served as VP of Netflix and President of Redbox) became the CEO of MoviePass in 2016, he experimented with different pricing models. In August 2017, when 51% of the company was acquired by a publicly traded Big Data firm Helios and Matheson Analytics Inc. (NASDAQ: HMNY) for $27 million, it made a bold move with a massive drop in subscription price which turned its fortunes.

Often dubbed as ‘Netflix for movies’, MoviePass aimed to disrupt the traditional pay-per-view pricing model of the movie industry and offered a subscription-based pricing model to give a fillip to the struggling North American film industry. However, MoviePass’ fortunes didn’t last for long.............

Scrambling American Movie Industry

With the advent of low-cost home streaming alternatives like Netflix and Amazon becoming increasingly dominant and given the increasing movie ticket prices, American audiences (especially millenials) were reluctant to view movies in theaters like before............

MoviePass’ Disruptive Strategies

Movie Pass’ revolutionary strategy on August 15^th 2017 to slash its subscription rate to a mere $9.95/month for one movie a day option3 and the remarkable rise in its subscribers thereafter had taken the American movie industry by a storm...............

Challenges and Changing Dynamics

At a time when MoviePass was moving briskly, cracks began to show up distinctly. With the sudden spurt in subscriber base, customer service became an avoidable casualty resulting in delay in issuance of cards, customer service requests going unanswered for weeks and social media outburst. This turbulence culminated in a full “service outage” on July 26^th 2018 and MoviePass had to borrow $5 million in order to maintain its operations........

Exhibits

Exhibit I: Estimated Theater Attendance over the Years

Exhibit II: MoviePass Subscribers – Change in Generated Theater Sales

Exhibit III: MoviePass’ Path to 1 Million Paid Subscribers compared to other Subscription Services

Exhibit IV: America’s Largest Movie Theater Chains

Exhibit V: Rise and Fall of MoviePass

MoviePass’ Disruptive Subscription Model: Benefiting Competitors?

Synopsis

After gaining millions of new users to the service starting in August 2017, when the company dropped its monthly price to $9.95 a month to see one movie per day, the movie-ticket subscription startup went into a tailspin in 2018. 2018 saw issues with the app, bad customer service, the company temporarily running out of cash, and finally - just under a year from when it announced the $9.95 plan.

Often dubbed as ‘Netflix for movies’, MoviePass aimed to disrupt the American movie business by introducing the subscription-based pricing model as against the pay-per-view pricing model prevalent for quite a long time. Though the fledgling subscription service began in 2011, its game changing subscription plan launched on August 15th 2017 disrupted the American movie business which had long been plagued with decreasing theatre admissions and increasing ticket prices. With Mitch Lowe as its CEO (earlier served as VP of Netflix and President of Redbox), in just over nine months, MoviePass’ subscription base had increased from 20,000 to 3 million. Its parent company Helios and Matheson Inc. (HMNY) launched two subsidiaries (MoviePass Ventures and MoviePass Films) to penetrate the ecosystem more effectively. However, its fast-paced success could only last for a short spell..............

Assignment Questions

I. To understand and evaluate the underlying economics of MoviePass’s subscription-based theatre admission model

II. To analyze the reasons for MoviePass’s poor financial performance and debate on the nature of those reasons from the view point of how many of them are self-inflicted and how many of them are competition-induced

III. ...............

Preamble to the Case Analysis and Discussion Dashboard

The purpose of this case study is to enable an understanding of how a challenger brand can lose its competitive advantage due to negative unit economics, in the backdrop of MoviePass case study. Classroom discussion began by analyzing the business model loopholes of MoviePass. Then it moved further analyzing the reasons for the poor show of company which started the innovative service. The discussion was concluded by offering a few strategic options available for MoviePass’ turnaround. The classroom discussion was orchestrated accordingly [Exhibit (TN)-I]..............

Exhibits

Exhibit (TN)-I: Classroom Discussion Dashboard

Exhibit (TN)-II: MoviePass Subscription Model Benefiting the Stakeholders

Exhibit (TN)-III: Analyzing MoviePass’ Business Model

Exhibit (TN)-IV : Business Type vs. Planning Type Matrix – Analyzing MoviePass’ Business

Exhibit (TN)-V : Reasons for MoviePass’ Poor Performance

Exhibit (TN)-VI : Strategic Options Before MoviePass