Subscription movie service MoviePass offered anyone willing to shell out $10 a month — less than the price of a single movie ticket in some parts of the country — the chance to see (almost) unlimited movies at any participating theater.
For the consumer, it was the deal of a lifetime. But for parent company Helios and Matheson, it was nothing more than a grand experiment, and one even it knew had little chance of succeeding, at least not in the ways you’d traditionally measure an app‘s success.
To understand MoviePass, you first have to come to grips with the fact that its consumer-facing business model is only part of the story. Many would, mistakenly, assume it made money by getting people into a theater on the cheap. Theaters stood to benefit from selling overpriced drinks and snacks, and the often contentious relationship would prove to be somehow symbiotic in the end.
And it appeared to be working. Over the course of a single month last year, MoviePass CEO Mitch Lowe said subscribers spent some $11 million on AMC concessions alone. When the alternative is empty seats, leading to fewer add-on sales, theaters, seemingly, will take what they can get. But the service never really cared much about getting you into a theater. This wasn’t a Hail Mary attempt at saving an industry that saw profits flatline over the past decade before falling precipitously off a cliff in recent years. It was something else entirely, and the entire operation hinged on people willing to use it without knowing, or caring, how it actually intended to make money.
Privacy advocate and whistleblower Edward Snowden once said of Facebook that it was a “surveillance company” that calls itself a social media platform. MoviePass isn’t Facebook, but the two are more similar than you might think.
MoviePass is in trouble
Its current state of affairs is a sad one. According to a securities filing by its parent company this week:
If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc. (“MoviePass”), which would cause a MoviePass service interruption.
Such a service interruption occurred on July 26, 2018
In laymans terms, the service has run out of money and the service has stopped working. Or, to hear the company tell it: “We are still experiencing technical issues.”
We are still experiencing technical issues with our card-based check-in process and we are diligently working to resolve the issue. In the interim e-ticketing is working. We apologize for the inconvenience and appreciate your patience while we resolve this issue.
— MoviePass (@MoviePass) July 27, 2018
Translation: “We’re broke.”
And its no wonder. In May, the service burned through some $40 million in funds, with an expected $45 million loss in June.
It’s not that Helios and Matheson haven’t tried. It recently tried to lure in new subscribers with promises of ‘bring a friend’ days and premium upgrades, like IMAX films. Its parent company even attempted a reverse stock split to keep the company listed on the NASDAQ exchange and secured an emergency loan of $5 million. Both were essentially bandages on a wound that seemingly needs amputation.
For a company whose business model relied on partnerships with corporate interests, not the consumer, it’s definitely tried to put its best foot forward to save its consumer-facing business.
But, that’s not really the one that matters.
It’s not what you think
In a keynote last March titled “Data is the New Oil: How Will MoviePass Monetize It?,” Lowe revealed that the company existed primarily to collect data on its users. “We know all about you,” he said. “We get an enormous amount of information. Since we mail you the card, we know your home address … we know the makeup of that household, the kids, the age groups, the income. It’s all based on where you live. It’s no that we ask that. You can extrapolate that.”
He continued:
Then, because you are being tracked in your GPS by the phone … we watch how you drive from home to the movies. We watch where you go afterwards, and so we know the movies you watch. We know all about you.
Lowe, essentially, was laying out the groundwork of an understood agreement. There’s an implicit and additional cost to the money you shell out for MoviePass each month, and that cost is in tracking your every move before, during, and after using the app.
Lowe later backtracked on this assessment, stating the company had disabled location tracking. Even if you’re inclined to believe Lowe, the data tracking story only got creepier from there. In May, MoviePass emailed its users detailing a partnership with student loan refinancing service Laurel Road — because student loans and movies are obviously the perfect combination.
You’d be forgiven for not understanding the connection between swimming in student loan debt and using a pass to catch a few cheap flicks at the local theater. But as Lowe told us earlier this year, the company is more than aware of your current financial standing. And although it claims not to sell the data it has collected on its users, there’s a lot of legal wrangling that can be done when “gifting” it to partners instead.
In this case, the gifted personal data started paying dividends. People all over the web started wondering what the hell was happening when an entertainment app started offering them student loans, or better rates to refinance.
The sustainable way vs. the MoviePass way
As multiple studies on consumer psychology have shown, it’s possible to tease a consumer into paying more for what they perceive to be a good deal. If the average person visits a theater twice a month, paying $30 for two trips, he could be convinced to to spend an extra $15 to see more movies each month.
But much like your local gym, few will actually do it.
Some won’t show up at all, paying monthly for a subscription they’ve promised themselves they’ll take full advantage of after the holidays, or when things slow down at work. Others will continue to go as normal, never really considering they’d be better served paying for a single movie ticket. It is a deal, after all, even if not for them.
This was the sustainable model, at least in theory.
MoviePass, though, just wasn’t able to attract the number of subscribers it needed to make inroads. So it switched to something more nefarious. Instead of selling people on seeing more movies each month MoviePass switched to selling people, or their data at least. It was a loss leader, the type of move that would cause the company to hemorrhage money on the front end while hoping to recoup it from partners who’d pay for the types of data it collected on the back end.
That model too appears to be failing. MoviePass is holding on for dear life, but it’s doubtful it can for much longer. Once people begin getting turned away from theaters when trying to use the service — which is already happening — it’s highly unlikely a turnaround is in the cards.
From here, Lowe appears to have two options: Extract more money from each user by raising prices or limiting the number of movies they can see each month, or start selling customer data to the highest bidder.
Consumers probably aren’t going to care much for either solution.