#1484 2017 · MoviePass (Helios and Matheson) · subscription entertainment
Unlimited Cinema for $9.95 - Until the Math Arrives
the problem
Moviegoing was pay-per-ticket and declining; price was the barrier a subscription could remove.
background
In 2017 MoviePass announced a no-contract subscription: unlimited movies in theaters, no blackout dates, for a flat $9.95 monthly fee, accepted at more than 91 percent of U.S. theaters, pitching itself as disrupting the industry the way Netflix and Redbox had.
The market response was immediate: churn of 4.2 percent in month one falling to 2.4 percent in month two, monthly retention above 96 percent, and subscriber counts racing toward the millions as parent Helios and Matheson funded the growth.
what everyone would do
Price the subscription just below average monthly ticket spend.
what they saw
Subscriptions work when marginal cost is near zero; cinema tickets cost full price per visit. MoviePass bet that scale would conjure a subsidy that did not exist, so every new subscriber was growth and liability at once.
the move
The company paid theaters full ticket price while charging subscribers less than the price of one ticket a month. Growth itself was the product, sold to investors as data, scale and eventual bargaining power with studios and exhibitors. Subscription economics inverted the risk: the heaviest users cost the most, and the model survived only if enough light users subsidized them and something, data deals, discounts, acquisitions, materialized before the cash ran out.
why it works
For a while it did: the $9.95 anchor felt like theft in the customer's favor, driving viral adoption and above-96-percent retention that made the growth story intoxicating.
the payoff
Churn fell from 4.2% to 2.4%, monthly retention above 96%, and subscribers raced past a million after the price cut.
where it breaks
Adverse selection brings the heaviest moviegoers first; the promised leverage over theaters never arrives; cash burn scales with success, so the faster it grows, the faster it dies.
what came after
The definitive cautionary case of buying growth with negative unit economics, cited wherever subscription dreams meet adverse selection.
references
- [1]Press release: MoviePass announces $9.95 subscription (Exhibit 99.1)SEC EDGAR (Helios and Matheson), 2017sec.gov
- [2]MoviePass slashes prices to $7.95 per monthCNBC, 2018cnbc.com