Why MoviePass Failed (And Was Always Going To)

MoviePass may be on its last legs, but hardly any of its failures could rightly be called a surprise. It’s been an entire year since their all-you-can-watch movie plan was first announced, prompting millions of new subscribers who jumped at the chance to see one film a day for $9.95 a month, and in that time there have been multiple red flags.

Although MoviePass itself had technically existed since 2011, their disruptive low-cost plan made them something of a household name. In an era of burgeoning theater ticket costs, the service offered a lifeline to cinephiles longing to get out of the house more regularly for minimal cost. Previous iterations of their services utilized a voucher system but, by the time the new plan rolled around, they had devised an integrated prepaid card that simplified the system for their members.

It seemed like a deal that was too good to be true, and fans and critics alike patiently observed its eventual downfall. Service outages, conflicts with theaters, and even internet shade cast by The Walking Dead all accompanied MoviePass on its downfall, despite the fact that the company remains extant at time of this writing. So, what happened? And why was this destined to happen?

This Page: Why MoviePass Failed
Page 2: What MoviePass (And Theaters) Can Do Next

MoviePass’ Bizarre Business Model Explained

The offer for which MoviePass would become known began back in August of 2017. After an analytics firm obtained a majority stake in the company, the $10 plan was rolled out; for a low-cost fee, members could see a film a day. Users would select the film and the cost of the ticket would be put on a membership card to be used at the cinema. Essentially, once on board, MoviePass would foot the bill. The expectation was that moviegoer habits would generate enough valuable data to justify any losses incurred from members seeing more than one film per month (along with less active members)

Following the rush of capital generated by new subscribers, other avenues manifested to keep MoviePass afloat, including film distribution under MoviePass Ventures. Of these, John Travolta’s ignoble turn in Gotti made headlines as a critical dud with a hot-potato production past.

From the sidelines, MoviePass looked to be hemorrhaging money even during its busiest fiscal quarters. With a model reliant on the hopes that the majority of its members wouldn’t use the very service they were paying for, or that the data they generated would subsidize any losses, it was a system that turned heads but didn’t seem to have staying power.

Why MoviePass’ Business Model Doesn't Work

The part of the equation about monetizing customer data is murky and hard to parse, but the tickets-per-month aspect isn’t. From this metric, MoviePass relied on passive members; so long as the majority of members were active users of the service, the company would remain perpetually in the red.

If the mean ticket price is $8 and the monthly service costs $10, MoviePass was banking on cardholders seeing one movie or less a month to court any hope of a profitable outcome. While it's true that the majority of cinemagoing audiences see relatively few movies, meaning it's arguable that a portion of subscribers would be too busy to use their purchased plan, any members seeing upwards of two films a month pressured the expectation for the rest of them to act as an offset. If a user went to four films in a month, that requires eleven other members seeing just one to reach a break-even point.

The new plan saw upwards of two million subscribers by February of this year, but even though this represented a significant amount of capital, it required an exponential amount of payouts to theaters to match. Despite MoviePass’ direct transactional method, which provides a more straightforward relationship with theaters than a printed voucher or app integration alone, many franchises were not pleased with the disruptive service, with AMC in particular tussling with MoviePass since its original beta launch.

Once the new MoviePass subscription was announced, re-priced plans and a cascade of outages and changes played fast and loose with customer expectations and spread nagging doubt about the longevity of the service. In the past weeks, there have been blackouts on specific films like Mission: Impossible - Fallout, restrictions which prevent seeing a film more than once, and confusing new popular film surge fees - not to mention the entire service going dark for a period. It appears that overspending on tickets has caught up with MoviePass' funds.

Page 2 of 2: What MoviePass (And Theaters) Can Do Next

The Future of MoviePass

MoviePass stock price plummeted as they scrambled for $1.2 billion to stay afloat, and the writing on the wall seems quite clear. However, the service still remains in business and continues to boast its $9.95 charge on its homepage, although there have been serious changes to the plan and a monthly increase is long expected and overdue. As it stands, it'll be unlikely that MoviesPass will disappear, but its budget options will. The question of whether the increased prominence will be worth all the bad PR is presently unanswered, though.

On the other side, MoviePass Ventures has had a rocky history over its brief lifecycle, which clouds predictions for an upcoming distribution success. Still, the original MoviePass service retains a massive subscriber base, representing potential targets for merchandising, sales, and other offers; that is, until the difficulties with basic services propel those users onward.

Back in June, MoviePass CEO Theodore Farnsworth spoke with Screen Rant, looking towards international expansion to seek out additional revenue streams. Part of the disruptive strength of the company is its method of ticket payouts, which avoids the need to directly partner with theaters, and Europe’s fragmented theatrical ownership might represent a market where the MoviePass concept might thrive.

Why Theater Subscription Services Are Better

But MoviePass isn't the only game in town, and the company's future exists independently to the subscription model concept. The MoviePass method has inspired new competitive services that are theater-first. AMC recently rolled out their AMC Stubs A-List, a three-movie-per-week plan offered to users at $19.95 a month, absent of any restrictions on IMAX or 3D tickets.

There’s a simplicity to a plan like this one, which bears no requisite location-based apps or surge pricing on popular or first-week releases. Since it's offered directly by the chains, there’s an apparent ease of use, although this does mean that film distribution and locale are key. Beyond that, though, the profitability of these subscription services is most apparent, with any losses incurred by frequent users offset by regular cinemagoers and concessions purchases, an essential loss leader strategy unavailable to MoviePass.

MoviePass shot for the moon, and if their final days are drawing near, that disruptive and storied legacy remains. It announced an uncharted market for subscription-based theatrical attendance in America, and a year of unlimited films and copious losses yet defined a new monthly charge which millions of consumers are willing to pay.