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MoviePass has a new “plan for profitability” but it probably won’t work

If the service wants to survive, it will need to “piss a lot of people off,” says one analyst.

MoviePass has a new “plan for profitability” but it probably won’t work
[Photos: Jeremy Yap/Unsplash; Burst/Pexels]

MoviePass is currently in a free fall. Its parent company, Helios and Matheson Analytics, just hit a depressing stock low of 71 cents a share as money woes and negative headlines continue to pummel it. Last week, MoviePass had to borrow an emergency $5 million to keep the service available to subscribers, and now it’s beginning to make certain popular films unavailable to its user base.

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This morning, MoviePass announced it has a new strategy going forward, a “plan for profitability” that revolves around significantly cutting costs. Among other things, the company says it plans to slash its monthly burn by 60%. The question is: Will it be enough?

If MoviePass is able to significantly cut its costs, that that may give it some runway to figure out a profitable model that can scale. Included in this new plan is a minimum subscription price of $14.95/month (compared to the current $9.95), as well as a limit on “first run movies” that are available to its subscribers.

While these changes are aimed at stemming losses, they don’t address the larger question of whether MoviePass’s business model is inherently flawed. According to Wedbush analyst Michael Pachter, the company is very likely doomed for this reason. The economics simply don’t add up, he says, because MoviePass hemorrhages money on every customer it has.

“The only ways for the company to become viable,” Pachter writes via email, are “raise prices or find another revenue source or … cut expenses.” Given that MoviePass doesn’t control the cost of tickets (it pays full price for every ticket its subscribers purchase), it’s very hard–if not impossible–for the company to significantly cut expenses.

And if MoviePass raises its price–which it’s now nodding toward–“they wouldn’t have as many members.” So its problems are twofold: Will the new $14.95 fee will scare away subscribers, and will the new baseline price actually bring in enough money to keep the service afloat? Pachter doesn’t mince words: “It’s a bad business model, since they have no control over the product they are offering.”

Abandon All Hope? Maybe Not

Eddie Yoon, the founder of EddieWouldGrow, a think tank and advisory firm on growth strategy, who’s written about MoviePass’s business strategy, thinks there may be some way to keep MoviePass afloat. A subscription model that makes money from other cross-brand opportunities is a good longterm strategy, he says. In the case of MoviePass, “It’s been poorly executed.”

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[Photo: Kilyan Sockalingum/Unsplash]
The biggest threat Yoon sees to the company are the customers who take advantage of the service. There are movie viewers who enjoy going to the movies alone, and do so frequently. There are others who enjoy the social aspect of the cinema–and maybe go to the theater every week or so if they can coordinate with friends. The latter group is the profitable customer base, which MoviePass should focus on, and the former is what’s sinking the service.

If MoviePass wanted to survive long enough to turn into a sustainable business, it would have to “give up on the ghost of getting the scale,” Yoon says. This means focusing in on the few customers who are profitable for the business and getting rid of the ones who are not. “It will piss a lot of people off,” he says, “but they are already pissing a lot of people off.”

In order to make these big changes, the company would have to be very clear about what’s changing. For instance, if MoviePass wanted to charge surge pricing–or implement other fee changes that would impact the cost based on demand–it would have to provide a simple and universal explanation. What angers customers the most are when big, random changes are thrown their way when they’re trying to use the service as usual.

By focusing on the customers who wouldn’t use the service as frequently–and creating a new subscriptions structure that would lessen costs–Yoon thinks it’s possible for MoviePass to have a future. He adds that it should focus regionally, on the areas where the service has a real stronghold, and form partnerships with local, second-tier theaters (read: not AMC).

For now, we’ll have to wait and see if MoviePass has a chance at survival. With the stock sliding, and customers becoming angrier, it’s going to be a slog. Though Yoon may see some potential, Pachter does not. His diagnosis is two words: “not viable.”

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About the author

Cale is a Paris-based reporter. He writes about many things.

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