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MoviePass couldn’t afford to pay for movie tickets on Thursday

money.cnn.com

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Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#21

Post by surge »

legitster wrote: post #20

If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets. For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense! I am trying to wrap my head around…

Maybe hoping to make their money back when people let their subscriptions idle during the off season for movies...but this is most attractive avid movie goers so I don't see this working. People who don't go to movies all the time likely won't get it.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#22

Post by ehsankia »

Waterluvian wrote: post #5

Was the entire play of MoviePass to pay for people's movie tickets until they make it and then jack up the prices + negotiate with cinemas for better deals? What was the "make it" condition? Is this a common strategy? It also loosely reminds me of the dotcom era strategy. It doesn't matter if we're not making any real money, we have a lot of users. Surely that can be converted into money somehow. We're worth billions…

Yeah, they were hoping to sell user data, get partnerships with theaters or even businesses around. They even tried getting deals with specific movies. But yeah the whole SV strategy is disruption. Look at Uber for example.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#23

Post by s73v3r_ »

legitster wrote: post #20

If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets. For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense! I am trying to wrap my head around…

They already do strongarm some smaller theaters into getting a cut of concessions.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#24

Post by ChuckMcM »

gorbachev wrote: post #9
ChuckMcM wrote: post #6

Earlier quoted context omitted.

You would no doubt be surprised. High risk lending is a thing in the Bay Area at least, I attended one of the VC lunches and at my table was a person who did that for a living for hedge fund. Sort of like really really big payday loans, but with worse terms. He mentioned that one of the most unusual notes they had written was backed by obligations on future projects by the CEO of the company, so if the company folded…

What are the chances the CEO will disclose those terms to prospective employees of his new companies? Near zero? That's a serious landmine for employees who get part of their comp as stock options. Edit: edited to reflect what I actually wanted to say (future companies instead of current company)

Absolutely but once you're in the situation where you are securing high risk debt financing you're employees should already reset the future value of their stock to $0. While I don't know if it is a hard and fast rule, it has been true in my experience over the last 30 years in the bay area that when a company is doing this sort of move to survive it has never left any value in the common stock.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#25

Post by alew1 »

noja wrote: post #16

How many movies a month does their average customer watch? Is there a small group of users costing them the most money?

I’ve seen 30 since signing up at the end of November. Not sure how typical that is, but my friends with MoviePass also see a bunch!

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#26

Post by jld »

legitster wrote: post #20

If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets. For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense! I am trying to wrap my head around…

Becoming movie payola was the way I thought they would go. They could be an avenue for studio to discount tickets to specific films without some of the problems of traditional couponing. This could either just drive buzz, or could allow studios to goose opening weekend sales by paying MoviePass to push films, as well as reimbursing MoviePass the ticket cost.

Probably not enough to become profitable though.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#27

Post by legitster »

tompetry wrote: post #18

I think the subscription model for theatres makes a lot of sense for all involved. Getting more people to the theatres (where they buy other stuff) and creating larger audiences who didn't previously visit theatres. The pricing and terms of MoviePass are unsustainable, but I think there will be more subscriptions for theatres that are tried.

Agreed. I think their general conceit is that people enjoy the movie-going experience, but they are put off by the price. There is truth to this.

That said, they really botched the strategy - they could have bootstrapped the whole thing and slowly come down in price.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#28

Post by Jtsummers »

surge wrote: post #21
legitster wrote: post #20

If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets. For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense! I am trying to wrap my head around…

Maybe hoping to make their money back when people let their subscriptions idle during the off season for movies...but this is most attractive avid movie goers so I don't see this working. People who don't go to movies all the time likely won't get it.

The problem with this idea is that (at $9.95) someone in my area needs to see one movie in the evening and they're ahead. Two movies, and MoviePass needs them to not see a movie for a full month to almost catchup, and they'd still be behind by $1.50. During the big movie seasons, it's easy to see 2-5 movies in a month. I've only seen 2 movies (since April) that I wouldn't have seen without MoviePass. I've seen 15 movies.

MoviePass has paid $137.00 for me, and I've paid them $89.95 (I bought the annual pass, joke's on me now, but I did get enough in to be better than break even). If I'd done the monthly I'd have spent $38.80 over that same time, they'd be out $100. They'd need me to idle for 10 months to catch up.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#29

Post by nine_k »

gorbachev wrote: post #9
ChuckMcM wrote: post #6

Earlier quoted context omitted.

You would no doubt be surprised. High risk lending is a thing in the Bay Area at least, I attended one of the VC lunches and at my table was a person who did that for a living for hedge fund. Sort of like really really big payday loans, but with worse terms. He mentioned that one of the most unusual notes they had written was backed by obligations on future projects by the CEO of the company, so if the company folded…

What are the chances the CEO will disclose those terms to prospective employees of his new companies? Near zero? That's a serious landmine for employees who get part of their comp as stock options. Edit: edited to reflect what I actually wanted to say (future companies instead of current company)

I bet it would be framed as an investment by the bank. Could even look good from a large enough distance.

Re: MoviePass couldn’t afford to pay for movie tickets on Thursday

#30

Post by clintonb »

s73v3r_ wrote: post #23
legitster wrote: post #20

If I am a traditional 'tech' company - I can afford to lose money when I am investing it in my platform or technology. It's like borrowing money to invest in your assets. For MoviePass, they are losing money and passing it off to theaters - it's like borrowing money to buy more ingredients for a failing restaurant. You can't charge less than the marginal cost, it doesn't make sense! I am trying to wrap my head around…

They already do strongarm some smaller theaters into getting a cut of concessions.

What leverage do they have to strongarm? If a theater is popular, that means MoviePass customers like the theater. MoviePass needs the theater more than the theater needs MoviePass. If MoviePass chooses not to pay for tickets at the theater, that’s a MoviePass problem.
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