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MoviePass Owner Sued by Shareholders as Business Model Falters

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Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#101

Earlier quoted context omitted.

Globally Netflix doesn't have much competition. HBO, Amazon, Hulu etc are America focused while Netflix has done a lot to cater to local markets.

Netflix has stacks of local market competition in every local market. They're just not companies Americans know of.

> Netflix has stacks of local market competition in every local market. They're just not companies Americans know of.

I'm in the UK and I can't really think of any serious competition they have here. Maybe Amazon, but I don't know anybody who's talking about Amazon Prime originals.

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#102
post #77

Earlier quoted context omitted.

Nope it would not have worked. You see movie theater owners have to pay the movie owner a per viewer fee. So it is not merely about filling up empty seats. The entire "filling up empty seats" story relies on the misconception that if you have empty seats there is a zero marginal cost to extra viewers, but that is not the case, movie owners charge per ticket sold. The deal movie pass offered theaters was "if you make…

>The deal movie pass offered theaters was "if you make a deal with us, we can help you raise revenues at a marginal loss." No sane business person wants that. The point of business is to make money not lose it. Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamenta…

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Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#103

Earlier quoted context omitted.

Problem is, it's nigh impossible for a tech company to "strike deals with all the theater chains," be they sweetheart or not so sweet. The movie theater biz is one of the most inept around, stuck in the 1950's in terms of its business model. I did a tech startup that tried to bring social/mobile/local tech to the movie theater experience, and the theaters balked. They fear technology. It took a decade of fearmongerin…

Any chance the theaters were being rational and it was in fact you who were mistaken? The idea of an app that makes people watch more movies does seem pretty far fetched the way you describe it. A more logical conclusion would be that you either didn't sell your thing to them very well (as you haven't sold it to us) or that they, being in the movie business, saw something about it that you, being in the app business,…

$1B is an ~8% increase in industry revenue. That doesn't feel extremely significant in terms of value added.

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#104
post #77

Earlier quoted context omitted.

Nope it would not have worked. You see movie theater owners have to pay the movie owner a per viewer fee. So it is not merely about filling up empty seats. The entire "filling up empty seats" story relies on the misconception that if you have empty seats there is a zero marginal cost to extra viewers, but that is not the case, movie owners charge per ticket sold. The deal movie pass offered theaters was "if you make…

>The deal movie pass offered theaters was "if you make a deal with us, we can help you raise revenues at a marginal loss." No sane business person wants that. The point of business is to make money not lose it. Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamenta…

> Movie theaters don't make their margins on tickets sales, they make them on concession sales. The model of "lose a small amount on tickets sales, and make it up and then some on concession sales" is fundamentally sound. The ticket loses would get written off as a Cost of User Acquisition for the high profit concession items.

The interesting issue is that the theaters know this, and have already calculated it into ticket prices. This has been the modus operandi for nearly as long as theaters have ever existed. The interesting gall of MoviePass was thinking they had a new angle in a game so much older than them. Movie theaters have already calculated their margins to the knife's edge of marginal costs on tickets versus concession and value add sales, and have done so for nearly a century.

Turns out MoviePass didn't actually have a new angle and tried to do what Movie Theaters were already doing, without the benefit of controlling any direct interest in the revenue from the value adds and concession sales. I don't understand how any of the VCs saw that business plan and considered it a good idea. We've known that marginal costs on theater tickets have been a loss leader for nearly a century or so, it's a very well known fact about the industry that is practically an economics 101 lesson in every textbook.

The theater market is also this consolidated precisely because of this long, calculated economic model. A lot of the poker game of passing individual theaters between chains is almost entirely because of this game of playing knife's edge marginal costs versus added incentives/interesting concessions for sustained customers in the long term, where even entire individual theaters in a chain may be loss leaders for customer loyalty to other theaters elsewhere in a chain.

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#105
post #91

Earlier quoted context omitted.

The marginal cost is likely significantly lower than the ticketed price. I'm sure there is a win-win there somewhere. In Australia tickets are about $20 ea retail. Many of the cinemas have deals regularly offering tickets for around $15. If you are with certain telcos you can get tickets all year round for $13.

> I'm sure there is a win-win there somewhere. $15 popcorn.

Which MoviePass wasn't selling and had no way to sell.

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#106
post #89

Earlier quoted context omitted.

The marginal cost is likely significantly lower than the ticketed price. I'm sure there is a win-win there somewhere. In Australia tickets are about $20 ea retail. Many of the cinemas have deals regularly offering tickets for around $15. If you are with certain telcos you can get tickets all year round for $13.

I am not sure your statement about the marginal cost is correct. This is a closely guided secret among studios and exhibitors, but the little anecdotal information that leaks out indicates that for well publicized major releases the studios want pretty much the entirety of the ticket price and the theater can only make money off of concessions. There isn't much room for moviepass in here. Even for movies that are not…

I don't think it's a closely guarded secret. The movie theater business is a century old textbook example of a marginal cost loss leader for concession sales.

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#107
post #30

MoviePass (incorrectly) assumed it would be able to strike sweetheart deals with all theater chains, thus drastically reducing overall costs. It even sounds good in theory - why wouldn't the theater want to get paid for seats that would have otherwise gone empty and have more people inside buying concessions? It could even have worked - maybe five or ten years ago. Now the theaters themselves quickly realized the val…

Problem is, it's nigh impossible for a tech company to "strike deals with all the theater chains," be they sweetheart or not so sweet. The movie theater biz is one of the most inept around, stuck in the 1950's in terms of its business model. I did a tech startup that tried to bring social/mobile/local tech to the movie theater experience, and the theaters balked. They fear technology. It took a decade of fearmongerin…

>The movie theater biz is one of the most inept around, stuck in the 1950's in terms of its business model.

Meanwhile, they are still (for the most part) in business, decades later, while "cool" business models like MoviePass cost shareholders millions and blow out in less than a year.

Who should be learning from whom?

Re: MoviePass Owner Sued by Shareholders as Business Model Falters

#108

Earlier quoted context omitted.

Problem is, it's nigh impossible for a tech company to "strike deals with all the theater chains," be they sweetheart or not so sweet. The movie theater biz is one of the most inept around, stuck in the 1950's in terms of its business model. I did a tech startup that tried to bring social/mobile/local tech to the movie theater experience, and the theaters balked. They fear technology. It took a decade of fearmongerin…

> The movie theater biz is one of the most inept around, stuck in the 1950's in terms of its business model. Meanwhile, they are still (for the most part) in business, decades later, while "cool" business models like MoviePass cost shareholders millions and blow out in less than a year. Who should be learning from whom?

Movie Pass made no sense from the start. It’s the dot-com “lose money on every customer and make it up in volume” model all over again.
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