
MoviePass Owner Sued by Shareholders as Business Model Falters - nimos
https://www.bloomberg.com/news/articles/2018-08-15/moviepass-owner-sued-by-shareholders-as-business-model-falters
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paxys
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 value of such a subscription model, and made
the logical decision to cut out MoviePass entirely and just offer it
themselves.

It's similar to how Netflix would never exist had it started out today,
because no studio would surrender their back-catalogs to them for pennies.

~~~
brianstorms
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 fearmongering for theaters to fork over millions to buy digital
projectors. The last thing they want is tech that will empower moviegoers.

What you discover with the "exhibition industry" (what theaters like to call
themselves) is that they are in the fast-food business. Popcorn, soda, candy,
junk food: this is what the theater sells. The movie is there just to bring
you into the building. But what they want you to buy is the concessions.
Without the movie nobody in the world would wander into a theater and order a
popcorn and a soda for $12 or whatever.

When I spoke with exhibitors, I found them to be like realtors: really
paranoid, untrusting of their competition, and particularly untrusting of
uppity little tech startups (can't really blame 'em, I mean, if a tech startup
ever gets successful they tend to wipe out everything in their wake--witness
Netflix, Amazon, Apple, Microsoft, Facebook, Craigslist, etc.)

Despite the fact that we had built an app that presented a compelling case for
a $1 billion or higher bump in annual U.S. box office revenue--we basically
came up with ways to get more people to go to more movies more often--the
exhibitors would have none of it. They didn't trust it, they wanted nothing to
do with it. ESPECIALLY if their competitors in the same city had the same
tech. The idea of a mobile app that empowered moviegoers to get alerted to
every moving coming, and track upcoming movies after you indicated you liked
the trailer, and tracked your favorite stars/directors/etc, and tracked the
reviews of your favorite critics, and tracked what your friends were planning
to go see, none of that meant diddly to exhibitors.

It was the craziest thing I've ever seen.

The way theaters are trying to survive now is by focusing on what their core
competence is: food. Notice how many theaters now sell hamburgers and pizza
and sandwiches, and beer and wine, and so on. You go to a movie now, you may
be set back for $30 in meal fees per person easily. For an exhibitor, that's
nirvana.

Nah, MoviePass was doomed from day one.

~~~
jasonkester
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, didn't.

~~~
phobosdeimos
Its not far fetched because such apps actually exist and do everything he/she
describes.
[https://play.google.com/store/apps/details?id=net.sharewire....](https://play.google.com/store/apps/details?id=net.sharewire.Pathe2)

~~~
Splyce
I dont believe he was making the point the app wouldnt function or didnt exist
but more that the claims being made about said app would hold true. From what
i gathered is this guys app would not just increase movie goers attendance but
increase it by $1 billion worth a year. Thats some really bold claims and I
doubt any serious investor would pass up if there was any sort of data to back
it up.

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kosei
> MoviePass parent Helios & Matheson Analytics Inc. omitted and misstated its
> financial prospects in press releases when it touted a "sustainable"
> business model, the shareholders claim in lawsuits filed in Manhattan
> federal court.

Is this for real? Any outsider could have seen that this model was
unsustainable from the start, with the business buying tickets at full price
and then selling them at an unlimited rate for $9.99. To claim ignorance here
as an investor just seems negligent.

~~~
smnrchrds
If the company actually made false statements, it would be illegal. _They
should have known better than to believe me_ is not a valid defence for
securities fraud.

~~~
kosei
Sure, if they falsified their books, that's absolutely illegal. But "they told
me their business model was sustainable, and I believed them and gave them my
money" doesn't seem like a reasonable argument either.

If that's how those investors fund their companies, I've got this nifty bag of
magic beans they might be interested in... For $1M, they'll grow $2M in beans,
I promise!

~~~
smnrchrds
> For $1M, they'll grow $2M in beans, I promise!

You are reinforcing my point. If you do that, it would be fraud, plain and
simple. You would have to pay the investors back and you will spend a couple
of years in prison. You can't show up to the court and say, _but your honour,
they should have known better_. Well, you can, but it would not change the
court's decision in your favour.

Communications with the investors is not a place to play loose. If you say _we
are profitable_ and you are not, or _we are sustainable_ and you are not, or
_we have a buyer lined up_ and you do not, you would find yourself in a world
of trouble.

~~~
hn_throwaway_99
The argument we are making is that MoviePass's business _model_ WAS
sustainable, it's just that the model was predicated on the very risky
proposition that they'd be able to get sweet deals with movie theaters, which
didn't happen. Tons of people felt that their model was extremely unlikely to
come to fruition, so they didn't invest.

We don't know the full story of what was said, and it is possible the
defendants lied about factual content, but right now it just sounds like sour
grapes.

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drawkbox
In the end a service like MoviePass will be needed, noone wants one just tied
to one theater chain most likely though it will be that way for a while if not
indefinitely. It looks like this iteration of a movie service independent of
movie theaters just won't be it.

As it has been said, theaters are empty much of the time and they make major
margins from their concessions. You'd think more of them would have gone for
it. Maybe somehow they tie it to concessions sales in that you can get 19.99 a
month or something if you aren't buying concessions but 14.99 or 9.99 with
limited movies if you are buying concessions and that is tracked through the
card. At that point it is a loyalty/rewards program and you could go to the
theaters with ROI in that the customers you bring in are x% concessions buyers
for x amount. Seems like an easier sell hooked to concessions sales.

Theaters pay between 5-20k per film per week and make almost nothing from
ticket sales, if not lose some depending on the distributor and if they are
first run theaters. Theaters NEED concession sales more than ticket sales.

It seems a service that allows free movies that ties pricing to concessions
would do better. Or, we'll just be stuck with theater bound movie services
which is essentially a local theater only rewards program.

~~~
jrs95
Honestly nevermind being tied to one theater chain, I wouldn’t mind being tied
to one theater. I go to the same one almost all of the time anyways. And even
if I didn’t, there are enough AMCs around that it’s not much of a value add
for me to have something that works at different chains.

~~~
swozey
I live in a city with Alamo Drafthouses and I refuse to ever visit an
AMC/Regal/etc after moving here. I'm fine with them making their own monthly
payment programs.

~~~
indecisive_user
Have you been to an AMC lately? The one near me upgraded a lot of their show
rooms and though I've never been to an Alamo Drafthouse, they both seem to
have a lot of the same features from what I can find.

Reserved seating, print e-tickets at their robo kiosk, comfortable reclining
seats, full bar with pub food. I know that AD theaters have a lot of niche
showings and cool events, but as far as just watching the latest blockbuster,
are there other advantages?

~~~
baddox
Indeed, and I’ve never been to an Alamo Drafthouse, but I’m fairly sure they
have nothing that can even touch my nearest AMC which has a true IMAX screen
and a Dolby Cinema screen.

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SN76477
I think MoviePass has been successful in showing that the industry needs a
shakeup. I dont know what their monetization model was, I dont think they knew
what it was.

~~~
michaelchisari
But every industry can be shaken up if you're willing to give things away
effectively for free with VC money. I don't know if that translates to proving
an industry needs a shakeup.

~~~
Fomite
Exactly. It's easy to "shake up" and "disrupt" an industry by spending VC
money like it's going out of style. "People like things given away at below
market rates" isn't even a proof of concept.

~~~
indecisive_user
Alamo Drafthouse is testing its own subscription service and AMC already
rolled theirs out.

Now maybe it's just coincidental timing but moviepass certainly proved there's
a huge interest in that model of movie tickets.

~~~
Mindwipe
Chain specific subscription services (at more sustainable costs than
Moviepass) have been common outside the US for a number of years. Indeed,
that's where Moviepass got the idea from. I don't think Moviepass proved much
there.

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acjohnson55
Damn. Been rooting for them. Theaters are practically vacant most of the time,
so I'd think it would be a win-win. But the chains can't stomach sharing the
power. Sounds like Movie Pass is all but done at this point.

~~~
ian0
A long time ago I heard of a demo of a telco project in a mall's cinema. They
sent a location based SMS to everyone in the mall giving away half price
tickets to an otherwise empty screening starting in 15mins. And apparently it
filled up.

However that was years ago and I don't think anything came of it. Ive always
imagined there was some business rationale for the cinema to keep the ticket
pricing static and just take the hit on the empty screenings.

~~~
patio11
A buddy of mine similarly did digital signage for a mall in central Japan. The
most important sign just aggregated Twitter accounts controlled by employees
of the retail shops. By far the most successful emergent behavior: "Do you cut
hair for a living? Do you not have someone's hair to cut in next 30 minutes?
Tweet that the next person to walk in gets 10% off their haircut and it will
show up on a sign that a hundred people pass every five minutes."

(I suspect that many people who cut hair in Japan do so on the US model, where
they are independent contractors of the shop who "rent a chair" as opposed to
salaried employees. It is to their direct advantage to maximize throughput, in
a way that it is not to the direct advantage of e.g. someone who works at
McDonalds to maximize sales of burgers.)

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gremlinsinc
A better business model:

$19.99 per month. $2/matinee | $3/non-matinee. $1 in 'movie cash' for every $5
spent on concessions. spend 15 -- get $3...meaning the $3 is basically waived
for a non-matinee.

Edit to clarify: This would then be more friendly towards theaters, encourage
more $$ in concessions, and make them possibly give more deals/lower costs to
moviepass... I think it would be more sustainable.

~~~
maksimum
At which point it's $26/mo if you go to see two movies. Hardly a deal even in
LA or NYC.

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vamshi4001
They sent a confirmation mail saying that "I am in" as soon as I cancelled
their subscription! Pretty lame they can't identify difference between an
entry event and an exit event

~~~
laken
Careful! If you got that email, you didn't fully cancel, and resubscribed. The
app has a prompt on open telling you about the plan changes, even if you
canceled. If you check "I agree," it un-cancels your subscription.

