
The Entire Economy Is MoviePass Now - jds375
https://www.nytimes.com/2018/05/16/technology/moviepass-economy-startups.html
======
mabbo
> The king of money-losers, of course, is Amazon, which went years without
> turning a profit. Instead, it plowed billions of dollars back into its
> business

The key difference with Amazon is that Amazon could choose to be profitable at
any time- just raise prices ever so slightly, reducing growth in customer
demand, and the stop building out its enormous logistics empire and new
businesses. Amazon could have had profits for a very long time, but Bezos
understands that re-investing money in the company grows the value quickly.
Plus, you only pay taxes on profits.

MoviePass can't really do that. They don't have potential profits that they
can just stop re-investing. They aren't spending money on investments- they
just don't have income high enough to cover the costs of their product. And
lots of other start-ups have the same problem right now.

~~~
Bucephalus355
Raising prices would solve lots of problems for Amazon. They’d lose some
market share, reducing the monopoly accusations. Most likely companies are
going to face increasing pressure to do something about inequality levels, so
maybe a $5 / hour (hopefully more) pay raise for their 28k a year warehouse
workers could also be in the store.

~~~
CamTin
I'm not a lawyer, but I think if you are accused of being a monopoly, suddenly
increasing your prices is a bad legal strategy because it proves you have
pricing power, which is the classic sign of a Sherman-style monopoly that
regulators like to break up.

------
Certhas
> But it also reflects the willingness of shareholders and deep-pocketed
> private investors to keep fast-growing upstarts afloat long enough to
> conquer a potential “winner-take-all” market.

That's the gamble. Destroy competition, get lock in, become a monopolist and
the free market is your money printing machine. If regulators had teeth to
break up such monopolies, we wouldn't be seeing these gambles, and maybe more
honest competition.

~~~
dlwdlw
This strategy only works if you can effecticely build new habits that are
sticky enough to persist when the friction increases. Even better is if the
new behavior has interesting interactions with other things.

The reason enterprise tools tend to be “worse” is because the stickiness is
arbitrarily enforced instead of being rooted in reality. Uber/lyft are non-
sticky because theyre basically the same.

------
vinhboy
> Enjoy It While You Can

I love the conclusion of this article. As someone who has participated in the
online "deals" community for 10+ years, I have definitely benefitted from many
of the opportunities.

However, I do spend a considerable amount of time wondering what will happen
when this house of cards comes falling down.

But you know, I think that for every one person like me taking advantage of
these "arbitrage" scenarios, there are like 10 people paying full price. They
keep this economy going.

~~~
mmt
> But you know, I think that for everyone person like me taking advantage of
> these "arbitrage" scenarios, there are like 10 people paying full price.
> They keep this economy going.

That seems contrary to what the article is saying, which is that for every
person taking advantage, there are _zero_ people paying full price, because
it's the investors who are keeping this economy going.

As such, it may never end without a regulatory end to the winner-take-all
scenario, as a different comment suggested.

~~~
metalliqaz
All it would take for it to end is for investors to stop investing in money-
burners.

~~~
mmt
Isn't that a tautology, though?

My point is that actual[1] investors have an incentive to pour their money
into money-burners because if _just one_ of those initially money-burning is
the next Google, Facebook, Amazon, or whatever overwhelming winner-take-all
breakout profitable company, they will have more than justified dumping all
that cash into the losers.

[1] for lack of a better term. I've never quite understood why it's considered
"investing" to buy stock in a company if someone other than the company itself
previously owned the stock. That cash isn't going into company coffers. This
activity seems more like asset ownership/speculating than asset allocation
(which is what I think of when I hear the word "invest").

~~~
metalliqaz
Your point is well taken.

I think I just don't agree that government stepping in is the only way to end
the cycle. Seems to me it can/will die of natural causes when the "bubble"
bursts.

~~~
mmt
But what bubble? Where's the irrationally increasing asset values at a macro
level? Where's the "greater fool" that's buying it all up?

Without that, there's nothing to burst.

Moreover, this has been going on for _so_ long, at least since (before) the
dot-com boom, and we've had quite a few economic downturns. It's not very
credible that any bubble would survive that.

------
austinl
Reminds me of _VC Fund My Life_. It's an index of discounts offered by
startups, which you more or less know they're taking a loss on. Clever name.

[http://www.vcfml.com/](http://www.vcfml.com/)

~~~
erentz
That site seems like it’s all fake promotion - e.g. coinbase is on their and
last I looked coinbase’s fees were monstrously high compared to Gemini and
other exchanges. It’s definitley not saving you anything choosing them.

~~~
bonestamp2
Agreed, and Gemini is not well known enough... it's basically no fees for most
users moving between USD and BTC, and it's legit, based in NYC and follows all
of the NY state regulations on crypto.

~~~
wmf
Gemini recently increased fees to 1% so it's now far more expensive than GDAX.

~~~
erentz
Wow, that’s insane. I can no longer recommend retail buyers use Gemini if
they’re charging 1%. Very disappointing.

~~~
bonestamp2
Guess it's Robinhood then. Free to buy BTC.

~~~
wmf
Note that you can't transfer BTC into or out of Robinhood so you may be stuck
if they increase fees in the future.

------
xivzgrev
Pretty much. Seated was another gravy train. You got a $15 Amazon or Uber gift
card just for going to restaurant with a second person. There were no
minimums. you just had to show up and had to order food. There was a 2-3 month
period where my girlfriend and I were getting good meals for a net $15-$20
total. It was awesome, but I knew it wouldn't last. Then they put in
restrictions - to qualify for the $15, you needed at least 4 people or spend
$X. It's no longer even a "good" deal, so now I don't use it anymore.

~~~
pmoriarty
I got an even better deal: I cook my own meals, or eat at even cheaper
restaurants. I'm also looking in to joining a community garden and growing
some of my own food.

Amazon restaurant deals are not worth it for me, even with their discounts.
But I understand that a certain segment of the population doesn't think much
of such an expense, and that's who Amazon is targeting.

~~~
CabSauce
That sounds like a different product, not a better deal.

------
andrewjrangel
I am curious if this will end with a "bubble-burst" or a slow burn like
twitter has experienced. Surely the money has to dry up sometime? It is too
bad that none of these companies create any kind of net good for society like
a startup that pays you over minimum wage to clean up a park or sort
recycling.

~~~
crazygringo
> _Surely the money has to dry up sometime?_

Why? A bit simplified, but think of the money as coming from the profits from
the companies that have been successful. It's just how investment works. And
when you add up all the gains and losses, it's still a net positive as the
economy grows a little bit more year after year.

And what do you mean no net good? The companies create jobs which create huge
amounts of income taxes (always) and corporate taxes (when profitable) that
pay the salaries of the people who, for example, maintain our parks, or manage
a city's recycling systems.

~~~
nickparker
Jobs aren't intrinsically good. These startup jobs might be, but it's an
insanely complex system you're trying to suss a value judgement out of.

If these startups didn't exist, the money going into them would be seeking
returns elsewhere. There would probably be jobs involved there too, and the
people working those jobs might be doing something better for society than
building a short-lived money-losing consumer product.

If the mysterious "elsewhere" didn't create jobs with the money say because it
was spent on capital assets, that's still not the end of the story. Wherever
it went, someone else has it now and they're probably spending it, perhaps
hiring some people with it ie creating jobs.

The simple interpretation of your second line is the broken window fallacy,
which is false. The grasping-at-straws interpretation is that paying software
engineers to work on junk is a better than average way to route capital
through our economy - measured in terms of how much real value the capital
produces for people as it changes hands from company to coder + tax man, coder
to shopkeeper + tax man, and tax man to public works employees, etc forever. I
don't think we could possibly measure the latter interpretation, but I don't
believe it.

~~~
hueving
These companies losing investor money isn't anything like the broken window
fallacy.

If I pay a company $0.75 for a $1 widget with a $0.25 VC subsidy, I get the $1
widget and I'm ahead a widget. Nobody had to destroy a widget to make me buy a
new one.

The underlying widget suppliers still get the full price so the money is
flowing into the economy. The VCs are the only ones losing anything.

So paying people to clean parks is not better for the economy than VC
subsidizing blue apron meals.

The mistake you are making is assuming that a company losing money cannot
provide more value to society than it loses.

~~~
nickparker
You're right it's not quite the fallacy in that there isn't any destruction
going on. It's something adjacent though:

The whole point of markets is that people decide where to spend their money
based on the value they can get for it. When 3rd parties subsidize services
like Moviepass or Blue Apron, they break the pricing mechanism that's supposed
to lead us to efficiently use limited resources eg seats in a movie theater or
space on mail trucks.

If a company losing money is providing more value to the customer than it
costs to operate, they don't need to be losing money and they should raise
prices. Otherwise, you're arguing these companies have a beneficial
externality of some kind, and society at large gains in the transaction even
though the company is burning more value than the customer gains from its
product. I don't think that's the case for Moviepass or Blue Apron.

It's Bastiat's idea of the unseen alternative, except we're talking about LP
money channeled through VCs instead of taxpayer money through the government.

I'm not blindly against VC-, cross-business, or any other kind of subsidies.
If positive externalities exist they're a good thing. Eg, Amazon was "losing
money" or barely breaking even on its physical goods business for a long time,
but that money was strengthening our logistics network (both internal to
Amazon and in USPS, FedEx, UPS) so they could be profitable later at the same
or lower price points. Healthcare probably ought to be a money-losing business
because a healthy labor force has huge positive externalities. I just don't
think leisure or mild convenience/lifestyle products are positive on the
balance.

------
bmpafa
VC bucks creating discounts is about the only form of wealth redistribution we
[the U.S.] can count on these days.

~~~
adventured
Not quite. The US is currently undergoing a renaissance of successful
government programs that have massively cut poverty and homelessness over the
last 15 years.

"Child Poverty Falls to Record Low [nearly a 50% reduction since 1967],
Comprehensive Measure Shows Stronger Government Policies Account for Long-Term
Improvement"

[https://www.cbpp.org/research/poverty-and-
inequality/child-p...](https://www.cbpp.org/research/poverty-and-
inequality/child-poverty-falls-to-record-low-comprehensive-measure-shows)

"The U.S. Social Safety Net Has Improved a Lot. ... Its social safety net is
only a couple of percentage points below the OECD total, and larger than that
of Canada, Australia and South Korea."

"Furthermore, U.S. government transfers have been increasing over time. The
U.S. system of taxation and spending has become more progressive during the
past two decades. Per-capita government transfers were about $8,567 a person
in 2016, up from about $5,371 at the turn of the century (adjusted for
inflation) — an increase of 60 percent"

"After 16 years of expansions in the safety net under Republican and
Democratic presidents alike, the U.S. has a much more robust welfare state
than people seem to realize."

[https://www.bloomberg.com/view/articles/2018-05-16/the-u-
s-s...](https://www.bloomberg.com/view/articles/2018-05-16/the-u-s-social-
safety-net-has-improved-a-lot)

The National Alliance to End Homelessness, reports that total US homelessness
declined by 27% from 2005 to 2017. The drop was from 763,000 to 553,000 for
all forms of homelessness (while the US simultaneously added 30 million people
to its population).

"the rate per 10,000 people is at its lowest value on record."

[https://endhomelessness.org/homelessness-in-
america/homeless...](https://endhomelessness.org/homelessness-in-
america/homelessness-statistics/state-of-homelessness-report/)

(their 2013 report which gives figures back to 2005):

[https://b.3cdn.net/naeh/bb34a7e4cd84ee985c_3vm6r7cjh.pdf](https://b.3cdn.net/naeh/bb34a7e4cd84ee985c_3vm6r7cjh.pdf)

~~~
cimmanom
Given how much larger our population is, what would be shocking would be if
our social safety nets were _smaller_ than those of Canada, Australia, or
South Korea.

~~~
RhodesianHunter
The relative measure used in the linked article is a percent of GDP used on
social welfare programs.

It's not an absolute value comparison.

------
dalore
Hmm you laugh, but if you could sell dollar bills at $0.75 but you limited the
amount any person could buy. And you made them look at advertising, and
collected all sorts of personal info on them. You could easily quite a bit of
money off them. More then what you lose in selling the dollar bills at a loss.

~~~
supertrope
My economics professor auctioned $1. Someone bought it above par.

~~~
dsr_
The lesson your class was supposed to learn is that people aren't always
rational. Did they?

(And did your economics class then go on to assume everyone is perfectly
rational and understands their own utility functions, anyway?)

~~~
sullyj3
Rational doesn't mean valuing every dollar exactly the same. Buying a $1 for
more than $1 from an economics professor is funny, maybe a good story, maybe a
good keepsake, and plausibly worth more in utility than what they paid.

------
adventured
The entire economy.... Talk about an extreme click-bait headline.

Their fraudulent premise is extracted from this single setup:

"Over all, 76 percent of the companies that went public last year were
unprofitable on a per-share basis in the year leading up to their initial
offerings"

There were a whopping 30 tech IPOs in 2017 (tech & biotech IPOs substantially
tilt the percentage of unprofitable listings; there has been no change in the
number of unprofitable biotech listings, they overwhelmingly tend to be
unprofitable across all years). You see, that's the entire economy. By
comparison there were 370 tech IPOs in 1999, 12x more.

Meanwhile, back in reality, the S&P 500's profits are at record highs.

Small business profitability is also booming per the National Federation of
Independent Business survey (a survey going back to 1973), which is
registering sales & profit growth levels rarely seen in the last five decades.

"NFIB: A ‘record level’ of small businesses are growing their profits"

[https://www.washingtonpost.com/news/on-small-
business/wp/201...](https://www.washingtonpost.com/news/on-small-
business/wp/2018/05/08/nfib-a-record-level-of-small-businesses-are-growing-
their-profits/)

"Small business profits are at a 45-year high: NFIB survey"

[https://finance.yahoo.com/video/small-business-
profits-45-hi...](https://finance.yahoo.com/video/small-business-
profits-45-high-144509636.html)

[https://www.bloomberg.com/news/articles/2018-03-13/u-s-
small...](https://www.bloomberg.com/news/articles/2018-03-13/u-s-small-
business-optimism-index-rises-to-highest-since-1983)

~~~
salvar
> The entire economy.... Talk about an extreme click-bait headline.

I don't think the headline meant to imply that literally the entire economy is
MoviePass.

------
cityzen
One thing I found interesting is that MoviePass Ventures has started acquiring
rights to movies. From an article on IndieWire:

Just five days after MoviePass declared that it would acquire films through a
new subsidiary, MoviePass Ventures, the company has made good on the promise.
Partnering with The Orchard, MPV will share the reported $3 million bill for
North American rights to “American Animals,” the first narrative feature from
BAFTA and Sundance Grand Jury Prize-winning documentarian Bart Layton (“The
Imposter”). A U.S. Dramatic Competition contender at Sundance, “American
Animals” premiered there January 19, hours after the MoviePass announcement.

Full article: [http://www.indiewire.com/2018/01/moviepass-the-orchard-
acqui...](http://www.indiewire.com/2018/01/moviepass-the-orchard-acquisition-
american-animals-sundance-1201921511/)

Trailer:
[https://www.youtube.com/watch?v=SKvPVvy2Kn8](https://www.youtube.com/watch?v=SKvPVvy2Kn8)

I saw the trailer for that movie and had to pause it to make sure it said
MoviePass. The movie looks like something I'd like and I'm looking forward to
seeing it in the theater with MoviePass. I like to see MoviePass movies with
MoviePass, dawg.

I think the $10/month thing is a marketing stunt. Don't forget they hired
Mitch Lowe who was an executive at Netflix and Redbox as CEO in 2016. I would
say there's some method to the madness here. They're gaining a lot of insights
and a lot of users. I would still pay $10/month even if they limited it to 4-5
movies per month.

Also, don't forget about the tech. MoviePass has built out a system that I am
still fascinated by where you can check in for a movie and your pre-paid debit
card is instantly funded for enough to cover the price of a ticket. I know
it's nothing earth shattering but as a nerd I get a little giddy thinking
about it whenever I use it.

It will be interesting to see how it all plays out. I think they're playing a
long game.

------
rdiddly
It's kind of too obvious to even point out, but why act surprised that a
company, each of whose customers causes a net loss, gets poorer, faster, as it
grows?

 _Spotify, the popular music streaming service based in Sweden, lost $1.5
billion last year, even as_ [because] _it continued to add millions of users._

 _On Tuesday, Helios reported that MoviePass lost $98.3 million in the first
quarter, " despite adding_ [because it added] _more than a million net
subscribers._

FTFY.

------
amelius
It's called "predatory pricing", and it's illegal in many places.

[https://en.wikipedia.org/wiki/Predatory_pricing](https://en.wikipedia.org/wiki/Predatory_pricing)

------
acd
Central banks are pumping out new money in form debt of close to zero interest
rates. This is below market rate interest rates if the market would freely
choose the interest rate would be higher. The new money flows to automation in
startups that makes processes cheaper. Thus the central banks are not creating
inflation through salary inflation they are creating deflation through
automation. Robots on average replace 5.7 humans. Software is also a form of
automation.

Thus the central banks keep printing new money in hope for inflation but the
process where the money flows are creating deflation.

~~~
johnvanommen
Interesting.

I've long thought that the ZIRP policies of the last ten years had the exact
OPPOSITE effect of what was intended. The idea of ZIRP was that the Fed would
inflate house prices, and this would keep homeowners from defaulting on their
mortgages.

But the truth was that many homeowners only "owned" a tiny fraction of their
home. Often as little as 5-10% of what they paid for it. _So if their home
price dropped by even 15%, they were underwater._

This created a cascade of defaults. Then gasoline was added to the fire, when
the government began to forgive the capital gains of walking away from a home
that was underwater.

This created a scenario where thousands of people walked away from their
homes, and then large hedge funds scooped up thousands of properties for
pennies on the dollar.

Naturally, prices recovered eventually, but then the former homeowners were
now renters, and the rent was prohibitively expensive. To a large degre
because the value of the dollar had been devalued to prop up prices in the
first place.

------
empath75
This dude stole my startup idea:
[https://news.ycombinator.com/item?id=16945451](https://news.ycombinator.com/item?id=16945451)

~~~
jpao79
'MoviePass inspired me to start my $20 bill club where you send me $10/mo and
I send you a $20 bill in the mail.'

Hey - that just might work - once you've shown enough traction and proven
demand for DollarPass monthly membership subscriptions, then you should be
able to go to USA.gov and negotiate a bulk pricing on $20 bills at a sig-ni-
fi-cant discount. Plus if you had a payment app so the end user could pay for
stuff with the $20, you could show the user ads and charge a fee of every
transaction. You could also track their GPS location 24/7 and sell that.

It's all about leveraging and fully monetizing your captive user base!

------
textmode
"The fact that Google and Facebook were able to generate such enormous profits
and growth does give hope to some companies," Mr. Ritter said. If start-ups
can figure out to convert a large user base into paying customers, he added,
"it can be enormously profitable."

Did Google or Facebook "convert a large user base into paying customers"?

Is that what enabled them to "generate such enormous profits"?

------
nraynaud
Yeah, I am a bit sad to see those Ofo, limebike, Bird going all out in the
streets, they are trying to outspend each other for the winner to raise the
price. I just want a sustainable shared transportation system.

~~~
pwinnski
Ofo has been free to use for many months now, at least in Dallas. Are they
counting on the competitors to all fold and leave them the sole market owner?
Such weird economics!

~~~
pcr0
1\. Yep, they're funded by Alibaba and they've been buying out bankrupted
bikeshare companies.

2\. Alibaba and Tencent both own competing bikeshare services, so it's a cash-
burning contest.

------
candiodari
This is why I think we don't have inflation. Very low loans, and for managers
_personal_ careers it is actually beneficial to do this. The more of this is
done, the more others are forced to do the same. This then results in lower
interest rates, which ironically make it cheaper to do this, and results in
more below-cost and more capacity, making the problems worse.

But in reality many companies are producing/exporting under cost, because it
results in cashflow. To "conquer market-share".

It also means that at some point interest rates will rise ever-so-slightly and
_boom_ the whole thing will stop in a matter of a few months and we'll see 10%
inflation in quite a few products and an absolute disaster in the stock and
bond markets.

But in reality inflation is already here. The money has been printed.
Governments have given it to their favorite banks, and financed their own
careers _ahem_ I meant government programs with it. Banks have given this in
loans to everyone (because governments demanded they do this), and those
managers have "invested" it in growth.

In reality of course, the vast majority of those managers and governments have
no idea how to grow the economy (in fact, according to secular stagnation
theory it hasn't really grown, for individuals, since ~1980-1990 depending on
where you are in the world). So it's just been invested in unnecessary
capacity expansion, making products they have no hope in hell of selling at
the normal price, or just outright into financial constructions.

These things will have to be paid, and they will have to be paid by the
customers. So the cause for price increases has occurred in the past, but
people have used loans to stave off the consequences of their decisions on a
large scale. So inflation is already here, and done, it's just suddenly it
will need to explode.

------
Karrot_Kream
How do startups that don't network well with VCs survive in this kind of an
ecosystem? Doesn't this make VC money the kingmaker to penetrating a market?
I'm not sure having to be well-connected enough to be favored by VCs is a good
thing in the long run for the economy, but maybe this isn't such a different
situation from the pre-VC status quo.

------
jonbarker
Positive cash flow is actually way more important than profit, although you
should have both ideally. If you are running a positive cash flow business
with good growth and accurate depreciation numbers on fixed assets, you are in
a better position than a profitable microbusiness in a small market. Amazon's
breakthrough wasn't realizing this, it was realizing how big the ecommerce
market was and how to grow to be able to address the whole market using cash
flow to invest. They also used a large pile of investment to get there along
the way too. (Four negative cash flow years in their history according to
this)):
[https://realmoney.thestreet.com/articles/08/12/2016/comparin...](https://realmoney.thestreet.com/articles/08/12/2016/comparing-
amazon-then-tesla-now)

------
mearly87
I'm curios the impact VC subsiding goods happens on traditional players in
industries -- they can't compete because they don't have the luxury of
operating at a loss.

------
alexchantavy
> So, back to the 75 Cent Dollar Store. Are you in?

Anyone care to share great examples of these MoviePass-like businesses right
now so we can enjoy the savings?

------
organicmultiloc
Consumers are wising up to this and just turning the tables on companies,
exploiting them for the first reduced month or whatever the unit of service is
and then jumping ship immediately.

Hey if you want to lose money on the transaction I'm happy to help you out.

------
telltruth
It’s just basic economics. Let’s say you are CEO of a company. Your CFO
informs you that you are going to make $1B in profit this quarter. You will be
a fool to leave the money on table and give it back to shareholders. That
doesn’t buy you anything. You don’t gain any competitive advantage or
significant stock price boost (because market keeps going up _anyway_ ). From
the eyes of CEO, you are simply throwing away your profit money in to a
garbedge bin. Instead, you would take out another billion dollar in credit at
tiny interest rates based on your growth. Use all that up in expansions,
building moat, acquisitions, long term projects and then show $1B in loss to
get full tax credits. Market would love you even more because you are building
up expectations for even bigger things to come as well as becoming safer bet
by gaining bigger moat.

Taking losses and burning cash to aquire customers also makes sense when
mountain of cheap investment money and credit lines are easily available.
Remember, IPO is the major event for cashing out for most investors. Balance
sheets before or after don’t matter too much as long as you can cross that
proverbial finish line called IPO. Once that event happens, you take a dip in
so-called “river of money” fueled by massive trillion dollar funds like
Blackrock (which are in turn fueled by our 401Ks) and all your sins are washed
away over night.

Current economy and business models wouldn’t make sense to people who are
still living in past when money wasn’t cheap and companies were valued for
dividends they returned. In a way, new way is actually all good. This is what
allows taking on high risk bets. Without these models, we wouldn’t have
massive cloud infrastructure built up so fast without worrying about chicken-
and-egg problem. We wouldn’t have app based taxies available so fast virtually
all of the world without worrying about establishment. We also wouldn’t have
such massive investments in AI research without worrying about actual impact.
All these stuff simply wouldn’t be possible in 60s and 70s because companies
would be reluctant to do investments on such massive scale without being
extremely confident and diligent. Most likely these stuff would have gotten
killed right away. Hype is good. Cheap money is great.

------
Shivetya
I do not accept putting Amazon and places like Moviepass in the same
comparison. I would not even accept Moviepass is comparable to
Airbnb/Uber/etc.

I never understood the allure of Moviepass to the investor. So basically you
want to buy another companies product and resell it to another party and
expect the source company to cave to your demands of partnership? What service
are you providing and to who? It is similar to all those attempts to deliver
groceries but they mostly failed because they were buying from a source who
could care less who bought their product at full price as long as they were
paid.

------
blueyes
Joel Spolsky addressed this, much more insightfully, in one of his early
strategy letters:

[https://www.joelonsoftware.com/2000/05/12/strategy-
letter-i-...](https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-
and-jerrys-vs-amazon/)

There are real reasons why companies like MoviePass exist, why companies like
Snap lose money, and why investors back them. It's just a land grab where you
have to move fast to establish dominance.

~~~
lozenge
Snap I can understand, but MoviePass not. People can easily switch to another
subscription.

~~~
tlynchpin
People can easily switch, maybe so, but generally they don't. That is one of
the reasons subscription revenue is highly prized. Many businesses are
sustained on long forgotten subscriptions landing on credit card bills every
month.

~~~
intrasight
This is so true. Less true for me since I have my credit card email me about
every transaction, and every time I get one I must decide if I wish to keep
that subscription.

Here's an idea for a business. Monitor customers credit card transactions for
subscriptions, and do bulk negotiation with the service provider to knock down
the price based upon how much service the customer is actually using. Take 10%
of the savings.

Each time one of these subscription payment emails arrives, the user would be
shown a few extra buttons: 1. cancel my subscription, 2. Offer service
$X/month to keep me as a customer, 3. No change.

Just the "one click cancel" would be useful, but the "get me a better price"
should be real popular.

~~~
cimmanom
What would the incentive be for the service provider to participate in this?
Most of these customers aren't going to cancel anyway.

~~~
intrasight
There are lots of business that are in the business of negotiating better
prices. It's arbitrage - assuming that a service provider with list price of
$25/mo would still be happy to get $20 as opposed to losing the customer.

------
Mc_Big_G
Buy HNMY @ $0.65 if you have the cajones. If there was ever a case of "be
greedy when others are fearful" this is it. There's a good chance you'll lose
it all but the potential is there if they can get it right. I like that
they're adding more services like a premium for 3D/IMAX and front-row seats.

------
JansjoFromIkea
What exactly happens the entertainment industry when MoviePass fails? When
Netflix stop deciding to lose colossal sums of money each year and their
competitors get to scale back as a result? When a large number of people don't
have enough disposable money to justify paying $10 a month on Patreon to a
podcast they can get for free?

I do feel like the free movie ticket business in general is a bit of a mad
bubble that's gonna burst in a big way. A huge number of people currently
going to the cinema seem to be going on things like this instead of directly
paying the huge ticket prices themselves. I get free tickets weekly from my
health insurance to a cinema that shows stuff I'd never dream of paying to
see, you'd have to imagine the chain and distributor are getting some
reasonable kind of kickback from each time I go though.

~~~
slivym
It's not really all straight forward though. Whilst it's true that it's
cheaper to get a MoviePass for a month than to buy 2 tickets in that month I
can't remember the last time I paid full price for a movie ticket anyway. The
cinema industry is basically a chaotic experiment in price discrimination. The
most successful Cinema is the one that can get the 50 people willing to pay
full price to pay it whilst also giving heavy discounts to the other 200
people to make sure the cinema is full.

------
ghostbrainalpha
I think of MoviePass as very similar to Groupon. Their business model
eventually eats itself and the growth in unsustainable, but at the end of the
day they are still ok.

Sure Groupon's stock went from $30 to $5, but the company still exists, and is
a solid part of the marketplace.

------
acchow
> Over all, 76 percent of the companies that went public last year were
> unprofitable on a per-share basis

How is this the entire economy? I bet if you added the revenues (or market
caps) of all those companies together, they would pale in comparison to Apple.

------
sp332
I misread the author as Kevin Rose, which would have been fitting.
[https://en.wikipedia.org/wiki/Kevin_Rose#Startups](https://en.wikipedia.org/wiki/Kevin_Rose#Startups)

------
privexpert5
This business model makes sense for some products, like Snapchat. Get as many
users as possible and maybe eventually the advertising revenue will pay off.

Focusing on monetization early makes for successful businesses, but good
products happen because they fix or solve a problem --not because they make
money.

------
nerfhammer
thank goodness so many people are smarter than those darn goofy VCs.
Businesses competing for customers! It's flagrant hubris. Those Silicon Valley
guys who became billionaires doing this still have no idea what they are
doing. I am pretty sure they have a big comeuppance due to them.

~~~
Retric
The number of internet only SV companies that regularly pull in 100+ million
in actual profit each year and are thus _stable_ billion dollar companies is
surprisingly small. The companies that shoot past that into 50+ billion dollar
territory are a large part of why SV has so many billionaires.

~~~
Analemma_
The number of people who became billionaires through venture capital– as
opposed to becoming a VC after you were already independently wealthy through
family or another business– is also quite small.

------
pishpash
Not every one of the half dozen "MoviePasses" in a given market category can
come out on top to dominate (by definition, one -- at most two -- can) but
every one is funded/priced like it will. This thing will come crashing down,
it's just a matter of time.

------
_bxg1
I wonder if this is a bubble that's going to burst eventually. With so many
ships sinking and so much optimism being for naught, investors might grow
tired of the game and stop investing so aggressively, perhaps shifting things
too far to the other side of the spectrum.

~~~
adventured
The article implodes when you actually start comparing the scale of what the
article is basing itself on to anything else.

The US economy will hit $20 trillion in GDP this year. The article is built
heavily upon a few dozen IPO listings for just one year.

With US business profitability at essentially record highs for all sizes of
business, the article is going to comical lengths to present a false headline.

If we had 500 unprofitable tech companies pulling an IPO in 2017, that would
mean something. 30? That's not even a rounding error in the US economy and it
obviously says nothing about the ability of those companies to reach
profitability.

One year also does not make a trend. The number of unprofitable tech listings
in 2015 and 2016 was similar to: 2001, 2005, 2007, 2011, 2013.

~~~
ryanwaggoner
Looking at the original analysis, it looks like 108 IPOs, where did you get
30?

[https://site.warrington.ufl.edu/ritter/files/2018/01/IPOs201...](https://site.warrington.ufl.edu/ritter/files/2018/01/IPOs2017Statistics_January17_2018.pdf)

~~~
adventured
In that PDF it breaks out the number of tech and biotech IPOs.

66% of the "other" category (ie everything else) reported being profitable.
Something the article goes out of its way to not mention.

The 30 tech IPOs and the 32 biotech IPOs dramatically tilt the number of
unprofitable listings as a percentage.

If you only have 108 IPOs and 32 are biotechs, which are almost always
unprofitable, you start with an extreme tilt.

------
mrbonner
Comparing MoviePass to Amazon is like comparing Michael Scott Paper company
and Dunder Mifflin.

------
_nalply
> So, back to the 75 Cent Dollar Store. Are you in?

Yes, of course. (And thinking: «only as a customer»).

------
osteele
DELETED as a misreading of the OP.

~~~
ryanwaggoner
_The author 's thesis is that all unprofitable business are the same._

This is not the author's thesis. The author's thesis appears to be:

 _" An economy full of unprofitable companies has risks."_ and we should be
concerned about the rise of so many unprofitable companies.

------
ada1981
Non-paywalled: [http://outline.com/ctYCuP](http://outline.com/ctYCuP)

Perhaps this is the redistribution of wealth we’ve been waiting for.

Can I look forward to the AptPass Startup that will pay my rent in Park Slope
so they can study my consumption patterns?

------
the_cat_kittles
so i guess the first thing i think is: where does the money go? i think it
mostly goes to employees and contractors of the company, who get paid a lot
usually. it doesnt go to the consumers of the product, they just get a better
deal on things- not the same as getting money. in movie pass' case, i guess it
goes to the theaters? i guess its just interesting to try and pin down where
the money ends up going in lots of the these vc backed money losing endeavors.
seems like the kind of article pricenomics would do a really good job on-
taking 10 or so big money losers that ultimately kicked the bucket, and seeing
where the cash all ultimately went.

------
eldavido
This is such a stupid and uninsightful analysis. You can tell just by the
terms they use.

A company that isn't profitable isn't necessarily "losing money". Sure the
amount of cash on hand can be declining, but if the business is building long-
term assets such as a consumer brand, recurring transactions, differentiating
IP, etc., that's hardly bad business management.

In order to really understand this you have to look company-by-company at
what's really going on with the financials. If someone wants to give away for
75 cents something that costs a dollar, sure, that's a fast lane to
bankruptcy. But there are tons of other cases, including aggressive new
customer expansion, trying to create winner-take-all network effects,
development of core IP, etc. that really will create long-term benefits for
their owners.

Using "profit" as a metric is such bullshit. Ask Amazon. They focused on
creating as much free cash flow as they could for two decades, and look where
they are now. Why someone would insist a company earn an accounting profit, or
even worse, pay cash dividends, in an environment with a sub-2% fed funds rate
and near-zero returns on cash to investors is silly. I would much rather have
a company with 10-15% return on equity "lose my money" than hand it back as
relatively useless cash.

tl;dr read Ks and Qs, this stuff isn't amenable to sound bites.

