MoviePass: What Happens When the Forever Promise Breaks

With The Odyssey and Spider-Man helping pull people back into theaters this summer, I have been thinking again about what went wrong at MoviePass.

I love movies: the popcorn, the trailers, the dark room, the shared laugh or gasp. So I understand the appeal of MoviePass.

 

 

Its Forever Promise was strong:

Pay one monthly fee and go to the movies without worrying about the ticket price.

That is a real customer insight. MoviePass was not just selling cheaper tickets. It was removing friction.

Instead of asking, “Is this movie worth $18?” the customer could ask, “What should I see this week?”

That is what good subscriptions do.

Netflix changed home entertainment from “Should I rent this?” to “What should I watch?”

Spotify changed music from “Should I buy this album?” to “What do I want to hear?”

Disney+ turned a family content library into a recurring household utility. Blue Apron tried to turn dinner planning into a repeatable habit.

The problem was the model underneath it.

MoviePass collected fixed monthly revenue. But every time a subscriber went to a movie, MoviePass had to pay the theater for the ticket. That meant each act of engagement created a real variable cost.

So the most enthusiastic customers were also the most expensive customers.

At MoviePass, more usage created more losses.

Compare that with Netflix. Netflix has huge content costs, but it does not pay a full retail fee every time a subscriber watches another episode.

Or Disney+. A child watching Frozen for the 43rd time may help retention, reinforce brand affinity, and support the broader Disney ecosystem.

MoviePass sat in the middle. It owned the subscription relationship but not enough of the economics.

The 2017 $9.95 unlimited plan made the problem sharper. It was simple. It drove growth. It created buzz. All good elements for a healthy subscription.

But it also required too many assumptions that weren’t proven:

1. Light users had to subsidize heavy users.
2. Usage had to decline over time.
3. Ticket costs had to stay manageable.
4. Theaters or studios had to share economics.
5. Advertising, data, or other revenue had to subsidize the model, eventually. And most importantly…
6. Growth had to improve the model rather than expose it.

Those assumptions can be tested. They cannot be wished into existence.

This is where MoviePass moves from a subscription case study into a fraud and governance case study.

A bad model is not fraud. An aggressive price cut is not fraud. A growth strategy is not fraud.

But when management knows the economics are not working and tells investors or customers a better story than the facts support, the issue changes.

That is why I also think about Amazon Prime’s “Project Iliad.”

Amazon Prime is a far stronger subscription business than MoviePass. The value proposition is broad: shipping, video, music, deals, storage, and habit. But the FTC alleged Amazon used dark patterns to enroll customers into Prime and made cancellation harder through a process internally known as “Iliad.” Amazon later settled the FTC case.

That is a different problem from MoviePass, but it’s relevant.

MoviePass shows what happens when the economics of the promise don’t work.

Project Iliad made it too hard for customers to leave when consumers felt the economics no longer worked.

Both violate the spirit of a Forever Transaction.

A subscription should not depend on subscribers failing to use the product or failing to cancel.

For subscription practitioners, the MoviePass lesson is not “be less bold.”

They neglected first to ensure the promise, pricing architecture, customer behavior, and cost to serve fit together. And then they hid the problems and inserted friction into the product to make it harder for subscribers to get the value they’d already paid for.

MoviePass had a promise people wanted. But they failed to deliver on it in a way that was fair to subscribers and investors alike.