MoviePass Reworked Its Business Model. But It May Be Too Late, Analysts Say
MoviePass, the embattled movie subscription service, appears to have settled on a pricing plan that the company says is “built for the mass consumer,” even as analysts argue that the plan isn’t built for profits.
On Monday, MoviePass announced that it would change the terms of its existing plan, which allowed its more than 3 million U.S. customers to see movies as often as once per day for $10 per month, which is cheaper than the average single movie ticket. The new plan, which MoviePass hopes will dramatically reduce its losses, limits customers to just three movies a month. Additional tickets are discounted up to $5 each. The revised plan takes effect Aug. 15.
It’s a “plan that delivers what most of our loyal MoviePass fans want, and one that, we believe, will also help to stabilize our business model,” CEO Mitch Lowe said in a statement.
The announcement came one week after MoviePass trended on Twitter for suffering a second outage that restricted users’ access to some of the summer’s most popular hits, including Mission: Impossible—Fallout. The company borrowed $5 million from a hedge fund to keep the service active before announcing that it would raise its monthly subscription fee from $9.95 to $14.95; after customers protested, MoviePass quickly abandoned the idea. (It also suspended a brief “surge pricing” strategy that increased viewing prices during busy periods.)
MoviePass isn’t the only subscription service to tinker with its pricing scheme; ClassPass, a subscription service for fitness clubs, has also searched for a happy economic medium. But the company’s dramatic changes have dismayed its customers. Worse, they may not mend its broken business model, analysts tell Fortune.
“My sentiment is that it still doesn’t solve the core problem,” says Eddie Yoon, founder of EddieWouldGrow, a think tank and advisory firm on growth strategy. “Even at three movies a month at $10, they’re still going to lose money unless they sufficiently anger the people that are super-consumers.”
In “super-consumers,” Yoon is referring to the 15% of MoviePass customers who see more than three films a month—a small but impactful portion of the user base that drains the service of money, since MoviePass buys tickets from theaters at full price. In a statement, CEO Lowe acknowledged the company is trying to “bring some moderation to the small number of subscribers who imposed undue cost on the system by viewing a disproportionately large number of movies.” Yoon calls it the “Homer Simpson problem,” referencing an episode of The Simpsons in which the character nearly bankrupts an all-you-can-eat buffet with his insatiable appetite. Alienating customers like this, Yoon says, might drive MoviePass users to rival ticketing services but save the company more money in the long run.
Karie Bible, a box office analyst at entertainment research firm Exhibitor Relations, believes that MoviePass may not be accurately reporting its number of super-consumers. “I think a lot more than 15% of people misuse the system,” she says. “Fans are going to be upset the company is changing its policy and limiting the movies they can see.”
That change is likely for good. “It seems to be the official end of company’s unlimited offer,” says Daniel Loria, vice president of content strategy and editorial director at Box Office Pro, an industry trends and data site. “The big issue for MoviePass is they haven’t gotten it right when it comes to customer service. For many months they upended their original model, going on the defensive… this [new plan] is an explicit acknowledgment that the original model wasn’t sustainable.”
Lowe maintains that MoviePass conducted “several months of research” determining what customers value and has “evolved to accommodate what has become an unprecedented phenomenon.” Indeed, the market reacted positively to news of reworked business model—the share price for Helios and Matheson Analytics, the company’s parent, jumped nearly 40% Monday morning. (In June, it recorded a deficit of $45 million, according to SEC filings.)
But investors aren’t the only customers MoviePass must please. “Unlike streaming services, this is an out of home experience,” Loria says. “In any out of home experience, customer service is a huge pillar.”