The Problem With MoviePass

During 2018 we looked at the rise and fall of MovePass.

Now they told CNBC they would test a relaunch Beta with pricier subscription plans in Chicago, Dallas, and Kansas City.

The MoviePass Story

For $9.99 a month, MoviePass subscribers could go to a movie a day.

MoviePass subscribers had it so cheap that a low Rotten Tomato rating barely mattered. They went to see A Bad Mom’s Christmas and Daddy’s Home 2. They went to the movies more frequently, sometimes during the middle of the week, and sometimes alone.

Last week, the MoviePass former CEO explained his pricing strategy. With price descending he could attract a bigger group of casual users. Then, with more people, he expected the theaters would give MoviePass discounted ticket prices. They did not. He also hoped to get a slice of the concession stand revenue pie. He did not. In addition, he planned to sell the customer data he collected and expected that film makers would pay him for “custom” advertising, Neither happened.

Within just four days, they had 150,000 new subscribers. During Aug 2017, they had 1.5 million subscribers. They climbed to 2 million subscribers soon after.

There was just one problem. With every new subscriber, MoviePass lost more money. Even when they tried to tweak the plans, it did not work out. They had to shut down in 2019.

Our Bottom Line: Thinking at the Margin

MoviePass moved the margin for movie going.

To grasp “the margin,” let’s assume for a moment that you need access to a parking space near where you work. You can purchase a monthly pass that lets you park as many times as you want for 30 days. Or, you can pay for a spot every time you go to work. The deal you select determines your incentives. With the monthly, it is likely you will go to work more frequently. However, with the daily, you drive less frequently because you pay for each visit.

Similarly, MoviePass changed the decisions we make at the margin. By moving that margin from each film to each month of films, it created new incentives.

Alfred Marshall (1842-1924) was the economist who first recognized the significance of the margin. He let us see that the cost of something extra is the key to understanding demand- and supply-side behavior. So we could say that Marshall helps us see that the MoviePass phenomenon is about more than lower prices. It also changed viewing habits because it moved the margins for how we purchase tickets.

My sources and more: Thanks to WSJ for reviewing the MoviePass Story, here, as did their podcast, The Journal, here and here. Then, CNBC had the updated description of their Beta relaunch.

Please note that parts of today’s post were in a previous MoviePass econlife. Our featured image is from the new MoviePass website.