After several disastrous miscalculations, MoviePass is back.
This time, they think they’ve got movie ticket markets figured out.
The MoviePass Story
Since their launch in 2011, MoviePass had a Goldilocks problem. Prices were either too high or too low. They could not figure out what was just right.
Between 2012 and 2018, monthly price packages ranged from $7 to $99. Some packages included an unlimited number of films while others had a ceiling of six. The CEO hoped that, with more moviegoers, 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 customized data he acquired. It did not happen.
Rather like Uber, they briefly tried surge pricing that boosted the price of popular films. Then, they eliminated blockbusters when they first hit the theaters and diminished the number of showtimes. Because some people were sharing their subscription plans (and even scalping tickets), they mandated that a single mobile device be used. They also then said no repeat movies. As a last resort, in 2017, they dropped their price to $10 for a movie a day. As you might expect, the subscriber avalanche climbed to 3 million.
There was just one problem. With every new subscriber, MoviePass lost more money. Through a 2020 Chapter 7 bankruptcy filing, they liquidated their assets..
MoviePass subscribers went to the movies more frequently. Sometimes during the middle of the week, and sometimes alone, they had it so cheap that a low Rotten Tomato rating barely mattered. One news site tried to quantify their impact:
And now, they are back.
MoviePass published their newest prices:
Our Bottom Line: Thinking at the Margin
Looking at the MoviePass sage, an economist would say they were thinking at the margin.
To see how a margin determines your incentives, 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.
Please note that parts of today’s post were in a previous MoviePass econlife. Our featured image is from the MoviePass website.