Assumptions & Failures: Why MoviePass Failed
When MoviePass modified its subscription-in-theater-movie service in late 2017 to be one movie per day at a rate of $10 a month, the deal seemed too good to be true. I live in Los Angeles, where a movie ticket can cost upward of $15, so subscribing to MoviePass was a no-brainer for me. I only had to see one movie a month for my subscription to pay itself off, so I signed up. But I didn’t see just one movie a month. With the tickets already paid for, I started seeing one, sometimes two movies a week, and my friends did the same.
Fast forward to 2019 and MoviePass is on its last legs. The service faced monetary problems starting in early 2018, followed by a brief suspension of service in July of that year. The service is still running, technically, but in a very limited capacity with far fewer benefits. Turns out that deal that seemed too good to be true, in fact, was.
What happened? How did a product that gained millions of subscribers fail so catastrophically? Many factors contributed to MoviePass’ decline, particularly a number of assumptions they made about customer and partner behaviors.
MoviePass built their model assuming that many subscribers would not actually use the service, the so-called “breakage mode” that many subscription services rely on. Unfortunately for MoviePass, they greatly over-estimated breakage. Their service was such a good deal that it didn’t make sense not to use it. Seeing a movie became so cheap that it almost felt like getting away with something, bringing an extra thrill to users.
Furthermore, MoviePass admits that it failed to anticipate the number of fraudulent users it would have. Stories posted online tell of users buying tickets with MoviePass and selling them for higher prices in cash, buying tickets into a theater just to use the bathroom and then leaving, buying multiple tickets for the same showing on subsequent days in order to get free tickets for dates and friends, buying tickets just to get theater rewards points…the list goes on. All of these extra ticket purchases, within the “one ticket per day” rule caused MoviePass’ expenses to skyrocket.
Finally, MoviePass assumed their market hold would give them leverage within the industry, thus allowing them to cajole distributors and theaters into sharing concession profits, offering ticket discounts and deals to make MoviePass economical. Again, MoviePass assumptions were wrong. Distributors and theaters did not side with MoviePass, the outsider, instead banding together to keep their own businesses afloat.
Perhaps it would have been hard to discover fraudulent users via user research, since users often say they do one thing and act on another. Perhaps initial research showed that people don’t go to the movies much anymore, and MoviePass misinterpreted the motivation behind their user’s behavior. What we know for sure is that MoviePass developed a model based on many assumptions about user behavior, and this collection of assumptions lead MoviePass to its demise.
