what-happened-to-moviepass

What happened to MoviePass?

MoviePass was a subscription-based movie ticket service founded by Stacy Spikes, Hamet Watt, and Tony B. Casti in 2011.

The service enabled consumers to purchase a certain number of movie tickets per month and then check in to the cinema using an app.

In February 2018, the $9.95 per month service was available in 91% of all cinemas across the United States, and the platform boasted over 2 million users.

In September 2019, however, the platform was shut down, with parent company Helios and Matheson Analytics filing for Chapter 7 bankruptcy protection in January 2020.

Unsustainable business model

The business model of MoviePass was unsustainable from the moment the platform came into existence.

In simple terms, the company served as an intermediary by purchasing movie tickets at the list price and then selling them to consumers.

The co-founders hoped most customers would use the service less than others.

This approach is known as the breakage model, where companies depend on unredeemed prepaid services as a revenue source.

For example, fitness companies rely on some customers never using their gym membership to offset the cost of those who exercise regularly. 

As it turned out, however, consumers were attracted by discounted movie tickets and used the service frequently.

The company lost money on almost every customer it managed to attract.

Helios and Matheson acquisition

Helios and Matheson acquired MoviePass in 2017, a software distribution and consulting company listed on the NASDAQ.

MoviePass CEO Mitch Lower partnered with Helios and Matheson CEO Ted Farnsworth to secure extra revenue streams.

Both believed the only way the company could survive was to attract more users to the platform and negotiate a commission on ticket sales with cinemas.

To increase the user base, prices were reduced by more than 80% despite protestations from co-founder Stacy Spikes. 

Though the company lost even more money per customer, it nevertheless managed to attract another 1 million subscribers in just three months.

MoviePass management was aware of the cash burn, but they wanted to sell the data from their extensive user base to other companies in the industry or use it as leverage in future deals.

Failed business diversification

MoviePass then expanded into three additional revenue streams:

  1. Data monetization and advertising.
  2. MoviePass Ventures – a new division to acquire and release existing films with the help of a distributor.
  3. MoviePass Films – a new venture for the company to create and distribute its own films.

Only the first revenue stream, data monetization, and advertising complemented the existing business model.

But even it was not viable because the company could not sell the data at scale.

In other words, no advertiser would pay for access to just over 200,000 subscribers spread across the U.S

MoviePass Ventures and MoviePass Films also failed because both ventures were outside the company’s area of expertise, and it showed.

For example, the mob film Gotti was financed by MoviePass for $10 million but only earned $6 million at the box office. It would prove to be one of many critical and commercial failures.

Endless controversy

The company also seemed to be in a perpetual state of controversy. 

Lowe once publicly boasted that MoviePass tracked the location of its users before backtracking after the inevitable response from consumers.

Some consumers were prohibited from watching certain films with little or no explanation provided, and the app was prone to systemic crashes.

Poor customer service was also prevalent.

Customers became irate because MoviePass hesitated to refund their money, while others were upgraded to more expensive plans without their permission.

These and other misleading practices attracted the attention of the FTC, which settled with MoviePass out of court for an undisclosed amount. 

Helios and Matheson were also sued by investors and then by a group of Reddit consumers who initiated proceedings on not one but two occasions.

In the coup de grâce for MoviePass, the company was delisted from the NASDAQ in early 2019 after flooding the market with shares to keep it afloat.

After losing 99% of its value, the platform was shut down for good in September 2019.

Key takeaways:

  • MoviePass was a subscription-based movie ticket service founded by Stacy Spikes, Hamet Watt, and Tony B. Casti in 2011. The platform was initially popular – perhaps too popular – and was shut down in September 2019.
  • MoviePass was doomed to failure from the moment it began operations. The company relied on the breakage model to drive revenue, but its movie tickets proved so popular that it made a loss on nearly every customer. MoviePass was also embroiled in a controversy that resulted in litigation from investors and consumers alike.
  • Acquiring company Helios and Matheson set about introducing additional revenue streams such as advertising, data monetization, and film production and distribution. Data monetization was the only stream that complemented the existing business model, but it was not viable because MoviePass had a relatively small audience.

Main Free Guides:

Related Business Stories

What Happened to WeWork

what-happened-to-wework
WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010. WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork, which provided the impetus for the failed IPO and significant devaluation that would follow.

What Happened to Netscape

what-happened-to-netscape
Netscape – or Netscape Communications Corporation – was a computer services company best known for its web browser. The company was founded in 1994 by Marc Andreessen and James H. Clark as one of the internet’s first and most important start-ups. The Netscape Navigator web browser was released in 1995 and became the browser of choice for the users of the time. By November 1998, it had been acquired by AOL, which tried unsuccessfully to revive the popularity of the web browser. Ten years later, Netscape was shut down entirely.

What Happened to Musical.ly

what-happened-to-musically
Musically, or Musical.ly as it is officially known, was a Chinese social media platform headquartered in Shanghai. After passing 200 million users in May 2017, the platform was shut down by tech company ByteDance in November. After its acquisition, ByteDance suggested Musical.ly would continue to operate as a standalone platform. Company representatives noted that it would be able to leverage ByteDance’s AI technology and enormous reach in the Chinese market. Musically was ultimately absorbed into TikTok in June 2018, with the app no longer available in August of the same year. Existing users were offered technical support and several new features as a sweetener.

What Happened to Vine

what-happened-to-vine
Vine was an American video social networking platform with a focus on looping video clips of six seconds in length, founded by Dom Hofmann, Rus Yusupov, and Colin Kroll in 2012 to help people capture casual moments in their lives and share them with their friends. Vine went on to become a massively popular platform. Yet by 2016, Twitter discontinued the mobile app, allowing users to view or download content on the Vine website. It then announced a reconfigured app allowing creators to share content to a connected Twitter account only. This marked the end of Vine.

What Happened to CNN Plus

what-happened-to-cnn-plus
CNN Plus was a video streaming service and offshoot of CNN’s cable TV news network that was launched on March 29, 2022. The service was ultimately shut down just one month after it was launched. Trouble began for the platform when parent company WarnerMedia merged with Discovery. The latter was unimpressed with paltry viewer data and, with $55 billion in debt to clear, was not interested in funding CNN+ moving forward. Other contributing factors to CNN Plus’s demise include a lack of compelling content and streaming service market saturation.

What Happened to Clubhouse

what-happened-to-clubhouse
Clubhouse is a social app that allows thousands of people to communicate with each other in audio chat rooms. At one point, the company was worth $4 billion and boasted users such as Mark Zuckerberg and Elon Musk. Clubhouse declined because it rode the wave of pandemic lockdowns and suffered when people resumed their normal routines. The decision to remove the invite-only feature also caused a rapid influx of new members and removed any exclusivity. Clubhouse management also failed to define a business model and was unaware of the components of a successful social media site.

What Happened to Facebook

what-happened-to-facebook

What Happened to Sean Parker

what-happened-to-sean-parker
Sean Parker is an American entrepreneur most associated with the music-sharing platform Napster. Parker founded Napster with childhood friend Shawn Fanning, and the service was launched in June 1999 while the pair were still teenagers. Napster’s ultimate demise in 2001 is well documented. Parker was forced to step down as Facebook president in 2005 after an arrest for drug possession in North Carolina. Still, he retained a significant shareholding and informal involvement with the company. He then worked with Peter Thiel at his venture capital firm for a time and then moved into philanthropic efforts.

About The Author

Scroll to Top
FourWeekMBA