MoviePass, an online movie ticket subscription platform, has gained a lot of attention over the past few months – and rightfully so. In the two years, this company has gone from a behind the scenes company to headline news and market disruptor.
How MoviePass works
MoviePass was founded in 2011, offering movie-goers monthly subscriptions for access to a set of movie tickets. What originally started off as a voucher system eventually evolved to a pre-loaded, debit card-like product where customers were able to redeem their tickets at theaters.
The core value proposition of MoviePass is quite similar to other online platform businesses such as Classpass, which offers the same voucher system- but with fitness classes. MoviePass aimed to build a product that brought customers value through lower prices and the convenience of booking movie tickets online; Their mobile app was a way to connect to millennials who want immediate access to movie tickets.
Since their launch, MoviePass has faced strong resistance from major movie chains such as AMC Theatres. Many of the major movie theater operators saw MoviePass as commoditizing the ticketing and customer engagement process, eroding already diminished differentiation theater chains. This threat came on top of the challenge many online streaming services, such as Netflix and Hulu, posed to the share of customers’ entertainment wallets.
Accelerating Growth With Pricing
MoviePass currently has over 3 million subscribers- users have access to a set number of movie tickets per month. As of August 28, 2018, MoviePass offers only one monthly subscription package for $9.95 for 3 movies per month.
Since 2016, with the arrival of new CEO Mitch Lowe, MoviePass has been actively using price to test new strategies and models, tactically acquire new customers, and influence the market as a whole.
One way MoviePass has used price is with deep price cuts. The company took their original packages that cost as much as $50 per month to a flat $9.95 monthly subscription fee that allowed customers to watch one film per day. The single price cut won more than 150,000 new subscribers in just two days.
Another pricing strategy MoviePass used was to offer unlimited movie tickets per month for a single flat price.
While subscribers only pay a flat fee for their subscription, MoviePass has to pay the theatre for each movie ticket purchased using a MoviePass card. At the current subscription fee, customers can begin saving money upon redemption of their second ticket. While this pricing model offers abundant benefits to MoviePass users, it is unclear how MoviePass can sustain this business model.
One way to help the business model are ‘ghost subscribers’ – customers who continue payments but neglect to go to see movies. Like a gym, MoviePass is trying to factor in non-use. It is unclear what percentage of users are inactive, but the risk to sustainability is a legitimate concern; The company temporarily went offline in July 2018 due to a lack of cash, resulting in many unhappy customers. ( ).
Along with sales stemming from subscriptions, MoviePass also gains revenue through deals with local restaurants. MoviePass’ CEO revealed controversial information stating the company tracks its users via location-based services on their app. The company uses mass surveillance to see where customers go before and after seeing a movie. MoviePass then analyzes this information and works with frequented restaurants to create deals for MoviePass users. MoviePass realizes a profit from the success of such promotions- although the exact percentage of their revenue gained from this strategy is uncertain.
The Good And Bad Of MoviePass’ Pricing Journey
The Good: MoviePass has been very active in experimenting with their pricing. They used their tests to adjust their product offering and customer willingness to pay. The company was also bold with their pricing; They were proactive in price changes – both increases and decreases – but also in package designs and fences (e.g. access to blockbuster films) in their offer.
The Bad: With proactive pricing, also comes customer confusion and dissatisfaction. As MoviePass accelerated growth, customers experienced the price experiments in virtual real-time. When prices were too low, MoviePass increased prices. When movie theaters pushed back on blockbusters, MoviePass adjusted their offer design and price. Making both incremental and material price and offer changes only become more difficult with growth. MoviePass has also had the added pressure of managing expectations and deliver on its core value proposition.
MoviePass’ ambition is bold – leveraging its pricing toolkit to accelerate growth and disrupt a huge market.
If imitation is the most sincere form of flattery, then the movie theatre industry has done just that as major movie theater chains like AMC and Cinemark are taking a play from MoviePass’ playbook by offering their own subscription service.
It is still uncertain as to how MoviePass will navigate its business model reality and how they’ll manage the consequences of their pricing strategy. One thing companies can learn from MoviePass is how testing different price-points can be used to better understand a business strategy and how it influences the market. Just not necessarily in real time; not everyone needs to see how the sausage is made.
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