If At First They Don’t Succeed, MoviePass Tries, Tries Again

By J. Sperling Reich | February 18, 2014 12:37 pm PST
How MoviePass Works

Say what you want about MoviePass, the unlimited moviegoing subscription service, but one can not fault the startup for yielding to overwhelming market obstacles or folding at the first sign of serious industry pushback. Instead, when encountering hurdles to their business, the company, which operates in the United States, has been quick to pivot toward a model that worked better for themselves and their customers. MoviePass proved as much last fall upon announcing one of their most controversial modifications to date.

On October 31st of last year, MoviePass sent an email to subscribers with the subject “New Features”. One of its paragraphs read as follows:

We’re also excited to introduce a new feature: The Countdown Clock. This clock counts down the time until your next available screening. You will still be able to go to a movie each day, but there will be a 24-hour period between screenings. Your MoviePass app has already been updated, and you will notice these changes the next time you see a movie.

Maybe it’s best to rewind a bit here and provide a brief description and history of MoviePass. The company first tried to launch a beta version of its service in the summer of 2012, in which subscribers would be allowed to see an unlimited number of movies for a flat rate of USD $50 per month. There were several caveats though, including the fact that subscribers could only see one movie per day, each title could only be viewed once, 3D and Imax screenings would cost USD $3 extra and all tickets had to be purchased the day of the show via partners such as MovieTickets. Subscribers would receive a redemption code (mostly via a smartphone app) that could then be used at the theatre to obtain the actual ticket.

At the time, most found the cumbersome process to be complicated and confusing, and not at all convenient. It didn’t matter though since the exhibition industry was quick to squash the idea that they’d be working with MoviePass in anyway. This seemed to torpedo the whole concept, since MoviePass needed movie theatres to accept the redemption codes at each cinema.

However MoviePass had no intention of giving up. The company regrouped and by October that same year was back with a much more appealing model; the price had dropped to between USD $25 and $35 depending on where one lived, subscribers could still only see one movie per day, each title could only be viewed once, and no 3D and Imax screenings could be purchased. Subscribers were sent a MoviePass credit card which was to be activated using a mobile app while within 100 yards of a given movie theatre. Once activated, the card worked for 30 minutes at the designated cinema and could be used at the box office just like any other credit card.

By leveraging the existing credit card infrastructure, MoviePass removed the objections of cinema owners as an impediment to entering the market. A brilliant move that also enabled the company to shrug off any dissent from studios and web ticketing vendors like Fandango who had previously viewed the company as a threat.

At the time MoviePass CEO Stacy Spikes was a guest on Showbiz Sandbox, a weekly entertainment news podcast I co-host. We talked about the company’s past and what the future held. Spikes suggested that there would eventually be different subscription levels that would include 3D and Imax films, or reduced rate subscriptions that only allowed for moviegoing on weekdays. One of the goals, he said, was to help fill theatre auditoriums for the majority of showings which are not well attended.

Spikes was also candid about the overall MoviePass business plan:

“In all subscription models there is usage versus cost variable and they all work the same way. If everybody overuses you have a problem. We have certain people, like in a gym membership, who are going to go everyday. They are going to work out at the gym everyday and they are going to have these sculpted bodies that we all hate in the summertime. But, there’s also people who underuse and they don’t use it as much and then in the middle you have seasonality. So you may go a lot during Christmas and then dip. There are different types of users that are in the system so overall there is a behavioral economics to it that balances everything out and makes for a profitable business.”

By last October, MoviePass had first hand knowledge about the specific behavioral economics of their service. A year after their re-launch, the company was still in beta and keeping subscriber counts confidential. Given the vociferous and very public outcry the “New Features” email set off it is safe to assume MoviePass had a significant number of early adopters.

MoviePass: Unlimited No More” was the headline at Cinephiled. “MoviePass Introduces The Countdown Clock, Screwing Over Its Most Loyal Customers” screamed Popcultureology. Just in case you were still unclear how MoviePass subscribers really felt about the company’s new Countdown Clock there was this post from FirstShowing, titled “How MoviePass is Clearly Trying to Screw Over All Their Customers“. Some of those customers went so far as to air their complaints via YouTube, like the boys from Weekend Wrap-Up who gave everyone (or at least 351 people to date) an earful about their new first world problems:

[Update: As of August 18, 2017 Weekend Wrap-Up has removed the above referenced video.]

When we started receiving email about the Countdown Clock here at Celluloid Junkie I knew it was time to get in touch with Spikes directly to get more info. As is characteristic of Spikes he responded to emails and phone calls promptly. Less than a week after the “New Features” email was sent Spikes, on a multi-city tour to raise a new round of funding for MoviePass, took time out to discuss the reasons for instituting the Countdown Clock. While we spoke in November of last year, it is only now (after the holidays and Sundance) that I’ve had the unencumbered time to do the interview justice with a well thought out post.

Many of the previously cited blog posts suggested MoviePass was trying to “throttle” the service, if not directly, then certainly the comments sections are full of such accusations. “Throttling” is the practice of a company limiting access to its products and services to profitable levels. The term first gained widespread traction in 2005 when it was discovered Netflix was throttling, or slowing down, DVD shipments to subscribers who watched more than four or five movies in a month.

Obviously MoviePass must be trying to do the same thing. With the Countdown Clock subscribers would not be able to see as many movies in a month, meaning MoviePass would have to reimburse theatres at a lower rate, allowing them to keep a higher percentage of their revenue. This is simply not the case according to Spikes. He said the decision to instate the Countdown Clock was simply, “the maturing of any subscription model.”

“As you start to get into financial realities and the more mature your business gets the more you need to answer to your investors,” Spikes explained. “Your beyond just a great idea your trying to make it happen and you have to get into certain realities. So we looked at things like cellular phone unlimited plans, your cable before they started adding data caps after a lot of streaming come online. We too started to see things where we had to tweak the model a little bit to make sure it stays healthy. We’re also fine tuning it so that when we start adding 3D, Imax, couples plans, and other things, that we’ve built enough margin into the roadmapping to securely launch those other properties that are coming.”

Now, I know you’re probably thinking, “That sounded like a whole bunch of business school buzz words to me”. Though that might be purposeful on Spikes part, given that he is, you know, running a business. (Even the Weekend Wrap-Up boys admit as much in their YouTube rant). Part of launching any business, no matter its size or stage, is executing a plan and/or strategy, monitoring results and adjusting where needed. “So no, it’s not intentially designed to say don’t go,” Spikes said of the Countdown Clock. “But it is designed to say we have to be smart, we are running a business, we’re not running a charity for people who want to go to the movies. And as this business matures, and a year ago we didn’t know what it would look like, we have to try and start figuring that out.”

Spikes and his MoviePass team were also likely facing resistance from early adopters, who are often the most avid (and most frequent) users of new products and services. When the email went out introducing the Countdown Clock it was this constituency that roared loudest. “The people who were calling us are also very similar to the people who say MoviePass is too expensive,” Spikes stated. “We literally have people saying it should be the same price as Netflix. Why is it so expensive? You should make it cheaper. There’s a group that’s not even doing the math. Think about how many times you get to go. You still can’t beat that value everywhere.”

Full disclosure: I am a relatively satisfied MoviePass subscriber and unlike those Spikes referenced I have actually done the math. There are some months where I don’t see a single movie, yet still paid USD $25 for my monthly MoviePass subscription. Other months, like during the holidays, I’ll see five movies using MoviePass without which I would have paid nearly twice the amount of my subscription. On average, I’ve broken even for the most part. I suppose I’m one of those seasonal customers Spikes spoke of.

There are other types of customers however. Ones often referred to as “bad seeds”. There are a few in every crowd; ones who figure out ways to game the system. The kind of customer who causes the majority of us – the good seeds – to go through metal detectors at the airport. Spikes conceded the Countdown Clock was also meant to combat those abusing the system; a handful of subscribers who are effectively stealing from MoviePass, cinema owners and studios. “It’s unfortunate that a small few can cause us to have to put things in place for everybody, but it’s a few that are hurting the system,” he lamented. “We have to answer to our investors for people who are doing things that they are not supposed to do. We want to make sure the company is healthy while we get those things fixed.”

Stacy Spikes
MoviePass CEO Stacy Spikes (Photo Credit: Fast Company)

Perhaps the uproar over the Countdown Clock would not have been as loud if it hadn’t been introduced as a “new feature” and instead was put forth for what it was – an adjustment to help MoviePass work as a business in the long run. When I intimated as much Spikes concurred and without hesitation pointed the finger squarely at himself. Spending so much time working on the technology that allows a service such as MoviePass to operate, one can begin thinking about the product in terms of “bugs” and “features”.

“The lingo internally was, ‘it’s a feature’,” Spikes recalled. “You always as a marketing person are trying to position things in there most positive light. Clearly I didn’t think far enough through that to think people are going to have an adverse reaction to calling it a feature. And that was completely my call. I typed the email.”

It is precisely that kind of smart, honest, determined leadership a company like MoviePass requires as it experiments with new models in a market such as exhibition which is notorious for its resistance to change. Though I don’t know him well, and we’ve never met in person, I feel confident in saying that the only reason MoviePass has made it as far as it has is due to Spikes.

As for the Countdown Clock, don’t be surprised if it gets rolled back into tiered plans. Spikes said it won’t affect 90% of the company’s subscribers anyway. For those who were so disgruntled over it they wanted to cancel their initial one-year contract, MoviePass allowed them to do so without a termination fee.

When I asked Spikes how many customers took them up on that offer his response was swift. “We found a lot of people complained. Very few people canceled,” he said in his usual forthright manner. “They barked. They yelled, and they came to the same conclusion we did, which is MoviePass still offers a lot of value.”

J. Sperling Reich