MoviePass has always been a deal too good to last
Some deals may actually be too good to work. MoviePass is one. People Express Airlines was another.
Remember People Express? The company comes up with a wistful sigh among consumers of a certain age when discussing MoviePass, the beleaguered ticket-subscription service whose business model, I believe, is referred to by economic experts as meshuggeneh.
Gather round, children, and I will tell you about an airline that existed from 1981 to 1987, flying runs between Boston, New York, London, Washington, D.C., and other cities for absurdly low prices. Were you even able to make reservations? I don’t remember; I just wallow in the nostalgic memory of taking the PATH train from Manhattan to the Newark airport, settling into my seat on the plane, and only then pulling out my checkbook and writing a check for $35 to pay for a one-way flight to Boston.
A check. For 35 bucks. Cynics dubbed the airline “People Distress,” but for a recent college graduate wanting a quick, cheap way home for the weekend, it was a godsend.
And, yep, too good to last. People Express tried to grow too fast, acquired one too many smaller airlines, took on too much debt, and saw its price-slashing imitated by the newly galvanized major airlines. Six years after the company launched, it was bought in a fire sale by Texas Air.
At least it had physical assets to sell. After the most horrific week in its short history, MoviePass looks poised to go under with nothing to pawn but its servers, its subscription list, and an idea that may yet turn out to be profitable — for other companies.
The fundamental notion seems sound, if only in our era of Internet smoke and mirrors: Offer consumers a deal so good they have to buy in — oh, let’s say the chance to see a movie a day for $9.95 a month — and scale it up so quickly and so unstoppably that before the rest of the industry can catch on, you’re too big to fail. It worked for Amazon and Uber and Netflix, right? All you need is enough venture capital to hang in until you’re massive enough to, in the case of MoviePass, start buying tickets at cut-rate bulk prices and maybe even demand a cut of the popcorn and soda sales.
What may sound foolproof in an MBA classroom is in the real world more like balancing on a high wire while juggling a bowling ball, a chain saw, and a cat. The trick is to reach the magic milestone — 5 million subscribers, supposedly, in the case of MoviePass — while you still have investors’ money to pour into the pit.
Until then, MoviePass continues to pay full fare for every movie ticket, all while facing open hostility from an exhibition business that would definitely resist seeing its concession revenues threatened. (Since almost all the money from ticket sales flows back to the movie studios, food and drink remain the theater chains’ primary sources of profit. Think of them as fast-food restaurants with bait.)
Mitch Lowe, the top executive at MoviePass, has been betting that most subscribers would see only two or three movies a month rather than several times a week. That may not be the case; in any event, many of MoviePass’s 3 million subscribers — a number reached within a year after the $9.95 a month pricing structure was announced — seem to have climbed aboard hoping to watch as many movies as possible before the backers come to their senses. For a lot of young cinephiles I know, the service has functioned as the People Express of moviegoing, a blessedly cheap way to binge out on a pricey consumer offering.
Even they know the party can’t last. In April, MoviePass disclosed it was losing $20 million a month. In June, the company announced new “peak pricing” surge fees for popular movies and movie times. In July, parent company Helios and Matheson Analytics filed to raise $1.2 billion to keep MoviePass running.
Last weekend came the meltdown many onlookers had been predicting. The service’s computers went offline for long stretches, and subscribers were unable to use their MoviePass app to purchase tickets for “Mission: Impossible — Fallout,” the hottest item at the box office. Some subscribers who were able to buy tickets through MoviePass posted photos of near-empty theaters for which they had paid a hefty surge fee, in some cases more than the price of the ticket itself.
MoviePass has proved itself capable of arguably dirty tricks before, as when it heavily promoted “Gotti,” a critically-slammed turkey in which the company had a financial investment. Was “peak pricing” turning into a Hail Mary pass to drum up revenues?
On Monday, MoviePass funneled a last-ditch $5 million into the company and the stock price for Helios and Matheson cratered by 60 percent. On Tuesday, MoviePass announced that the monthly subscription price was being hiked to $14.95 a month and that major studio releases, including “Mission: Impossible — Fallout,” will now be unavailable through the service.
This almost certainly spells the end. By Wednesday, the hashtag #MoviePassDeathWatch was making the rounds on Twitter, and online descriptions of the service were turning dry with snark (“a great socialist scheme accidentally implemented by very confused capitalists,” “Elon Musk just sent MoviePass a submarine”).
Can this company last? (Short answer: No.) Does it deserve to? The concept remains a good one: Movie ticket prices are too high and consumers welcome a correction. That was the notion behind People Express, and it worked before that company let its ambitions outrun its capital and before more established rivals moved in for the kill.
So, too, may it play out with MoviePass. In June, AMC, the nation’s biggest multiplex chain, announced its Stubs A-List plan, which allows subscribers to see three movies a week (including, ahem, “Mission: Impossible — Fallout”) for $19.95. It already has 175,000 sign-ups.
But the difference — and the great mistake — is that MoviePass had to grow gargantuan or go bust, that there’s never been any middle ground, and that subscribers to the service have always been a bargaining chip in a larger game, rather than a market to be served and served well. At least People Express wanted to fly me from New York to Boston for cheap. MoviePass mostly wants to be the next Netflix or Amazon in size and scale, and if we got to see a bunch of movies and broaden our pop-culture intake on its way to world domination, that was just a by-product of the business plan.
SCREENING TIP: Calling all Boston-area ’80s music nostalgists: The 2014 documentary “Life on the V: The Story of V66” gets a welcome one-night revival at the Coolidge Tuesday, Aug. 7, at 7 p.m., with director Eric Green in attendance. It’s the story of the little local music-video channel that could (and did) last all of 18 months in the mid-1980s while celebrating local bands and big hair. Scrappy but essential.