Why Did MoviePass Fail?
MoviePass failed because of 3 factors: pricing strategy, profitability strategy and the competitive landscape.
Why Moviepass Failed

Founded by Stacy G. Spikes in 2011, Moviepass wanted to offer a subscription-service for movie-goers. According to Spikes, the idea behind Moviepass came from his realization that with an ever-declining number of movie theater attendees, there was an opportunity to modernize the movie-theater industry.
The company was backed by True Ventures, AOL Ventures, Lambert Media, Moxie Pictures and Helios and Matheson. Helios and Matheson completed acquired MoviePass in 2017 (Albert-Deitch) and by January 2018, Helios and Methson had fired Stacy Spikes from the company he founded.
In its heyday, Moviepass allow subscribers to see one movie per day, in theaters, for a price of $9.95/mo. For reference, the average price of a movie theater ticket in 2019 was $9.17 (Julia Stoll).
In June 2018, Moviepass peaked with over 3M subscribers (Julia Stoll). By January 2020 however, Moviepass' parent company, Helios & Matheson Analytics Inc., filed for bankruptcy (Maidenberg).
How did MoviePass plummet so quickly? In this article, we'll be unravelling the series of strategic failures that led to Moviepass' bankruptcy.
The analysis will explore Moviepass' strategic failures across 3 components of strategy:
Pricing Strategy
Strategy for Profitability
Competitive Landscape
The 3 sections will explain, in detail, how poor pricing and profitability strategies eroded MoviePass customers' trust, destroyed the company's brand image and blocked it from re-inventing itself. Then, we will analyze how competitors positioned themselves in relation to MoviePass in order to take market share from the failing company.
1. Pricing Strategy
MoviePass' Pricing History
The price for Moviepass changed a lot over the years, ranging from $50/month to $9.95/month. When the company was founded in 2011, the subscription service offered unlimited movie tickets for $50/month. In 2012, Moviepass adopted a location-based pricing model which ranged from $24.99 to $39.99 per month for access to one 2D film per day (Meyer).
In 2016, after former Redbox executive and Netflix cofounder J. Mitchell Lowe joined Moviepass as CEO, two subscription plans were launched: 1. Unlimited movies for $40, $45 or $50 per month (location dependent) and 2. two films per month for $15, $18 or $21 per month (location dependent) (Pahwa).
After being fully acquired by Helios and Matheson however, the location-based pricing strategy was abandoned. Instead, Moviepass opted for a one-size-fits-all pricing strategy of $9.95 per month for one-movie-per-day (Roger Ma). For reference, the average price of a movie theater ticket in 2019 was $9.17 (Julia Stoll).
This was an extremely aggressive pricing strategy. At $9.95/month, Moviepass opted for a breakage business model. A breakage model is when a company relies on unredeemed prepaid services as their source of revenue (Investopedia). To make the breakage model work, Lowe relied on the fact that 89% of movie-goers only go 4x per year (Vice News). Put the case that 89% went 4x per year and the other 11% of subscribers went to 1 movie per week. With 1M subscribers, Moviepass would have a gross profit of nearly $35M from the breakage model alone (ignoring cost of manufacturing the card & running the service).
While the breakage model may have its merits, Moviepass' reality was different: the company lost $45M in June 2018 alone. Why did this pricing strategy not work?
Why Moviepass' Pricing Strategy Failed
Moviepass' pricing strategy failed for two reasons:
Miscalculated Demand
The Offerings Were Changed too Many Times
1. Miscalculated Demand
The first reason why the company's pricing strategy failed is because the $9.95 price-point had no consideration for demand. Let's analyze the costs associated with a movie ticket. In 2019 the average price of a movie ticket was $9.17. If a Moviepass user watches one movie per month, the company only earns $0.78. This is without considering the costs of manufacturing the card, shipping it and the maintenance of the service itself.
The company relied on the fact that 89% of movie-goers went to see a movie, on average, 4 times per year. Should that have been the case, even with the other 11% watching 1 movie/week, the average subscriber would see 0.77 movies per month. However, the nature of a card offering unlimited movies heavily incentivizes subscribers to go more often - which is exactly what happened.

In June 2018, the average Moviepass subscriber was seeing 2.11 movies per month, far above Moviepass' ideal of 0.77 movies/month. While they did eventually reach that threshold in September 2018, they only did so after numerous changes to their offerings, which we will highlight below. Nonethess, the company lost $130M for the three months ending September 30, 2018 (Business Insider)
Aggressive pricing is often used to lure customers into subscribing. Amazon Prime, Netflix, Spotify were all purposefully unprofitable to garner as many subscribers as possible. The idea being that profitability would come with scale and retention. However, such a strategy requires large stockpiles of cash ready to burn through the deficit. Moviepass had none. With Moviepass' parent company, Helios and Matheson Analytics, Inc. (NYSE: HMNY) trading at $0.07 by the end of July 2018, the company had little access to capital.
Ultimately, the company's inaccurate demand prediction was only one of the factors behind Moviepass' pricing failure. The other was that they continuously changed their product offering.
2. The Offering Changed too Many Times
In its history, Moviepass changed the deal 11 times (Sean Buckley). In the first 8 months of 2018, Moviepass altered its offering deal 6 times:
In 2017 the company introduced the $9.95/month, unlimited movie pass.
In early 2018, the unlimited deal was replaced by 4 movies/month + a 3 month iHeartRadio trial.
In April 2018, Moviepass re-released its "unlimited" deal, except subscribers could not see the same movie twice.
In May, subscribers had to take a photo of their stub to prove that they had gone.
In June 2018, Moviepass introduced surge-pricing, tacking on an additional $2-$6 depending on the film and time (which made Moviepass more expensive than simply buying a ticket).
In July, Moviepass blocked weekend showtimes of popular films.
In August 2018, Moviepass offered its service at 3 different price-points, from $9.95 to $25 for varying levels of theather access.
Needless to say, customers were confused and trust was eroded. On top of this, in July of 2018 the company had run out of money. MoviePass could not pay its suppliers.
Without its key suppliers, the app didn't work. Customers grew increasingly impatient as MoviePass' services malfunctioned (Sarah Toy). The company simply did not have enough money to pay the services its app relied on (payment processing, servers, card manufacturing, etc.).
With such instability in price and a service that doesn't work, customers cancelled their subscriptions. Between July and August 2018 alone, the company lost 92.3% of its subscribers (from 3M to 0.23M). The company looked incompetent to users.
With near-negative margins, grossly mis-predicted demand and a deal that changed every month, Moviepass' failure to plan and execute a strong pricing strategy was a core reason why Moviepass was forced out of business.
2. Moviepass' Strategy to Profitability
Diversifying the Business Model
In hopes of minimizing their losses, Moviepass expanded into 3 additional revenue streams:
Data Monetization & Advertising
MoviePass Ventures
MoviePass Films
Beyond the subscriptions, MoviePass also monetized the data they collected from viewers. In early 2018, the company offered to sell advertiser and subscription location data access to restaurants, bars and cab services (Dawe). The idea was that different businesses could send location-based advertisements to MoviePass subscribers who had just finished a movie. These advertisements would be targeted to the type of consumer, ensuring better results (Dawe). For example, a cab company could send a "techie" advertisement to someone who had just finished watching Star Wars.
MoviePass also launched MoviePass Ventures, its movie financing and investment branch (Meyer). Similarly, in 2018 company launched its own production company, MoviePass Films (Meyer). Helios and Matheson's idea was that MoviePass Ventures and MoviePass Films would be important sources of revenue which could help offset the losses incurred with the MoviePass subscription.
Why the Diversification Failed
Diversification is considered to be "good growth" when it creates synergies with other segments of the business. Out of all the aforementioned diversification ventures, only one had synergies with other parts of the business: data monetization & advertising.
Selling data had synergies on dimensions of coordination, as both ventures can coordinate across production, distribution, and R&D. Selling more data would force MoviePass to better understand their customer, further bettering their subscription business. Additionally, development costs could be spread out across both business segments.
However, selling data only works at scale. Even though analytics is Helios & Matheson's forte, with a plummeting subscriber-count MoviePass simply did not have the numbers to make their analytics and advertising branch successful. No business would pay to have location access to just 230,000 subscribers spread around the United States.
As for the other ventures, both MoviePass Ventures and Films were illogical hail marys. Not only did the ventures not have any synergies with the existing business, but the company was completely outside of its area of expertise - and it showed.
The first movie MoviePass Ventures helped finance was a the mob film Gotti. The movie was produced for $10M but was a complete flop, bringing in only $6.1M at the box office (Meyer). MoviePass also backed The Row, which was also a box office failure.
Unsurprisingly, MoviePass Films was also a failure. The company acquired 51% of Emmett Furla Oasis Films (EFO Films) and acquired the rights to EFO's library of films such as Lone Survivor and Rambo (Perez). Since then, MoviePass Films did nothing with the venture.
Ultimately, it is important to analyze growth, especially diversification, on dimensions of synergies. While the data and advertising branch showed promise, the company's failure to retain its users caused it to fail. As for the others, the diversification efforts failed because they carried no synergies to the core business.
3. Competitive Landscape
Moviepass Failed to Deter Competitors
First-mover advantage does not ensure long-term profitability.
While MoviePass disrupted the movie theater industry and had first-mover advantage, they were in no position to compete. In fact, MoviePass was easy pickings for competitors. The company had not created any defensible moats around itself that stopped competitors from copying their business model, their customers' trust was eroded, and the company was bleeding money. In short, they had built sustainable, long-term advantage beyond being first-to-market.
On the other hand, the pre-existing players (AMC, Regal, Cinemark, etc.) had high incentives to copy MoviePass' business model. Firstly, the additional foot-traffic inside of the movie theaters meant that the large movie-theater chains could sell more concessions. Additionally, these companies could put MoviePass out-of-business simply by refusing to accept MoviePass ticket holders. Lastly, these companies also owned the movie-theaters and had the data to manage movie-ticket demand. They could accurately predict what the demand of a movie would be and therefore run a profitable business even while offering heavily-discounted tickets through their subscriptions.
For the large movie-theater chains, offering a monthly subscription service was an excellent move - and that's exactly what they did.
Soon after MoviePass gained traction, movie theater chains revoked access to MoviePass holders and offered their own equivalent. AMC, Regal and Cinemark all released their own movie subscription services. AMC released AMC Stubs A-List, which allows users to see 3 movies/week for $19.95/month (price can vary based on geography). Regal and Cinemark released similar propositions.
Not only did MoviePass face tremendous competition, its competitors' products were better. Without talking about the functionality or the technical side of things, AMC and Regal subscribers could see more movies/month than MoviePass subscribers. Similarly, for those who did not need access to near-unlimited movies, Cinemark offered a 1 movie/month subscription. MoviePass was in the one category that did not appeal to customers: less movies/month at a higher monthly price. MoviePass was crushed by the competition.
In conclusion, MoviePass' failure started with their poor pricing strategy: their price point had no consideration for costs, they failed to predict demand and their deal was changed too many times. Their poor pricing strategy eroded customer trust, destroyed their brand image and made the company bleed cash. With such poor pricing strategy, they were doomed from the start.
In a desperate attempt to revive themselves, MoviePass tried to diversify its revenue source. However, their diversification into data & analytics was too little too late. Their other diversification efforts, MoviePass Films and MoviePass Ventures were not within their domain of expertise and had no synergies the movie-ticket business. Unsurprisingly, they failed.
Without cash and without a brand, MoviePass could not do anything to stop the better-positioned competitors from stealing market share. Large movie theater took MoviePass' idea and implemented it as their own, ultimately forcing the company to go under.