Last Thursday, I learned that MoviePass is shutting its doors. I had one thought-- Well, that didn't take long. I'd written of MoviePas
Last Thursday, I learned that MoviePass is shutting its doors. I had one thought– Well, that didn’t take long.
I’d written of MoviePass’s perpetual drama as recently as March 2019, when the struggling ticket service made news by announcing it had risen from the dead. Back then, I struck an optimistic note by mining the history of cinema for examples of successful sequels.
Turns out the analogy was too clever by half. Writing a great screenplay and a kickass business plan are two very different art forms, and MoviePass’s attempt at the latter won’t be winning a statuette anytime soon.
That doesn’t mean there aren’t lessons to be had for up-and-coming entrepreneurs, however. Here are four of them, based on a true story:
1. Cash flow is king.
When MoviePass launched in 2011, they charged a monthly $50 subscription fee. In return, customers could see unlimited movies playing in theaters.
Given the fact that your average family has to take out a second mortgage to go to the movies these days, this seems like a pretty good deal. But people didn’t really start biting until 2017, when MoviePass dropped the price to $9.95 month.
At that point, they exploded to around 3 million subscribers. Awesome, right? There was one problem. Huge movie theater chains such as AMC outright refused to work with them, and even when they finally capitulated, it cost MoviePass $8 to $15 a ticket.
This meant that MoviePass was losing money on every ticket they sold. Outflow started exceeding inflow, and that’s how you go out of business.
Keep a close eye on your cash flow statement. Pay attention to how much your business is making, along with how much you’re spending on costs like vendors and bills and payroll.
2. Keep faith with your customers.
MoviePass dealt with its cash flow problems by constantly tinkering with its business model. At one point, for example, they announced that $9.95 would no longer buy customers unlimited movies every month. Instead, they’d get to pick just three.
That’s a pretty radical change. Imagine walking into an all-you-can-eat buffet, paying for what you think will be an unrestrained feast, and then being told that you’ll receive a chicken, a side salad, and a soft drink instead.
You’d demand your money back, and think of the restaurant as a hopeless joke. If you promise your customers the moon, and deliver a nightlight instead, you’ll bounce back down to earth abruptly.
3. Sometimes you have to lose money to gain it.
There’s an idea in Silicon Valley that goes something like this: If you can win enough eyeballs, you’ll eventually figure out how to profit from them. Occasionally, it works–think of Facebook, which burned up inordinate amounts of cash before enjoying a single penny in revenue.
MoviePass wasn’t so fortunate, and there’s wisdom for small business owners here. I used to own a manufacturing business and I remember shocking the hell out of a local restaurateur when I told him it’d cost him $200 for me to replace the lightbulbs in one of his signs.
He couldn’t wrap his mind around it. He was an immigrant who’d worked his way up from nothing, and it was hard for him to imagine forking over that much for a job he could do himself if he had the equipment.
Problem was, he didn’t. I was the one with the boom truck; he could either pay me or go to one of my competitors, who was likely to charge even more. He was stuck between a rock and a hard place, but I was the one who capitulated.
I took a loss on the deal because the guy owned 20 restaurants. I knew that by winning his loyalty, I was setting myself up for juicy earnings in the future, because eventually he’d need my lucrative manufacturing services along with simple repair jobs.
Be prudent about spending, but keep an eye on the big picture.
4. Never give up.
The story of MoviePass can be viewed as a source of optimism and inspiration. It proves that the spirit of entrepreneurism is alive and well in this country.
After all, MoviePass’s legacy encompasses more than their problems. They proved definitively to major movie theater chains that millions of people are clamoring for their product, which inspired some of those dinosaurs to start monthly subscription services of their own.
Besides, it was reported today that Ted Farnsworth, an instrumental player in MoviePass’s rise and fall, is offering to buy the company in hopes of making it work.
Is he a hero stepping in at the last minute to save a sinking ship, or a naïve captain racing blindly toward an iceberg? Time will tell. Either way it sounds like the plot of a movie.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
This article is from Inc.com