MoviePass: The "Get Big Fast" Strategy Custom Case Solution & Analysis
Evidence Brief: MoviePass Case Analysis
1. Financial Metrics
Subscription Price: 9.95 dollars per month for unlimited movies as of August 2017 (Source: Paragraph 1).
Cost of Goods Sold: Average ticket price paid to theaters was 8.97 dollars nationally, with urban centers like New York and Los Angeles exceeding 12.00 dollars (Source: Exhibit 1 and 3).
User Growth: Subscriber base expanded from 20,000 in August 2017 to over 3 million by June 2018 (Source: Paragraph 14).
Burn Rate: Monthly cash deficit reached approximately 40 million dollars during peak growth periods in 2018 (Source: Paragraph 22).
Capitalization: Helios and Matheson Analytics (HMNY) owned approximately 92 percent of MoviePass and funded losses through continuous equity issuance (Source: Paragraph 12).
2. Operational Facts
Payment Mechanism: Utilized a standard MasterCard debit card system to pay theaters the full retail price of tickets at the point of sale (Source: Paragraph 8).
Technology: Mobile application required GPS check-in within 100 yards of the theater to unlock funds on the debit card (Source: Paragraph 9).
Market Position: MoviePass accounted for approximately 5 percent of the total United States box office receipts by mid-2018 (Source: Paragraph 18).
3. Stakeholder Positions
Mitch Lowe (CEO): Positioned the company as a data firm that would eventually monetize user behavior through studio partnerships and advertising (Source: Paragraph 5).
Ted Farnsworth (HMNY CEO): Focused on the Get Big Fast strategy, prioritizing subscriber acquisition over immediate path to profitability (Source: Paragraph 13).
Adam Aron (AMC CEO): Explicitly stated the 9.95 dollar price point was unsustainable and threatened to block MoviePass from AMC locations (Source: Paragraph 16).
Independent Theaters: Some smaller chains welcomed the increased foot traffic and concession sales (Source: Paragraph 19).
4. Information Gaps
Data Valuation: The case does not provide specific revenue figures or contracts for the sale of user data to third parties.
Churn Rate: Specific data regarding subscriber retention after the initial three-month period is absent.
Adoption Elasticity: Lack of data on how many users would remain if the price increased to a break-even level.
Strategic Analysis: The Aggregator Dilemma
1. Core Strategic Question
Can an intermediary survive by purchasing a commodity at retail price and reselling it at a 75 percent discount to build a data-driven monopoly?
Will the increased volume generated by MoviePass provide enough bargaining power to force theaters into revenue-sharing agreements?
2. Structural Analysis
The industry structure is characterized by high supplier power. Three major chains (AMC, Regal, Cinemark) control over 50 percent of the United States screens. MoviePass operates as a price-taker because it relies on the existing MasterCard infrastructure rather than direct integration with theater Point of Sale systems. The value chain analysis reveals that MoviePass currently adds cost without capturing any portion of the high-margin concession revenue, which is where theaters generate their profit.
3. Strategic Options
Option
Rationale
Trade-offs
Tiered Subscription Model
Limit usage to three movies per month to align costs with revenue.
Reduces churn risk but slows the Get Big Fast growth trajectory.
Studio Partnership Focus
Shift from theater confrontation to studio marketing and distribution.
Requires smaller subscriber base to prove targeted marketing efficacy.
Variable Pricing
Implement surge pricing for high-demand weekend showings.
Directly increases revenue but alienates the core early-adopter user base.
4. Preliminary Recommendation
MoviePass must immediately abandon the unlimited model in favor of a capped three-movie-per-month plan. The current unit economics are mathematically impossible to sustain through data sales alone. By capping usage, the company preserves capital to survive long enough to negotiate a share of concession growth with mid-sized theater chains who are more dependent on the increased foot traffic MoviePass provides.
Implementation Roadmap: Operational Stabilization
1. Critical Path
Phase 1 (Days 1-30): Update the mobile application to include ticket photo verification to prevent account sharing and fraud.
Phase 2 (Days 31-60): Transition all 9.95 dollar unlimited plans to a three-movie cap upon their next billing cycle.
Phase 3 (Days 61-90): Launch a high-demand surcharge for opening weekend blockbusters to manage liquidity.
2. Key Constraints
Capital Availability: The strategy depends entirely on the ability of HMNY to sell shares into the market. If the stock price drops below a certain threshold, the funding mechanism fails.
Theater Resistance: Major chains may develop their own subscription programs (e.g., AMC Stubs A-List), which would render the MoviePass value proposition obsolete for frequent moviegoers.
3. Risk-Adjusted Implementation Strategy
Execution success depends on reducing the average tickets per user from 2.2 to 1.1 within 90 days. The primary operational risk is a surge in customer support volume following the plan changes. To mitigate this, MoviePass must automate the plan transition process and scale down marketing spend to focus on retention of low-frequency users who are profitable for the model.
Executive Review and BLUF
1. BLUF
MoviePass is currently a capital-intensive subsidy for moviegoers, not a viable technology platform. The strategy of purchasing inventory at retail to sell at a deep loss assumes that data and bargaining power will eventually offset a negative gross margin. This assumption is flawed because the suppliers (theaters) are consolidated and have already begun launching competing products. The company will exhaust its capital within six months unless it immediately caps usage and pivots to a partnership model with independent exhibitors. Speed of transition is the only way to avoid total insolvency.
2. Dangerous Assumption
The single most consequential unchallenged premise is that user data has a higher market value than the 15.00 to 20.00 dollars of monthly loss incurred per active subscriber. There is no historical evidence in the media or advertising industry to support such a high valuation for basic demographic and attendance data.
3. Unaddressed Risks
Financial Risk (High Probability, High Consequence): The continuous dilution of HMNY stock will eventually lead to a delisting from the exchange, cutting off the only source of operational cash.
Competitive Risk (High Probability, High Consequence): AMC and Regal can launch internal subscription services with zero customer acquisition cost and better margins due to their ownership of the inventory and concessions.
4. Unconsidered Alternative
The team failed to consider a B2B pivot where MoviePass white-labels its technology for smaller theater chains that lack the technical capability to build their own subscription apps. This would move the company from a high-risk consumer play to a stable software provider with predictable recurring revenue.