Anybody who bothered to look at MoviePass's business plan would've immediately been confronted with the fact that the business was doomed to fail - barring some king of pivot that would bring in badly needed revenue for a company that buys movie tickets for $10 then sells them to its "customers" for 33 cents...
Just to put this problem in perspective, lets apply some math to this case study on how not to run a business. Lets assume that each of MoviePass's 400,000 subscribers decide to see 2 movies each week (they're entitled to one movie pass a day...but lets just assume they only use 2 per week) at a cost of $10...that's a total cost of $32 million each month. Now, each of those subscribers are paying $10 per month for their service which means MoviePass is collecting $4 million in revenue and burning $28 million every single month or $336mm per year...and that doesn't even count their staff and other overhead expenses which we're sure are considerable. Does that sound like a business plan that might be of interest to you?
As we said when we first wrote about the company in October: Who knew that massive cash losses could be detrimental to the health of a business?
After the company revealed in January (in response to an inquiry from an incredulous customer) that it had ended its relationship with AMC, critics of the company were waiting for the other shoe to drop...
But earlier this week, the company hinted at how it might see itself recouping all of this lost revenue. It's a tried-and-true method in Silicon Valley: Harvest all of the user data you can - transparency and customer service be damned.
MoviePass CEO Mitch Lowe revealed as much during a talk at the Entertainment Finance Forum this week, when he coyly informed his audience that "we [MoviePass] know all about you."
Huh? That's right: Though, as TechCrunch pointed out, there's nothing in the MoviePass user agreement authorizing it to collect such extensive reams of customer data - the company is apparently doing it anyway, as its CEO openly admitted.
"We get an enormous amount of information," Lowe continued. "We watch how you drive from home to the movies. We watch where you go afterwards."
This startled a TechCrunch reported, who said most users probably imagined the company's data-collection would be geared more toward helping movie studios learn about ticket sales patterns and perform A/B testing with more intense granularity.
Not that the company is literally tracking everything its users do.
It’s no secret that MoviePass is planning on making hay out of the data collected through its service. But what I imagined, and what I think most people imagined, was that it would be interesting next-generation data about ticket sales, movie browsing, A/B testing on promotions in the app and so on.
I didn’t imagine that the app would be tracking your location before you even left your home, and then follow you while you drive back or head out for a drink afterwards. Did you?
Naturally I contacted MoviePass for comment and will update if I hear back. But it’s pretty hard to misinterpret Lowe’s words.
After a few days, the company responded with the following statement:
We are exploring utilizing location-based marketing as a way to help enhance the overall experience by creating more opportunities for our subscribers to enjoy all the various elements of a good movie night. We will not be selling the data that we gather. Rather, we will use it to better inform how to market potential customer benefits including discounts on transportation, coupons for nearby restaurants, and other similar opportunities.
And there you have it: In its effort to create a streamlined "night at the movies", MoviePass eventually plans to set up parking or help you order a car, or giving you a deal on dinner before or after - or maybe evven connecting you with other movie aficionados. To do that, it needs to collect as much data on its users' activities as possible.
But as for an explanation for its lack of transparency? The company has yet to provide a reasonable answer.
Let's hope they come up with something before the service folds, or they're forced - in a final act of desperation - to package and sell all that data to the highest bidder. The scandal is reminiscent of a controversy involving Uber, when the company was exposed for tracking users of its apps after they'd been dropped off.
Of course, MoviePass is a great deal for consumers (as we've mentioned above). But we imagine at least some customers would've thought twice if they knew about everything they were giving away...