Movie ticket subscription “technology” company MoviePass is giving us another kind of spectacle. After a sharp growth in subscriptions, racking up 3 million users within a year, the company is in freefall. What is worse, unlike the startup unicorns it is modeling itself after, continuing on its path of massive user growth is not what will save it, but yet another push for a more extraordinary crash. Barring a deus ex machina, the Spotify of going to the movies will not exist as we know it for the next summer.
When it comes to EdTech, I’m sure many of us hold certain beliefs about the transformative potential of our business. There’s nothing wrong with dreaming big, as long as you put some numbers and common sense into it. In honor of the soon-to-be distant memory of MoviePass, run a check-up of your venture’s sustainable growth strategy.
Think things through. Do the honest math. Don’t consider just how your customers behave, but how they are likely to when your groundbreaking model becomes available to them, loopholes and all. By Bloomberg’s calculations, a user who watched 12 movies over the course of five months required MoviePass to pay an estimated $200 to theaters, despite only garnering them $50 from the user. After all, unlimited is another word for “not guilty of abuse.” Don’t be afraid to set limits in otherwise unlimited services. Customers might not like it as much at first sight, but it will not enrage them as much as changing rules in the middle of the game would.
Go in the red, but with an escape plan. All businesses need to invest in building a user base. Depending on your luck, your investors might not care that your business model is not revenue-positive for a while, as long as the user base is growing. Do not burn cash unnecessarily. MoviePass invested “tens of millions of dollars” in a technology platform that, legal resolution pending, may be generic enough for competitors to replicate without being considered in breach of a 2012 patent. Generally speaking, debt is good if it finances investment, or even marketing efforts, not subsidizing ordinary customer behavior. If your investors ask why you are running into so much debt, try having a better answer than “all the multi-billion dollar companies do it.”
Do not change the rules in the middle of the game. Including those you have changed before. It is never good to look like the company is managed by afterthoughts and in constant damage control. It is fine to change rules for new customers, but it is unacceptable to roll back offerings to early adopters. Instead of abrupt price increases, try adding complementary, value-added services that increase upselling opportunities. But don’t commit to promises other than your core values if your survival is at stake. Avoid the trap MoviePass put itself in: Change too much and betray loud customers, change too little and cease to exist, while hoping for future income streams from undeveloped partnerships.
Fix your mistakes as soon as you spot them. Pride can really get in the way of preventing a snowballing effect. At least do it before it is obvious to everyone else what the solution is. Adding fuel to the now proverbial cash and burn, a cadre of MoviePass competitors have jumped in, including the theater chains themselves. But you will be hard-pressed to find anyone willing to offer as free-willed and low-priced a service.■
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