Tech history is filled with revolutionary, industry-changing ideas.
Few people realize, though, that the first company to come up with something new often doesn’t succeed. It’s usually the second and third attempts from later startups that soar, learning from their predecessor’s mistakes.
Look at the biggest tech services today. Before Facebook, there was Friendster and Myspace. Spotify built its music streaming service on the heels of Rhapsody. Does anyone remember AltaVista Search? If not, Google it.
Executing a new idea is risky. Revolutionary companies are disadvantaged—they are not able to learn from prior mistakes. Everything they do is experimental.
Enter MoviePass, the new idea that may have saved the theater industry. Too bad they might not be around to see the fruits of their shakeup.
MoviePass was a subscription service. Members paid a monthly fee and, in return, were able to order a certain amount of movie tickets. For every ticket that subscribers ordered, MoviePass paid full price to the theater. When the company started in 2011, the fee was $29 and things went smoothly for six years.
Then Mitch Lowe happened. The Netflix co-founder took over as CEO and made two changes: drop the monthly fee to $9.95 and give subscribers one theater ticket per day—30 movies for 10 bucks.
If you are wondering how this business model was sustainable, so was everyone else. The answer? It was not.
Lowe, however, had a vision.
Lowe never planned to make money from this subscription model. Instead, he aimed to profit by selling user data. He thought MoviePass data could show filmmakers what people wanted to watch. It could tell nearby restaurants which movies left people hungry and what they might eat. It could tell theaters where in town their customers were coming from, even demographics. To Lowe, the possibilities were endless—in a creepy big brother sort of way.
Unfortunately, Lowe overlooked one data point. Turns out the one thing people like more than movies is dirt cheap movies.
After the subscriptions dropped to $9.95, the number of users grew by 4,000% in four months. MoviePass suddenly had 3 million members and each one was cashing in on tickets; making it the fastest growing subscription company in history. It grew too much, too quick—both for the company’s coffers and their nine employees. No amount of data sales could keep up with the huge losses in ticket purchases.
MoviePass is now broke, barely still around, experimenting with new business models.
Despite their failure, MoviePass addressed a critical problem with the industry: theaters are expensive while streaming from home is cheap.
MoviePass’ subscription model made theaters affordable again. Largely due to them, box office sales grew 10% in 2018. Theaters took note of MoviePass’ new idea—including its flaws—and are sprinting with it. AMC and Cinemark are starting their own, more sustainable subscription models. Hopefully, this becomes a standard tactic to help theaters compete with streaming services.
MoviePass, like AltaVista and Myspace, might ultimately fail, but their revolutionary idea just may have changed movie theaters for the better.