The downfall of MoviePass: what went wrong?

Anton P. | July 2, 2021

MoviePass was an inventive sensation for all cinemagoers until it turned into a complete flop. The service followed a simple principle. Movie lovers would purchase subscriptions, preload them on special debit cards, and use them to see movies at various cinemas. However, with subscription fees failing to cover the expenses, MoviePass quickly faced the music. Its unsustainable business model led to its demise, but the shady under-the-hood activities cost them their reputation. Let’s dig deeper into why MoviePass failed and how its strategies backfired.

What is MoviePass?

MoviePass had the ultimate deal for cinema enthusiasts. It offered a monthly subscription, allowing people to watch a certain number of films. In 2017, the service’s prices fell from 15-50 dollars to as little as $9.95 a month. According to Vulture, the service peaked in June 2018, with claims that MoviePass had more than 3 million users. However, this number would drop to 225,000 users by 2019. How did this happen?

MoviePass skyrocketed to fame and glory after slashing its prices. Users paying $9.95 for a subscription were able to watch one movie per day. On the surface, it was the glowing attraction potential subscribers wanted, but many claimed the offer to be less than realistic.

Depending on users’ locations, movie theaters priced a single movie ticket from $12 to $18. If people can watch a movie every day with a subscription costing $10, the math doesn’t add up.

Essentially, MoviePass lost money for every user it had. Its monthly subscription, in some areas, did not cover the cost of a single ticket. And since MoviePass paid the total price for each, its revenue was practically nonexistent.

Thus, the sad news was that the explosive growth was hurting its business. To combat this, MoviePass would go on to announce new fees for its services. For instance, it added surge fees to popular films and the best time slots.

Humble beginnings

MoviePass appeared in 2011 and struggled to gain support from potential users and cinemas. In its early stages, the service relied on a voucher system. Thus, clients would individually print them and show them at the participating movie theater chains. After that, MoviePass released a mobile app and an electronically preloaded prepaid card. In 2012, Business Insider named MoviePass as the best entertainment app. However, the bright feature was not meant to be.

In 2016, Mitch Lowe became the new CEO. Under his supervision, MoviePass began experimenting with different pricing models. For instance, one subscription would grant users six movies per month and cost $50. However, around the same time when Helios and Matheson purchased the majority of the sake, the prices significantly dropped.

The idea behind the $10 monthly subscription was to replicate the business models of Facebook or Google. In essence, MoviePass hoped to make up for the low prices with the revenue from users’ viewing habits used for targeted advertising. The price drop attracted so many users that the MoviePass website consequently crashed.

The MoviePass prices would go as far as to drop to $7.95 and $6.95 if the users chose to pay the annual price. However, soon enough, the unsustainable model proved to be fatal. As a result, MoviePass started exercising questionable actions, essentially preventing its subscribers from seeing movies.

Controversy and FTC allegations

In 2019, MoviePass finally filed for bankruptcy. However, it was not the end of this unfortunate saga. MoviePass would come under harsh scrutiny, leading to FTC complaints. Essentially, the service got charged for the following actions:

  • Misleading users and denying services for which they have paid. MoviePass knew that its deals were too good to be true. Thus, the service did some unthinkable things to minimize the financial damage. The tactics included changing clients’ account passwords to prevent them from using their subscriptions. It also would cut off its services when users reached a specific limit. The goal was to prevent clients from using the service too much. Such strategies did not settle well with the users nor with the FTC.
  • Failing to protect clients’ personal and financial information. The news of an unprotected database seemed like the final blow to MoviePass. A Dubai-based cybersecurity firm SpiderSilk discovered millions of unencrypted customer card numbers and personal credit card numbers. Some of the records related to the debit cards issued by the MoviePass. However, some of them contained clients’ credit card numbers and their expiration dates. The data also included billing info, postal addresses, and names. Experts stated that the exposed data was enough to make fraudulent transactions.

According to the FTC, MoviePass failed to provide fair services to its customers. Additionally, it did not take adequate precautions to safeguard its data. As a result, the people involved cannot misrepresent their services and must implement a comprehensive security program for their future projects.

Greedy data collection

As mentioned above, MoviePass wished to generate most of its revenue from its users’ data. Lowe had been relatively open about the way they might track their clients. However, the amount of data collected was not trivial, and it included the following details:

  • Clients’ home addresses since users would need to provide them to receive their MoviePass cards.
  • Lowe mentioned that they could estimate clients’ income, kids, and age groups.
  • The service also tracked clients’ journeys to the cinema and their route after that. Thus, the location tracking helped them calculate, for instance, the popular establishments that moviegoers visit.

MoviePass stated that the company would never sell its clients’ data to third parties. However, it did say that the accumulated information would help personalize users’ experiences. For one, they claimed that they would partner with specific companies to offer their clients discounts on transportation and coupons for nearby restaurants.

While the majority of users might not have opposed this data collection, it did raise some concerns. According to experts, MoviePass’s privacy policy also did not include statements about tracking clients’ movements.

Take caution with too-good-to-be-true deals

Initially, MoviePass did many things right and might have transformed into a successful business over time. However, the company’s ill-fated experimentations with pricing led to its demise. The $10 subscription was not a sustainable business model, and it eventually resulted in false marketing.

If you ever see apps promising you the world for a low price, treat them with caution. MoviePass was the perfect example of a company paying the ultimate price (literally) for the influx of users and media attention. If the math doesn’t add up, do not believe that a company takes a blow for you.

Additionally, if a service partakes in questionable location tracking, you should be able to avoid it. First of all, you can disable location tracking on your smartphone for specific apps. In other cases, you can install a VPN, connect to a server in a different location, and avert certain IP-based tracking as well.

Anton P.

Anton P.

Former chef and the head of Atlas VPN blog team. He's an experienced cybersecurity expert with a background of technical content writing.

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