How Helios and Matheson Analytics, which raised $60M to grow MoviePass, plans to make $9.95/mo service profitable using data from its rapidly growing user base
LOS ANGELES — As streaming services like Netflix and Hulu surge in popularity, movie theaters have been trying to compete … Tweets: @nytmedia , @ennisnyt , @nytimesbusiness , @mdudas , @eshmu , @nytimestech , @nytimestech , @nytimestech , and @nytimestech See also Mediagazer Tweets: @nytmedia : Cinema attendance was flat at U.S. cinemas in 2015 and 2016, and analysts are projecting a 4% decline in 2017 http://www.nytimes.com/... Connor Ennis / @ennisnyt : Moviegoing is on pace for a 22-year low. Could a subscription service help turn things around? @brooksbarnesNYT on the fast-growing MoviePass http://www.nytimes.com/... @nytimesbusiness : It took Netflix more than three years or Hulu 10 months to do what MoviePass announced: more than 1 million subscribers in just four months http://www.nytimes.com/... Mike Dudas / @mdudas : This is *terrible* reporting. This is like comparing Google to Groupon. http://twitter.com/... @eshmu : Fun, ongoing case study in subscription economics and the power of subscription models to change price perception and customer behavior. Will be interesting to see if this works. http://twitter.com/... NYTimes Tech / @nytimestech : If MoviePass gets big enough, it could try to demand that theaters sell tickets at a discount or share a slice of their concession revenue http://www.nytimes.com/... NYTimes Tech / @nytimestech : MoviePass said it had signed up more than 1 million subscribers in four months. It took Netflix more than three years to reach that level http://www.nytimes.com/... NYTimes Tech / @nytimestech : About 75 percent of MoviePass users are millennials, a group Hollywood has struggled to turn into avid moviegoers http://www.nytimes.com/... NYTimes Tech / @nytimestech : MoviePass's success creates new criticism from theaters owners — namely that it will never be able to make money by charging $9.95 a month http://www.nytimes.com/... See also Mediagazer
Context & Ripple Effects
By late 2017, MoviePass had become the fastest-scaling subscription in entertainment: after cutting prices and launching an $89.95 annual plan, it went from an estimated 150K users in August to 1M paying subscribers in four months — faster than Netflix or Hulu managed. But the math never closed at $9.95/month, and theater owners said so publicly.
This NYT piece captures Helios and Matheson Analytics' answer: a $60M raise to fund growth, with profitability deferred to monetizing behavioral data from a user base that is roughly 75% millennials. It is the moment the company stopped being a ticketing service and became a data bet on flat-to-declining cinema attendance.
First-order effects
- Theater owners face a middleman selling their product below cost while harvesting customer data they don't control — their criticism of the $9.95 price as unprofitable now has a named counter-strategy to attack.
- Helios and Matheson converts its $60M into subscriber acquisition, accepting per-user losses on the theory that data revenue scales with the 1M-plus base.
Second-order effects
- If the data-monetization pitch works, studios and exhibitors become the buyers of MoviePass audience insight — shifting leverage over pricing and marketing toward whoever owns the subscriber relationship.
- Rivals and exhibitors are forced to decide whether to match sub-cost subscription pricing or wait out a competitor burning cash to hold the price floor down.
Third-order effects
- The pattern this sets — underprice to buy scale, promise data will close the gap — is exactly the structure that broke when MoviePass ran out of money and couldn't cover its bills within months of this piece, vindicating the theater owners' arithmetic.
- The same pressure shows up years later at the winner of that era: Netflix, facing its own subscriber miss and ballooning costs, moved to cheaper, ad-supported tiers and paid sharing — evidence that sub-scale-per-unit subscription economics eventually force every player back toward monetizing users beyond the base fee.
The trend: Consumer subscriptions across entertainment are converging on below-cost entry pricing paired with secondary monetization — data, ads, or account sharing — because the base fee alone doesn't cover unit economics.