Harvard Case - MoviePass: Disruption Through Subscription
"MoviePass: Disruption Through Subscription" Harvard business case study is written by Ram Subramanian. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Sep 13, 2019
At Fern Fort University, we recommend MoviePass to fundamentally re-evaluate its business model and pivot towards a sustainable, value-driven approach. This involves a multi-pronged strategy focusing on strategic partnerships, data-driven pricing, and enhanced customer experience. By leveraging technology and analytics, MoviePass can create a sustainable competitive advantage in the evolving entertainment landscape.
2. Background
MoviePass, a subscription-based movie ticketing service, disrupted the traditional movie industry by offering unlimited movie tickets for a fixed monthly fee. This disruptive innovation attracted millions of subscribers but ultimately led to unsustainable financial losses. The case study highlights the challenges faced by MoviePass, including its rapid growth, aggressive pricing strategy, and lack of a robust business model.
The main protagonists are:
- Mitch Lowe: Former Netflix executive who co-founded MoviePass and spearheaded its initial growth.
- Ted Farnsworth: CEO of Helios and Matheson Analytics (HMNY), the company that acquired MoviePass.
- Movie theater chains: Major players in the industry who faced significant disruption from MoviePass's model.
3. Analysis of the Case Study
Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the digital subscription model.
- Bargaining Power of Buyers: High, as consumers have many entertainment options and can easily switch services.
- Bargaining Power of Suppliers: Moderate, as movie theaters have some leverage but are reliant on MoviePass for customer traffic.
- Threat of Substitutes: High, with streaming services and other entertainment options readily available.
- Competitive Rivalry: High, with several competitors entering the subscription-based movie ticketing market.
SWOT Analysis:
Strengths:
- Brand recognition: MoviePass gained significant brand awareness through its disruptive model.
- Technology and analytics: Potential for leveraging data to personalize offers and improve customer experience.
- Large subscriber base: A large pool of potential customers for future revenue generation.
Weaknesses:
- Unsustainable business model: The initial pricing strategy was not profitable and relied heavily on external funding.
- Lack of differentiation: MoviePass offered a basic service with little focus on unique features or value-added benefits.
- Limited control over movie theaters: Dependence on movie theaters for ticket distribution and pricing.
Opportunities:
- Strategic partnerships: Collaborating with movie theaters, studios, and other entertainment providers to offer exclusive content and experiences.
- Data-driven pricing: Implementing dynamic pricing models based on demand, location, and customer preferences.
- Enhanced customer experience: Offering personalized recommendations, loyalty programs, and other value-added services.
Threats:
- Competition: Existing and emerging competitors offering similar subscription services.
- Changing consumer behavior: Shifting preferences towards streaming services and other entertainment options.
- Regulation: Potential for government intervention in the movie ticketing industry.
Value Chain Analysis:
MoviePass's value chain consists of:
- Inbound logistics: Acquiring and managing movie tickets from theaters.
- Operations: Processing subscriptions, managing customer accounts, and providing ticketing services.
- Outbound logistics: Delivering tickets to customers through mobile apps or kiosks.
- Marketing and sales: Promoting the service and acquiring new subscribers.
- Customer service: Responding to customer inquiries and resolving issues.
Business Model Innovation:
MoviePass's initial business model relied on a disruptive innovation strategy that focused on attracting subscribers through low prices. However, this model was unsustainable due to the lack of value creation and profitability. MoviePass needs to innovate its business model by:
- Shifting towards a value-driven approach: Offering personalized experiences, exclusive content, and loyalty programs.
- Leveraging data analytics: Optimizing pricing, marketing, and customer service based on insights from customer data.
- Building strategic partnerships: Collaborating with movie theaters, studios, and other entertainment providers to enhance the customer experience and generate revenue.
4. Recommendations
1. Strategic Partnerships:
- Movie Theater Alliances: Negotiate exclusive deals with major theater chains to offer discounts, early access to screenings, and other perks for MoviePass subscribers.
- Studio Collaborations: Partner with film studios to offer exclusive content, advanced screenings, and behind-the-scenes experiences.
- Technology Integrations: Integrate with streaming services, loyalty programs, and other entertainment platforms to create a comprehensive entertainment ecosystem.
2. Data-Driven Pricing:
- Dynamic Pricing: Implement a dynamic pricing model that adjusts ticket prices based on demand, location, time of day, and customer preferences.
- Personalized Offers: Leverage customer data to offer personalized discounts, promotions, and recommendations.
- Tiered Subscriptions: Offer different subscription tiers with varying benefits and price points to cater to diverse customer needs.
3. Enhanced Customer Experience:
- Personalized Recommendations: Provide personalized movie recommendations based on customer viewing history and preferences.
- Loyalty Programs: Implement a loyalty program that rewards frequent subscribers with exclusive benefits and discounts.
- Concierge Services: Offer concierge services to help subscribers book tickets, find showtimes, and access exclusive events.
4. Technology and Analytics:
- Data Analytics Platform: Develop a robust data analytics platform to collect, analyze, and leverage customer data for business decision-making.
- AI-Powered Recommendations: Use AI and machine learning algorithms to personalize recommendations and optimize pricing strategies.
- Mobile App Enhancements: Improve the mobile app interface, add new features, and enhance user experience.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Leveraging technology and data analytics to create a personalized and value-driven customer experience aligns with MoviePass's mission to provide accessible and affordable moviegoing.
- External customers and internal clients: The recommendations cater to the needs of both moviegoers and movie theaters by offering a win-win solution that benefits all stakeholders.
- Competitors: The recommendations differentiate MoviePass from competitors by focusing on creating a unique value proposition through strategic partnerships, data-driven pricing, and enhanced customer experience.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability through increased revenue generation, reduced operating costs, and enhanced customer loyalty.
Assumptions:
- Moviegoers are willing to pay a premium for personalized experiences and exclusive content.
- Movie theaters are open to partnering with MoviePass to increase customer traffic and revenue.
- Technology and analytics can be effectively leveraged to personalize offers and improve customer experience.
6. Conclusion
By implementing these recommendations, MoviePass can transform its business model from a disruptive force to a sustainable and profitable player in the entertainment industry. By focusing on strategic partnerships, data-driven pricing, and enhanced customer experience, MoviePass can create a sustainable competitive advantage and capture a significant share of the evolving moviegoing market.
7. Discussion
Alternatives:
- Mergers and acquisitions: MoviePass could explore mergers or acquisitions to acquire existing competitors or complementary businesses.
- Vertical integration: MoviePass could vertically integrate by acquiring movie theaters or production companies to gain greater control over the value chain.
- Outsourcing: MoviePass could outsource certain functions, such as customer service or marketing, to reduce operating costs.
Risks:
- Competition: Intense competition from existing and emerging players could hinder MoviePass's growth.
- Technological disruption: Rapid advancements in technology could render MoviePass's business model obsolete.
- Regulatory changes: Government regulations could impact MoviePass's operations and pricing strategies.
Key Assumptions:
- The recommendations rely on the assumption that moviegoers are willing to pay a premium for personalized experiences and exclusive content.
- The success of the recommendations hinges on MoviePass's ability to secure strategic partnerships with key stakeholders in the entertainment industry.
8. Next Steps
Timeline:
- Month 1: Conduct a comprehensive market analysis and identify potential strategic partners.
- Month 2: Develop a data analytics platform and implement dynamic pricing models.
- Month 3: Launch personalized recommendations and loyalty programs.
- Month 4: Negotiate exclusive deals with movie theaters and studios.
- Month 5: Continuously monitor and adjust strategies based on customer feedback and market trends.
By following these steps, MoviePass can effectively implement its new business model and achieve sustainable growth in the competitive entertainment landscape.
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Case Description
In August 2018, MoviePass, a New York City-based movie ticket subscription service, faced an acute cash crisis that threatened its ability to continue in business. The company had disrupted the movie exhibition industry by offering movie tickets at a discounted monthly subscription price. Despite having quickly grown its subscription base to 3.2 million, it faced several challenges. The company had cash to survive for only the next two months, and a competitor was pushing its own subscription service. As a disruptor in the newly emerging subscription economy, MoviePass faced an existential crisis. How could the chief executive officer and his team increase MoviePass's subscription base and turn the company's first-mover and wider-network advantages into greater profitability-before the company ran out of capital?
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