Harvard Case - MoviePass: The "Get Big Fast" Strategy
"MoviePass: The "Get Big Fast" Strategy" Harvard business case study is written by Benjamin C. Esty, Daniel Fisher. It deals with the challenges in the field of Strategy. The case study is 21 page(s) long and it was first published on : Mar 21, 2019
At Fern Fort University, we recommend that MoviePass abandon its current 'Get Big Fast' strategy and pivot towards a more sustainable business model. This involves a multi-pronged approach that focuses on:
- Shifting from a subscription-based model to a tiered pricing structure.
- Leveraging data analytics to personalize movie recommendations and offer targeted promotions.
- Building strategic alliances with studios and theaters to offer exclusive content and experiences.
- Developing a robust technology platform to enhance user experience and provide valuable insights.
2. Background
MoviePass, a subscription-based movie ticketing service, gained immense popularity in 2017 by offering unlimited movie tickets for a flat monthly fee. This 'Get Big Fast' strategy, fueled by venture capital funding, aimed to disrupt the traditional movie ticketing industry. However, MoviePass's aggressive pricing model proved unsustainable, leading to significant financial losses and ultimately, bankruptcy.
The case study focuses on the challenges faced by MoviePass, including:
- Rapid growth and unsustainable pricing: The 'Get Big Fast' strategy led to rapid subscriber growth but resulted in massive financial losses due to the low subscription fees.
- Lack of a clear competitive advantage: MoviePass lacked a unique value proposition and struggled to differentiate itself from competitors.
- Limited data analytics capabilities: The company failed to leverage data effectively to understand customer preferences and optimize its offerings.
- Poor corporate governance and financial management: MoviePass's rapid expansion and lack of financial discipline contributed to its downfall.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of new entrants: High - The movie ticketing industry is relatively easy to enter, with low barriers to entry.
- Bargaining power of buyers: High - Consumers have many options for movie tickets, including online platforms and theater box offices.
- Bargaining power of suppliers: Moderate - Movie theaters have some bargaining power, but they rely on MoviePass for increased ticket sales.
- Threat of substitute products: High - Consumers can choose to watch movies at home through streaming services or rent DVDs.
- Rivalry among existing competitors: High - The movie ticketing industry is highly competitive, with multiple players vying for market share.
SWOT Analysis:
Strengths:
- Brand recognition: MoviePass gained significant brand awareness through its aggressive marketing campaign.
- Technology platform: The company developed a user-friendly mobile app for purchasing tickets.
- Data collection: MoviePass collected valuable data on customer preferences and viewing habits.
Weaknesses:
- Unsustainable pricing model: The flat subscription fee was not profitable in the long run.
- Lack of differentiation: MoviePass lacked a unique value proposition to attract and retain customers.
- Financial instability: The company's rapid growth led to significant financial losses.
Opportunities:
- Partnerships with studios and theaters: MoviePass can leverage strategic alliances to offer exclusive content and experiences.
- Data-driven personalization: The company can use data analytics to personalize recommendations and target promotions.
- Tiered pricing structure: MoviePass can offer different subscription levels with varying benefits and price points.
Threats:
- Competition from established players: MoviePass faces competition from well-established players like Fandango and Atom Tickets.
- Shifting consumer preferences: Consumers may prefer streaming services over traditional movie theaters.
- Technological advancements: New technologies like virtual reality and augmented reality could disrupt the movie industry.
Value Chain Analysis:
MoviePass's value chain was primarily focused on providing a convenient and affordable way for consumers to purchase movie tickets. However, the company lacked a clear value proposition and struggled to differentiate itself from competitors. This resulted in a weak value chain that failed to generate sustainable value for the company.
Business Model Innovation:
MoviePass's original business model was based on a disruptive innovation strategy. The company aimed to disrupt the traditional movie ticketing industry by offering unlimited movie tickets at a low price. However, this model proved unsustainable due to the lack of a clear revenue stream and the high cost of acquiring and retaining customers.
4. Recommendations
- Shift to a Tiered Pricing Structure: MoviePass should offer different subscription levels with varying benefits and price points. This allows the company to cater to different customer segments and generate higher revenue.
- Leverage Data Analytics for Personalization: MoviePass should invest in data analytics capabilities to understand customer preferences and provide personalized movie recommendations and targeted promotions.
- Build Strategic Alliances: MoviePass should forge partnerships with studios and theaters to offer exclusive content and experiences. This can enhance the value proposition and attract new customers.
- Develop a Robust Technology Platform: MoviePass should invest in a robust technology platform that enhances user experience, provides valuable insights, and supports data-driven decision-making.
- Focus on Corporate Governance and Financial Discipline: MoviePass should prioritize sound corporate governance practices and financial discipline to ensure long-term sustainability.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with MoviePass's core competency in technology and its mission to provide convenient and affordable access to movies.
- External customers and internal clients: The recommendations aim to enhance customer experience and provide value for both external customers and internal stakeholders.
- Competitors: The recommendations address the competitive landscape and differentiate MoviePass from its rivals.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability and generate positive returns on investment.
6. Conclusion
MoviePass's 'Get Big Fast' strategy, while initially successful in attracting subscribers, ultimately proved unsustainable. The company's failure to adapt to market dynamics, lack of a clear competitive advantage, and poor financial management led to its demise. By shifting to a more sustainable business model, leveraging data analytics, forging strategic alliances, and investing in technology, MoviePass can regain its footing and compete effectively in the evolving movie ticketing industry.
7. Discussion
Alternatives not selected:
- Continuing with the current subscription model: This option is not viable due to the unsustainable pricing structure and the company's financial losses.
- Exiting the market: While this option would avoid further losses, it would also forfeit the potential for future growth and market share.
Risks and key assumptions:
- Customer acceptance of tiered pricing: MoviePass needs to ensure that customers are willing to pay different prices for varying levels of benefits.
- Effective data analytics implementation: The company needs to invest in the right technology and expertise to leverage data effectively.
- Successful strategic alliances: MoviePass needs to negotiate favorable partnerships with studios and theaters.
- Competition and market dynamics: The movie ticketing industry is constantly evolving, and MoviePass needs to adapt to changing consumer preferences and technological advancements.
8. Next Steps
- Develop a detailed business plan: This plan should outline the new business model, pricing structure, marketing strategy, and financial projections.
- Secure funding: MoviePass needs to secure funding to support the implementation of the new strategy.
- Pilot test the new pricing model: The company should test the new pricing structure with a small group of customers before rolling it out to a wider audience.
- Invest in data analytics and technology: MoviePass should invest in the necessary resources to develop a robust technology platform and leverage data effectively.
- Build relationships with studios and theaters: The company should initiate discussions with studios and theaters to explore potential partnerships.
By taking these steps, MoviePass can transform its business and achieve sustainable growth in the competitive movie ticketing industry.
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Case Description
In August 2017, MoviePass dramatically lowered its subscription price from $50 per month to just $10 for up to one movie per day. The idea was to rapidly scale the business to the point where it could generate incremental revenue streams from related businesses (e.g., a share of ticket and concession revenues from theaters, advertising revenue from movie studios; and revenue from ride-sharing companies). Within two days, Moviepass had gotten 150k new subscribers; within six months, it had more than 2 million. But as of February 2018, the company faced three challenges: theaters were resisting the concept, investors were shorting the stock in record numbers as losses mounted, and competitors were beginning to appear. Could CEO Lowe convince investors that the company was viable and it could, indeed, monetize the growing subscriber base? At the same time, Lowe had to decide whether to raise subscription prices to cover the growing losses or keep prices low to grow the subscriber base as quickly as possible.
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