Harvard Case - MoviePass: A Netflix for Moviegoers?
"MoviePass: A Netflix for Moviegoers?" Harvard business case study is written by Lorianne Dueck, Guo-Liang Frank Jiang. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Nov 27, 2019
At Fern Fort University, we recommend that MoviePass re-evaluate its business model, focusing on a more sustainable and profitable path. This involves a strategic shift from a pure subscription-based model to a hybrid approach that incorporates tiered pricing, targeted promotions, and strategic partnerships. This will allow MoviePass to better manage costs, attract a wider customer base, and ultimately achieve long-term profitability.
2. Background
MoviePass, a subscription-based movie ticketing service, aimed to disrupt the traditional movie industry by offering unlimited movie tickets for a fixed monthly fee. This innovative approach initially attracted a large customer base, but the company struggled with unsustainable economics and faced significant challenges in its quest to become 'Netflix for moviegoers'.
The main protagonists of the case study are:
- Mitch Lowe: The CEO of MoviePass, a seasoned executive with experience in the entertainment industry.
- Ted Farnsworth: The founder of MoviePass, a visionary entrepreneur with a bold ambition to revolutionize moviegoing.
- The Movie Theater Industry: Traditional movie theaters, facing a threat from the disruptive model of MoviePass.
3. Analysis of the Case Study
To analyze MoviePass's situation, we can utilize a combination of frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: High, as the barrier to entry in the movie ticketing industry is relatively low.
- Bargaining Power of Buyers: High, as consumers have numerous options for entertainment and can easily switch between services.
- Bargaining Power of Suppliers: Moderate, as MoviePass relies on partnerships with movie theaters, but theaters are also dependent on MoviePass for increased foot traffic.
- Threat of Substitutes: High, as consumers can access movies through streaming services, home entertainment systems, and other forms of entertainment.
- Competitive Rivalry: High, as MoviePass faces competition from traditional movie ticketing services, other subscription-based models, and various entertainment options.
2. SWOT Analysis:
- Strengths: Innovative business model, strong brand recognition, potential for growth in emerging markets.
- Weaknesses: Unsustainable economics, lack of control over movie theater pricing, dependence on partnerships.
- Opportunities: Partner with studios for exclusive content, expand into international markets, offer personalized recommendations and experiences.
- Threats: Competition from established players, changing consumer preferences, potential regulatory challenges.
3. Value Chain Analysis:
- Inbound Logistics: MoviePass relies on partnerships with movie theaters for ticket distribution and access to showtimes.
- Operations: The core operation involves processing subscriptions, handling ticket purchases, and managing customer data.
- Outbound Logistics: MoviePass delivers tickets to customers digitally or through physical kiosks.
- Marketing and Sales: MoviePass leverages marketing campaigns, social media, and partnerships to attract new customers.
- Service: Customer service plays a crucial role in resolving issues and providing support.
4. Business Model Innovation:
MoviePass's initial business model was based on a pure subscription model, offering unlimited movie tickets for a fixed monthly fee. This model proved unsustainable due to the high cost of movie tickets and the lack of control over pricing. MoviePass needs to explore alternative business model innovations, such as:
- Tiered pricing: Offering different subscription tiers with varying benefits and price points, catering to different customer segments.
- Targeted promotions: Offering discounts and incentives for specific movies, showtimes, or customer groups.
- Strategic partnerships: Collaborating with movie theaters, studios, and other entertainment providers to offer exclusive content and experiences.
4. Recommendations
To achieve long-term sustainability and profitability, MoviePass should implement the following recommendations:
1. Shift to a Hybrid Business Model:
- Tiered Pricing: Implement a tiered subscription model with different price points and benefits, allowing customers to choose the plan that best suits their needs and budget. This could include options like 'Basic' (limited movies per month), 'Premium' (unlimited movies with additional benefits), and 'Family' (discounted pricing for multiple users).
- Targeted Promotions: Offer targeted discounts and incentives for specific movies, showtimes, or customer groups. This could involve partnering with studios to promote new releases, offering discounts for matinee screenings, or providing incentives for frequent moviegoers.
2. Strategic Partnerships:
- Movie Theaters: Negotiate strategic partnerships with movie theaters to secure favorable pricing and access to exclusive content. This could involve offering discounts for moviegoers who use MoviePass, providing access to early screenings, or offering exclusive events for subscribers.
- Studios: Collaborate with studios to offer exclusive content and promotions to MoviePass subscribers. This could involve providing early access to new releases, offering discounts on tickets for specific movies, or creating exclusive events for subscribers.
3. Data-Driven Insights:
- Customer Analytics: Leverage customer data to understand moviegoing preferences, identify trends, and personalize offers. This will help MoviePass tailor its services to individual needs and preferences.
- Predictive Modeling: Use data analytics to predict movie ticket demand, optimize pricing strategies, and identify potential opportunities for growth.
4. International Expansion:
- Emerging Markets: Explore opportunities for expansion into emerging markets with a high demand for entertainment and a growing middle class. This could involve partnering with local movie theaters and adapting the MoviePass model to local preferences.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: MoviePass's core competency lies in its ability to leverage technology and data to simplify the moviegoing experience. The recommendations align with this competency by focusing on data-driven insights and strategic partnerships.
- External customers and internal clients: The recommendations cater to the needs of both external customers and internal clients. By offering tiered pricing and targeted promotions, MoviePass can attract a wider customer base and meet diverse needs. The strategic partnerships will benefit both MoviePass and its partners by generating revenue and increasing customer loyalty.
- Competitors: The recommendations address the competitive landscape by offering a more sustainable and differentiated business model. By leveraging data-driven insights and strategic partnerships, MoviePass can create a competitive advantage and stand out from its competitors.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to improve MoviePass's profitability by reducing costs, increasing revenue, and expanding its customer base. The potential impact on profitability can be measured through metrics such as customer acquisition cost, customer lifetime value, and revenue per customer.
Assumptions:
- The movie theater industry will continue to evolve and adapt to changing consumer preferences.
- Technological advancements will continue to improve the moviegoing experience and create new opportunities for innovation.
- Consumers will be receptive to a hybrid business model that offers both subscription-based and pay-per-view options.
6. Conclusion
MoviePass's initial business model, while innovative, was unsustainable. By shifting to a hybrid business model that incorporates tiered pricing, targeted promotions, and strategic partnerships, MoviePass can create a more sustainable and profitable path to success. The recommendations are based on a comprehensive analysis of the company's strengths, weaknesses, opportunities, and threats, and are designed to address the competitive landscape and meet the evolving needs of consumers.
7. Discussion
Alternatives not selected:
- Pure subscription model: This model was deemed unsustainable due to the high cost of movie tickets and the lack of control over pricing.
- Acquisition by a larger company: This option could provide MoviePass with access to resources and expertise, but it could also result in a loss of control and autonomy.
Risks and key assumptions:
- Changing consumer preferences: If consumer preferences shift away from traditional moviegoing, MoviePass's business model could be negatively impacted.
- Competition from established players: Established players in the movie ticketing industry could respond aggressively to MoviePass's efforts, making it difficult to gain market share.
- Technological advancements: Rapid technological advancements could disrupt the movie industry and render MoviePass's business model obsolete.
8. Next Steps
To implement these recommendations, MoviePass should take the following steps:
- Phase 1 (Short-term):
- Implement a tiered subscription model within the next 6 months.
- Initiate discussions with movie theaters and studios to explore strategic partnerships within the next 3 months.
- Develop a data-driven marketing strategy to target specific customer segments within the next 2 months.
- Phase 2 (Mid-term):
- Expand into international markets within the next 12 months.
- Invest in data analytics and predictive modeling capabilities within the next 6 months.
- Monitor customer feedback and make adjustments to the business model as needed.
- Phase 3 (Long-term):
- Continuously innovate and adapt to changing consumer preferences and technological advancements.
- Explore opportunities for vertical integration and diversification to expand into related industries.
By taking these steps, MoviePass can position itself for long-term success in the evolving entertainment landscape.
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Case Description
MoviePass provided a subscription-based service that allowed its users to see films in theatres for a monthly fee. The company rose to stardom between 2016 and 2017, but in mid-2018, it suffered crushing financial losses when operating costs increased and ancillary revenues were too slow to materialize. The company's subscription base shrank sharply following the introduction of restrictions on its service and an announcement of a price increase. Helios and Matheson Analytics Inc. (H&M), MoviePass's parent company, would be de-listed if its stock price remained below the threshold stipulated by the NASDAQ Composite Index (i.e., US$1 per share). The chief executive officer of MoviePass and its management team had to keep the company afloat while trying to regain MoviePass's lost momentum. How could they revitalize the once-promising upstart and prevent H&M from being de-listed?
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