this week on case studies with the best
stock it’s movie pass you asked for it
and I’m diving into it we’re gonna do
three things this week number one I’m
gonna take you a little bit through the
history of where they came from number
two I’m gonna simplify all the stuff you
may be hearing in the media lately and
it’s bad news on top of bad news and
then I’m gonna tell you why it happened
[Applause]
movie pass the subscription movie card
that you stuck in your wallet could go
to movies on at an unbelievable discount
compared to paying full price
let’s first dive into the history it
started in San Francisco California when
these two guys
Stacy spikes and Hammett watt got
together with an idea to build the
Netflix for movie theaters they
allegedly got 19,000 people to sign up
in a single day which is absolutely
unbelievable and when those people
started going out to theaters they found
out a couple things some of the theaters
didn’t want to let them in because there
was too many of them coming in on the
highly discounted movie pass rate versus
the full price that the movie theater
wanted people to pay big movies were
coming out in 2011 such as one of my
favorites Moneyball and if you’ve got a
line of people up at the theater willing
to pay nine ninety five in San Francisco
why do you want to fill up your theater
seats and say I’m sold out to a bunch of
people using a movie pass card getting a
discounted ticket this was the beginning
of the tension that movie pass would
face with the theater chains now let’s
talk about this just for a second you
know when you think about digital
transformations and I’m gonna talk about
this at the end of the case study you
think about things like a subscription
to Netflix a subscription to music which
is a subscription to Spotify or Pandora
and so you’re no longer paying full
price for all your individual music
titles on Pandora or Spotify or serious
or XM satellite radio and then they got
married and became Sirius XM you paid
one price but it was a pretty hefty
price don’t know if you remember but in
your car it was usually about 25 bucks a
month or $300 a year for Sirius XM
that’s what I paid and when you balance
that out you’re saying to yourself well
I’m paying 300 bucks and I’m getting an
awful lot of music but I am paying 300
bucks in this case
movie pass was highly discounted now
their initial plans would then move up
as they launch a beta and a beta as I’ve
indicated before there’s nothing more
than a test that a few people are a part
of in this case by invitation only and
they were paying anywhere at that time
from like twenty five to forty bucks
so it was a fairly healthy price similar
to Sirius satellite radio or the initial
subscriptions for those kind of things
where you feel like you’re paying for
value you’re not just getting it for
free and so the early years of movie
pass kind of went like this and we come
to 2014 now 2014 was one of the worst
years on record for box office so
AMC is sitting there going hey guys is
pretty crappy year for box office maybe
we should think about this movie pass
thing and bring them in here and see if
we can get a few customers because at
this point discounted tickets are better
than no tickets at all that was the
original premise of movie paths that
they were selling so nonetheless at the
end of 2014
AMC suddenly makes like a Catholic prom
date and says ok I’ll do it
that led to the beginning of a major
chain really embracing movie pass now
behind the scenes there was tension in
the relationship because people still
weren’t so sure about it
also Cinemark AMC Pacific theatres and
others had their own issues because with
box office down you and me not going to
the theater as much or maybe quality
movies not being out there as much and
that was the two sided argument that was
being made the theaters were saying
you’re making not the greatest movies
anymore and you’re not putting enough
marketing into him and then the studio’s
are saying well the tickets are very
expensive
well they said well whose fault is that
so he had this tension going back and
forth meanwhile America was getting you
streaming services like Netflix and big
plasma TVs that had crashed under a
thousand bucks and saying screw it I’ll
sit right here at home and watch a movie
and so we get to the next chapter of
movie pass history now I’ve left out a
lot of little points and everything
because how they got there and where
they came from it’s not nearly important
as what is about to happen especially in
the name of subscription and in the name
of digital conversion of which I’m going
to explain that movie pass
was not a digital conversion he was
actually a marketing tactic nonetheless
as little companies tried to become big
ones what do you do go find some adults
in the room that can help you especially
if they’ve been other places and they
understand the playing field and they
can bring you some knowledge from that
playing field in end of 16 enter Mitch
Lowe who had come from Red Box and
Netflix what a great resume we got this
guy who’s over a red box which you would
see outside of Walmart and Target and
places like that to rent DVDs on the fly
and he was also at Netflix which was in
the middle of disrupting streaming and
you and I were getting used to those
subscriptions after the transition away
from Netflix and the mail-order DVD
within a month of him coming they’ve
announced tears where you could get to
three or four movies a month for your
subscription fee and even a hundred
dollar tier that would also get you into
3d movies now why is that important
because during this early chapter with
3d movies theaters would say okay okay
I’ll work with you movie pass but you’re
not getting into the 3d movie people are
paying 24 bucks and are getting the
glasses and are gonna watch the 3d
movies so there is this tension back and
forth kind of like if you have a credit
card and get a zillion miles on it and
you try to use it with an airline you
discovered blackout dates all of that
came together because what they’re
saying is with all those free credit
card points I’m only gonna let you go
for free so many places so many times
guess what it was the same thinking that
the movie theaters had that says look
you can’t use it on Memorial Day weekend
during a grand opening of the latest
Mission Impossible movie but you can use
it during these windows here but you
can’t use it for 3d it was nothing more
than this tension going back and forth
leading to some of the early movie past
customers to saying well what am i
buying and where can I go so there you
have it Mitch Lowe arrives in the middle
of 16 by the end of 16 in December
multiple reports now remember there’s a
private company so sometimes you don’t
know who to believe and you just kind of
listen to the stats and you use what you
got
they had indicated they had reached
20,000 subscribers and there are also
some unlimited plans that are out there
that we’re making a lot of tension as a
matter of fact when I’m in limit
plan was announced and they dropped the
price to 995 that’s where the new and
exciting history of movie pass came to
be
now when I say exciting I mean like
going downhill with bald tires on an icy
road it’s that kind of exciting they
dropped the price to 995 and they keep
it limited in the mix at 995 AMC says
I’m out I’m ceasing our relationship
you’re cut off we’re canceling the
contract legally within our rights
because we don’t think at 995 that you
can make a compelling business out of
that that we would be happy to be
selling discounted seats to also they
attracted the attention of an analytics
firm named Helios and Matheson and
Helios and Matheson came in with the one
thing that movie pass really needed at
this time and that was money they came
in and invested an assortment of chunks
of money and again it’s a private
company so you only have the
announcement she here and you never know
whether those are being amplified to
make things sound groovy or being
absolutely correct about the amount that
was being raised well nonetheless they
claim they came in and when they got
there they owned about 62 percent they
said between December and February they
invested 55 million dollars and by the
way there were reputable reports coming
out of movie pass apparently that Helios
and Matheson was losing 20 million
dollars a month on this service well is
partly because they did the discount
subscription but they then had the
contract rate that they had to pay the
theaters that’s called breakage and I’m
gonna get into that in just a minute
they invested another thirty five
million dollars and you can see pac-man
here and they were all in by the time
these investments were done it was
revealed that Helio Samantha s’en
actually owned 92 percent of movie pass
guess what so movie pass is basically
subsumed into Helios and Matheson and
the stock you could look on the stock
market for Helios and Matheson basically
was movie passed because now they’re the
same company because one owns the other
it’s like you getting married and you
and your spouse now or one you own the
house together you own the car together
you own the
together for better for worse you are
together and you were one legal unit
well that’s what happened here now
Helios and Matheson became the ticker
everybody would go to look at to say
how’s movie Paz doing and they would
enter that ticker so with all this going
on there is a lot of numbers on the
board and this is where all that frothy
news coverage was coming from hey we’re
at a million subs weren’t two million
subs from December to February we’re
dropping it to 795 we’re gonna get rid
of unlimited plan no wait we’re keeping
it we’re keeping it we’re gonna bring it
back and to the point that July 26 to
28th of 2018 a three days shutdown
everything stops some people were saying
oh it’s a crash because of their success
that may have been the case some people
were saying they have to scale the
business they have to build better
infrastructure especially on the app
because the app was locking up that may
be the case but the greater leaks were
coming from theater chains that were
saying I need to get paid and so what
did they do they went out and got 1.2
billion dollars just to stay in
operations and there is people in the
industry that we’re saying this isn’t
sustainable that 1.2 billion dollars if
that’s a real amount is just to barely
keep them afloat and with all these
numbers and all the stuff going on
there’s only one word for that and that
is damn I mean
dennah as in bad where are they going to
go to get a profitable business model
out of this and this is exactly what I
want to take you to because that’s what
we’ve all been hearing and we’ve all
heard about the stock for Helio Sam
Matheson was at 8 cents they did a
reverse split a reverse split means they
took shares off the stock market at 8
cents each and caused the price to go up
so if your stock is 8 cents and you buy
back half of them now it’s 16 cents
because there’s only half as many they
did it to pump the stock price back up
to $100 or more and then guess what it
came right back to 7 cents so the point
today the net enterprise value of movie
paths today 2000 2018 is barely 4
million dollars now how did that happen
number one they had a broken business
model number two somewhere along the way
they thought they should be financing
movies instead of staying in their focus
and selling a marketing distribution
product which is movie pass they
actually funded a movie the got a movie
starring John Travolta which tried
really hard and managed to score a zero
point on Rotten Tomatoes man you gotta
work at making a bad movie to get an
absolute zero on Rotten Tomatoes and
worse at the time it was released
remember this is all happening the
summer I mean just draw a line from
April of 2018 to August of 2018 and all
of this nutty stuff that’s been
happening in the media was happening
together it was exposed that they were
actually buying tickets to their own
movie but people wouldn’t go to the
theater and see it so in other words
they bought tickets so they could say oh
we’ve had box office this weekend of a
couple million here a couple million
there or something but in reality there
were nobody in the theaters watching
that they bought the tickets through the
systems and there were multiple people
in the industry and at rival studios and
you would expect rival Studios to say
things like that
but so many people were saying the same
thing with such conviction and the leaks
were also coming through the theater
companies themselves that it was
concluded man they made a turd of a
movie and they were using their own
system to go in there and try to buy
tickets to make it look like people are
actually attending with that said let me
take you through to what they were and
what they weren’t and there’s some
important lessons in here for you and me
and I hope to give you a window in to
what happened here first of all let’s
talk about what they weren’t no they’re
not a digital transformation there is
nothing unique about going to your
mobile phone and being able to buy
something heck Fandango and all those
other movie retailers allowed you to buy
a ticket right on your phone get a bar
code go the movie theater just like you
could buy a plane ticket or everything
else there’s no digital transformation
or your unrivaled technology never
before seen so they’re not a disrupter
with technology and it’s not a digital
transformation like streaming was that
was transformative streaming
high-definition movies into your home
this is not but what were they at the
end of the day I see them as a marketing
innovation and they tried to take
Paige how the Cellular playbook now why
do I say that well because I know
something about it because I helped
rewrite part of the history books and
cellular there is a thing for you
subscribe get breakage and create new
demand let me explain what that is you
subscribe to a mobile phone it’s 50
bucks a month and you used to get so
many minutes and so many text messages
etc some people use them all up and they
have to pay overages above 50 bucks you
know 2 cents a text message 10 bucks for
another gigabyte of data all that you’ve
done it I’ve done it
then there people like my sister who
don’t use their full plan and if you
really added it up maybe they used 38
bucks worth of it
well she uses 38 bucks but she pays 50
just like I do and that difference of 12
they call that breakage in other words
that’s positive breakage for Verizon or
AT&T or Sprint or any of the wireless
phone companies around the world but
there’s also they create new demand but
they always create a new demand on the
second phone what I mean by that is if
you go around the US and pick a phone
carrier and you get your $60 plan then
you pay 15 bucks for your spouse or
maybe you’re one of your kids for a
second phone so the discount comes on
the second phone not the first phone so
they understand that what movie pass did
initially they thought that way you know
it’s um you know 995 we’re gonna get
positive breakage and people are gonna
buy concessions are gonna buy popcorn
they’re gonna do things like that
they’re gonna pay 6 bucks for a soda all
the things you and I normally do we go
to a theater now the theater operator
argues well those people are going to
come in there and do it anyway whether
they’re on a discounted movie pass
ticket or they’re paying full price ok
but what movie pass was thinking is that
for 10 bucks a month that you would
probably some months not go to the
theater at all wait a minute wait a
minute wait a minute 10 bucks is less
than what a ticket would be in new york
new york tickle it’d be like 13 95
so if I use my movie pass card once in
New York I technically got a four dollar
discount on the ticket and the number of
people that actually completely use
movie pass cards the breakage wasn’t
there so in other words instead of maybe
half the people not using up their movie
pass 995 or whatever it was that month
they got creamed in addition to mobile
phones there’s another proxy that was
out there
do you remember coupon books high school
or junior high would say hey we’re
raising money for the high school band
or junior high soccer team and they
would come and try to sell you a coupon
books for about 15 or 20 bucks in it we
were coupons all over the city for pizza
and all these shops and things you would
go to some of them are quite useful and
would be a pretty good coupon because
they’re trying to create demand once use
the coupon discover a new store try
pizza out at a different place and you
say well they that was worth it and you
paid 20 bucks and you got more than that
value if you kept using the coupon books
and going to new and interesting places
so you can see whether it’s the cellular
industry or its old coupon books there
were a lot of proxies that were out
there one of the things they failed to
understand as I have right here they
miscalculated demand free beer effing
works and that’s what happened with all
these people with the movie pass cards
however as we go along there is also
some learnings that happened because
there was some good that came out of
movie pass we learned that you and me
wouldn’t buy a subscription that’s a
positive point the economics of which
were kind of broken by the time you got
discounted all to hear causing AMC to
say screw you I’m out of here
but when it comes down to it it actually
worked how do we know that well because
people like AMC and Cinemark had
calculators that worked and about the
same time this year the Empire Strikes
Back
AMC announces the Stubbs a list and
Cinemark announces movie club both of
them starting at 20 bucks a month with
some very reasonable to understand
restrictions about first open movies and
it makes you and I happy to have a
product that we see value in that’s
predictable and instead of unbelievable
value we get well that’s pretty good
value I’ll be willing to pay 20 bucks a
month because I have an AMC down the
street that I really really like and we
go there at least
once or twice a month so you know what
you know what that’s that’s a good
product for me instead down here the
product value was so unbelievable
it’s like announcing free beer at a frat
party you’re gonna run the keg dry
that’s the movie past story as I see it
I’m not sure they’re gonna be around too
much longer unless they get a really big
truckload of money and I don’t think it
would have had to be this way cuz that
they had follow some a fairly recent
business history I think there’s lessons
could be learned and they’d have a
really strong business model that’s what
I think but I want to know what you
think let me know what your thoughts are
movie pass on leave some comments down
below you can also let me know what
companies you’d like to see me do a case
study in the future because this one
movie pass was a suggestion from you you
can find me also on social media at Tom
Ellsworth for Facebook and Twitter or
elsewhere Thomas at Instagram and I’m
just Thomas Ellsworth over at LinkedIn
please subscribe to value tame it for
these case studies and more because
we’re on a mission to get to a million
subscribers and when we do the first
annual value tainment entrepreneur
conference featuring yours truly the biz
doc hosted by Patrick bet David and
other entrepreneurs and experts that are
going to help make you better your
business better and the people you touch
better still until next time I’m Tom
Merritt the biz doc and I hope I left you better than I found you
stock it’s movie pass you asked for it
and I’m diving into it we’re gonna do
three things this week number one I’m
gonna take you a little bit through the
history of where they came from number
two I’m gonna simplify all the stuff you
may be hearing in the media lately and
it’s bad news on top of bad news and
then I’m gonna tell you why it happened
[Applause]
movie pass the subscription movie card
that you stuck in your wallet could go
to movies on at an unbelievable discount
compared to paying full price
let’s first dive into the history it
started in San Francisco California when
these two guys
Stacy spikes and Hammett watt got
together with an idea to build the
Netflix for movie theaters they
allegedly got 19,000 people to sign up
in a single day which is absolutely
unbelievable and when those people
started going out to theaters they found
out a couple things some of the theaters
didn’t want to let them in because there
was too many of them coming in on the
highly discounted movie pass rate versus
the full price that the movie theater
wanted people to pay big movies were
coming out in 2011 such as one of my
favorites Moneyball and if you’ve got a
line of people up at the theater willing
to pay nine ninety five in San Francisco
why do you want to fill up your theater
seats and say I’m sold out to a bunch of
people using a movie pass card getting a
discounted ticket this was the beginning
of the tension that movie pass would
face with the theater chains now let’s
talk about this just for a second you
know when you think about digital
transformations and I’m gonna talk about
this at the end of the case study you
think about things like a subscription
to Netflix a subscription to music which
is a subscription to Spotify or Pandora
and so you’re no longer paying full
price for all your individual music
titles on Pandora or Spotify or serious
or XM satellite radio and then they got
married and became Sirius XM you paid
one price but it was a pretty hefty
price don’t know if you remember but in
your car it was usually about 25 bucks a
month or $300 a year for Sirius XM
that’s what I paid and when you balance
that out you’re saying to yourself well
I’m paying 300 bucks and I’m getting an
awful lot of music but I am paying 300
bucks in this case
movie pass was highly discounted now
their initial plans would then move up
as they launch a beta and a beta as I’ve
indicated before there’s nothing more
than a test that a few people are a part
of in this case by invitation only and
they were paying anywhere at that time
from like twenty five to forty bucks
so it was a fairly healthy price similar
to Sirius satellite radio or the initial
subscriptions for those kind of things
where you feel like you’re paying for
value you’re not just getting it for
free and so the early years of movie
pass kind of went like this and we come
to 2014 now 2014 was one of the worst
years on record for box office so
AMC is sitting there going hey guys is
pretty crappy year for box office maybe
we should think about this movie pass
thing and bring them in here and see if
we can get a few customers because at
this point discounted tickets are better
than no tickets at all that was the
original premise of movie paths that
they were selling so nonetheless at the
end of 2014
AMC suddenly makes like a Catholic prom
date and says ok I’ll do it
that led to the beginning of a major
chain really embracing movie pass now
behind the scenes there was tension in
the relationship because people still
weren’t so sure about it
also Cinemark AMC Pacific theatres and
others had their own issues because with
box office down you and me not going to
the theater as much or maybe quality
movies not being out there as much and
that was the two sided argument that was
being made the theaters were saying
you’re making not the greatest movies
anymore and you’re not putting enough
marketing into him and then the studio’s
are saying well the tickets are very
expensive
well they said well whose fault is that
so he had this tension going back and
forth meanwhile America was getting you
streaming services like Netflix and big
plasma TVs that had crashed under a
thousand bucks and saying screw it I’ll
sit right here at home and watch a movie
and so we get to the next chapter of
movie pass history now I’ve left out a
lot of little points and everything
because how they got there and where
they came from it’s not nearly important
as what is about to happen especially in
the name of subscription and in the name
of digital conversion of which I’m going
to explain that movie pass
was not a digital conversion he was
actually a marketing tactic nonetheless
as little companies tried to become big
ones what do you do go find some adults
in the room that can help you especially
if they’ve been other places and they
understand the playing field and they
can bring you some knowledge from that
playing field in end of 16 enter Mitch
Lowe who had come from Red Box and
Netflix what a great resume we got this
guy who’s over a red box which you would
see outside of Walmart and Target and
places like that to rent DVDs on the fly
and he was also at Netflix which was in
the middle of disrupting streaming and
you and I were getting used to those
subscriptions after the transition away
from Netflix and the mail-order DVD
within a month of him coming they’ve
announced tears where you could get to
three or four movies a month for your
subscription fee and even a hundred
dollar tier that would also get you into
3d movies now why is that important
because during this early chapter with
3d movies theaters would say okay okay
I’ll work with you movie pass but you’re
not getting into the 3d movie people are
paying 24 bucks and are getting the
glasses and are gonna watch the 3d
movies so there is this tension back and
forth kind of like if you have a credit
card and get a zillion miles on it and
you try to use it with an airline you
discovered blackout dates all of that
came together because what they’re
saying is with all those free credit
card points I’m only gonna let you go
for free so many places so many times
guess what it was the same thinking that
the movie theaters had that says look
you can’t use it on Memorial Day weekend
during a grand opening of the latest
Mission Impossible movie but you can use
it during these windows here but you
can’t use it for 3d it was nothing more
than this tension going back and forth
leading to some of the early movie past
customers to saying well what am i
buying and where can I go so there you
have it Mitch Lowe arrives in the middle
of 16 by the end of 16 in December
multiple reports now remember there’s a
private company so sometimes you don’t
know who to believe and you just kind of
listen to the stats and you use what you
got
they had indicated they had reached
20,000 subscribers and there are also
some unlimited plans that are out there
that we’re making a lot of tension as a
matter of fact when I’m in limit
plan was announced and they dropped the
price to 995 that’s where the new and
exciting history of movie pass came to
be
now when I say exciting I mean like
going downhill with bald tires on an icy
road it’s that kind of exciting they
dropped the price to 995 and they keep
it limited in the mix at 995 AMC says
I’m out I’m ceasing our relationship
you’re cut off we’re canceling the
contract legally within our rights
because we don’t think at 995 that you
can make a compelling business out of
that that we would be happy to be
selling discounted seats to also they
attracted the attention of an analytics
firm named Helios and Matheson and
Helios and Matheson came in with the one
thing that movie pass really needed at
this time and that was money they came
in and invested an assortment of chunks
of money and again it’s a private
company so you only have the
announcement she here and you never know
whether those are being amplified to
make things sound groovy or being
absolutely correct about the amount that
was being raised well nonetheless they
claim they came in and when they got
there they owned about 62 percent they
said between December and February they
invested 55 million dollars and by the
way there were reputable reports coming
out of movie pass apparently that Helios
and Matheson was losing 20 million
dollars a month on this service well is
partly because they did the discount
subscription but they then had the
contract rate that they had to pay the
theaters that’s called breakage and I’m
gonna get into that in just a minute
they invested another thirty five
million dollars and you can see pac-man
here and they were all in by the time
these investments were done it was
revealed that Helio Samantha s’en
actually owned 92 percent of movie pass
guess what so movie pass is basically
subsumed into Helios and Matheson and
the stock you could look on the stock
market for Helios and Matheson basically
was movie passed because now they’re the
same company because one owns the other
it’s like you getting married and you
and your spouse now or one you own the
house together you own the car together
you own the
together for better for worse you are
together and you were one legal unit
well that’s what happened here now
Helios and Matheson became the ticker
everybody would go to look at to say
how’s movie Paz doing and they would
enter that ticker so with all this going
on there is a lot of numbers on the
board and this is where all that frothy
news coverage was coming from hey we’re
at a million subs weren’t two million
subs from December to February we’re
dropping it to 795 we’re gonna get rid
of unlimited plan no wait we’re keeping
it we’re keeping it we’re gonna bring it
back and to the point that July 26 to
28th of 2018 a three days shutdown
everything stops some people were saying
oh it’s a crash because of their success
that may have been the case some people
were saying they have to scale the
business they have to build better
infrastructure especially on the app
because the app was locking up that may
be the case but the greater leaks were
coming from theater chains that were
saying I need to get paid and so what
did they do they went out and got 1.2
billion dollars just to stay in
operations and there is people in the
industry that we’re saying this isn’t
sustainable that 1.2 billion dollars if
that’s a real amount is just to barely
keep them afloat and with all these
numbers and all the stuff going on
there’s only one word for that and that
is damn I mean
dennah as in bad where are they going to
go to get a profitable business model
out of this and this is exactly what I
want to take you to because that’s what
we’ve all been hearing and we’ve all
heard about the stock for Helio Sam
Matheson was at 8 cents they did a
reverse split a reverse split means they
took shares off the stock market at 8
cents each and caused the price to go up
so if your stock is 8 cents and you buy
back half of them now it’s 16 cents
because there’s only half as many they
did it to pump the stock price back up
to $100 or more and then guess what it
came right back to 7 cents so the point
today the net enterprise value of movie
paths today 2000 2018 is barely 4
million dollars now how did that happen
number one they had a broken business
model number two somewhere along the way
they thought they should be financing
movies instead of staying in their focus
and selling a marketing distribution
product which is movie pass they
actually funded a movie the got a movie
starring John Travolta which tried
really hard and managed to score a zero
point on Rotten Tomatoes man you gotta
work at making a bad movie to get an
absolute zero on Rotten Tomatoes and
worse at the time it was released
remember this is all happening the
summer I mean just draw a line from
April of 2018 to August of 2018 and all
of this nutty stuff that’s been
happening in the media was happening
together it was exposed that they were
actually buying tickets to their own
movie but people wouldn’t go to the
theater and see it so in other words
they bought tickets so they could say oh
we’ve had box office this weekend of a
couple million here a couple million
there or something but in reality there
were nobody in the theaters watching
that they bought the tickets through the
systems and there were multiple people
in the industry and at rival studios and
you would expect rival Studios to say
things like that
but so many people were saying the same
thing with such conviction and the leaks
were also coming through the theater
companies themselves that it was
concluded man they made a turd of a
movie and they were using their own
system to go in there and try to buy
tickets to make it look like people are
actually attending with that said let me
take you through to what they were and
what they weren’t and there’s some
important lessons in here for you and me
and I hope to give you a window in to
what happened here first of all let’s
talk about what they weren’t no they’re
not a digital transformation there is
nothing unique about going to your
mobile phone and being able to buy
something heck Fandango and all those
other movie retailers allowed you to buy
a ticket right on your phone get a bar
code go the movie theater just like you
could buy a plane ticket or everything
else there’s no digital transformation
or your unrivaled technology never
before seen so they’re not a disrupter
with technology and it’s not a digital
transformation like streaming was that
was transformative streaming
high-definition movies into your home
this is not but what were they at the
end of the day I see them as a marketing
innovation and they tried to take
Paige how the Cellular playbook now why
do I say that well because I know
something about it because I helped
rewrite part of the history books and
cellular there is a thing for you
subscribe get breakage and create new
demand let me explain what that is you
subscribe to a mobile phone it’s 50
bucks a month and you used to get so
many minutes and so many text messages
etc some people use them all up and they
have to pay overages above 50 bucks you
know 2 cents a text message 10 bucks for
another gigabyte of data all that you’ve
done it I’ve done it
then there people like my sister who
don’t use their full plan and if you
really added it up maybe they used 38
bucks worth of it
well she uses 38 bucks but she pays 50
just like I do and that difference of 12
they call that breakage in other words
that’s positive breakage for Verizon or
AT&T or Sprint or any of the wireless
phone companies around the world but
there’s also they create new demand but
they always create a new demand on the
second phone what I mean by that is if
you go around the US and pick a phone
carrier and you get your $60 plan then
you pay 15 bucks for your spouse or
maybe you’re one of your kids for a
second phone so the discount comes on
the second phone not the first phone so
they understand that what movie pass did
initially they thought that way you know
it’s um you know 995 we’re gonna get
positive breakage and people are gonna
buy concessions are gonna buy popcorn
they’re gonna do things like that
they’re gonna pay 6 bucks for a soda all
the things you and I normally do we go
to a theater now the theater operator
argues well those people are going to
come in there and do it anyway whether
they’re on a discounted movie pass
ticket or they’re paying full price ok
but what movie pass was thinking is that
for 10 bucks a month that you would
probably some months not go to the
theater at all wait a minute wait a
minute wait a minute 10 bucks is less
than what a ticket would be in new york
new york tickle it’d be like 13 95
so if I use my movie pass card once in
New York I technically got a four dollar
discount on the ticket and the number of
people that actually completely use
movie pass cards the breakage wasn’t
there so in other words instead of maybe
half the people not using up their movie
pass 995 or whatever it was that month
they got creamed in addition to mobile
phones there’s another proxy that was
out there
do you remember coupon books high school
or junior high would say hey we’re
raising money for the high school band
or junior high soccer team and they
would come and try to sell you a coupon
books for about 15 or 20 bucks in it we
were coupons all over the city for pizza
and all these shops and things you would
go to some of them are quite useful and
would be a pretty good coupon because
they’re trying to create demand once use
the coupon discover a new store try
pizza out at a different place and you
say well they that was worth it and you
paid 20 bucks and you got more than that
value if you kept using the coupon books
and going to new and interesting places
so you can see whether it’s the cellular
industry or its old coupon books there
were a lot of proxies that were out
there one of the things they failed to
understand as I have right here they
miscalculated demand free beer effing
works and that’s what happened with all
these people with the movie pass cards
however as we go along there is also
some learnings that happened because
there was some good that came out of
movie pass we learned that you and me
wouldn’t buy a subscription that’s a
positive point the economics of which
were kind of broken by the time you got
discounted all to hear causing AMC to
say screw you I’m out of here
but when it comes down to it it actually
worked how do we know that well because
people like AMC and Cinemark had
calculators that worked and about the
same time this year the Empire Strikes
Back
AMC announces the Stubbs a list and
Cinemark announces movie club both of
them starting at 20 bucks a month with
some very reasonable to understand
restrictions about first open movies and
it makes you and I happy to have a
product that we see value in that’s
predictable and instead of unbelievable
value we get well that’s pretty good
value I’ll be willing to pay 20 bucks a
month because I have an AMC down the
street that I really really like and we
go there at least
once or twice a month so you know what
you know what that’s that’s a good
product for me instead down here the
product value was so unbelievable
it’s like announcing free beer at a frat
party you’re gonna run the keg dry
that’s the movie past story as I see it
I’m not sure they’re gonna be around too
much longer unless they get a really big
truckload of money and I don’t think it
would have had to be this way cuz that
they had follow some a fairly recent
business history I think there’s lessons
could be learned and they’d have a
really strong business model that’s what
I think but I want to know what you
think let me know what your thoughts are
movie pass on leave some comments down
below you can also let me know what
companies you’d like to see me do a case
study in the future because this one
movie pass was a suggestion from you you
can find me also on social media at Tom
Ellsworth for Facebook and Twitter or
elsewhere Thomas at Instagram and I’m
just Thomas Ellsworth over at LinkedIn
please subscribe to value tame it for
these case studies and more because
we’re on a mission to get to a million
subscribers and when we do the first
annual value tainment entrepreneur
conference featuring yours truly the biz
doc hosted by Patrick bet David and
other entrepreneurs and experts that are
going to help make you better your
business better and the people you touch
better still until next time I’m Tom
Merritt the biz doc and I hope I left you better than I found you
Please follow and like us: