You probably heard about MoviePass by now. For those who haven’t, MoviePass is a subscription that allows you access to a large theater network for a low monthly fee. Not only does MoviePass create more customer visits in theaters, but increased spending on concessions, leading to overall incremental revenue for the industry.
Needless to say, they are making tremendous ripples in the entertainment industry!
Started in 2011, MoviePass has gained a significant subscriber base of 2.5 million customers; of which 2.3 million joined after mid-August last year. Guess what happened last August? MoviePass slashed their prices from $50/month to $9.95/month causing the surge in customer subscriptions. MoviePass frequently changes their price level and offering in their efforts to drive adoption, but they also learn more about their customer behavior with each price/package change.
What is particularly interesting about MoviePass is they know the value they deliver to partners: more customers and more data. They know the value they provide to their users: more entertainment at lower prices. They are looking to capture the value not just from their primary monetization method, the subscription fee, but also from supplementary monetization methods including:
- Revenue share from theatre snacks
- Movie promotions
- Restaurant promotions
- Monetizing customer behavior data
MoviePass’ tremendous growth hasn’t been without obstacles and risks. Time and again they faced issues with big chains especially AMC, against sharing snack revenues with MoviePass. Now with a bigger customer base and more proof of driving incremental sales, it is getting harder for AMC to resist toeing in line with MoviePass.
Tech companies can draw 4 lessons from MoviePass’ rapid growth:
- A strong understanding of the value you create for your partners and customers is essential to rapid growth. Whether MoviePass knew the value from the beginning or it was a happy discovery along the way, they seemed to have quantified and defined their value to theaters.
- Explore alternative ways to monetize the value you create to supplement your primary monetization strategy. If you haven’t completed lesson #1, don’t attempt #2. Supplementary revenue sources will give you the flexibility to reduce the subscription price and increase your customer base. This can create a huge competitive advantage.
- Be bold and experiment with different pricing models. This will give you great insights about your customer base and the value of your offering. Consider carefully partner needs and user needs in the process.
- When you are new entrant, focus primarily on value creation for partners and users (eg. increasing incremental customer base and revenue for the industry) and this will help you gain leverage in negotiations and capture more value (eg. snack revenue share).
Many technology companies struggle to determine the best monetization model and price points given the goals of the company. Often, this is because of lack of alignment around a goal (revenue growth vs. profitability vs. customer growth, etc.).
Once everyone has agreed on a company goal, invest time to understand the value you create for different players in the industry, explore supplementary monetization methods, and experiment with different price levels and offering structures. This will give you more information to determine the right monetization method, right partners, and right price model to reach your organization’s goal.
If you like this blog by Mayuresh, check out our video blog series on Pricing with Confidence.