Subscription-based movie ticket purchasing service MoviePass shut down earlier this month after a handful of years in existence. The closure was abrupt, as the company sent out a notice on September 13th and closed the next day.
The brand's future is currently in limbo, as the CEO of MoviePass' parent company is leading the charge to rescue it. In a bid to save the failed company, Theodore Farnsworth, chairman and chief executive of MoviePass's majority shareholder Helios & Matheson Analytics Inc., has gathered a group of investors to make an offer to purchase the company's assets.
While we'll see where that effort lands, it doesn't mean MoviePass is in the clear. When a business or service with a lot of hype and promise fails, there are always lessons to take away from it, like these three.
1. Disruption is not always the best option.
"Disruption" has been a big buzzword for quite a while now, as several companies have popped up to change (or disrupt) the way an industry does business. However, sometimes it just doesn't work. Sometimes companies can try to disrupt an industry without really considering whether an industry needs to be changed, or they start up without a solid plan to change it and just decide to try things out in real-time.
However, there is a difference between market inefficiency, which you can obviously take advantage of, and market use perception, which relies on your assumptions about the market and customer behavior being correct. As with all assumptions, there is a chance that yours might be wrong.
Perhaps the people running MoviePass assumed they'd get more subscribers who would sign up, but only use the service a few times per month, thus spending less than the subscription fee. Whatever their assumptions about the market and customer behavior was, they apparently turned out to be incorrect.
The drug testing and general health diagnostics company my wife and I started had to deal with our own incorrect assumptions for a product we launched in our early days. We released two versions of a test: a more advanced and higher priced one and a more basic, lower-priced one. We assumed there would be demand for the more advanced one, but we were wrong. That market apparently did not exist and the higher-priced test fizzled. If we had done some market analysis before launching it, we might have known. Fortunately, it was not as expensive of a lesson as MoviePass learned.
2. You should try to have your business model in place before you ramp up operations.
When you use a traditional business model, it's relatively easy to ramp up your efforts because everyone knows the business model and therefore they know exactly what to expect and so do you. Disruption, however, means your own customers don't know what to expect, and neither do you.
While it is possible to pivot, and many companies that try novel business models have to, testing your models in real-time can prove problematic. Your customers might get tired of the model changing or you may find out, as Helios & Matheson did, that the model just doesn't bring in enough revenue to keep things going.
3. You have to make sure everyone is on board with your business model if it affects third parties.
If your service involves third parties, you have to make sure they are either on board with what you're doing or they at least don't mind it. AMC Theaters and other major players in the cinema industry did not like MoviePass' subscription service and actually saw it as a threat, as reported by TIME.
This meant that MoviePass had to work extra hard to overcome opposition from businesses that were involuntarily part of its business model and even saw it as a competitor to their own businesses. AMC Theaters disavowed the service after it launched, noting that it had not partaken in any discussions about being on board with the service. (It should be noted that the way MoviePass was set up to run meant it didn't require other businesses to agree to anything.)
If you are relying on other businesses in any capacity, those businesses should not find out that they are supposed to be partners of yours when you launch. They should at least be ambivalent about your existence and should not see you as a direct threat.