The personal website of Chris Coyier

The “I Hope They Sign Up And Never Use This” Business Model

I signed up for MoviePass. It works like this. You pay a monthly fee of $30 and you can see unlimited movies. No “blackout” dates or anything like that. At my location, movies are $8-$11 dollars, so if I see four movies in a month, I’m saving money. The savings go up the more movies I see. If I see less, I’m losing money. I see quite a few movies, so I figured I’d give it a shot.

How did they get every theater in the country to get on board with this? They didn’t. They send you a Discover card in the mail. You have to go physically “check in” (via a mobile app) at the theater. They say you have to be within 100 yards but I was able to check in from 2.8 miles away. You choose what movie and which showing, then buy your ticket with the Discover card. Works great.

I would think the card is somehow locked to only allow this one particular purchase. I didn’t try to buy popcorn with it or anything. I suspect it might just have a really low limit and time-lock though.

What is strange about this business model is that the people that love your service the most are your worst customers. The people that essentially forget about it are your best customers.

If someone goes and sees 10 movies in a month, MoviePass loses about $70 on that customer. They love MoviePass, but MoviePass doesn’t love them.

If someone has a really busy month and sees zero movies, MoviePass earns $30 from them. If this happens regularly, they might decide to cancel their account, in which:

After the 30 day trial period, the user will be charged a $20 cancellation fee to terminate their account

You also have to send them an email asking to cancel. But hey at least you don’t have to call.

That customer that doesn’t like you very much is your best customer.

Health clubs are the same way. They couldn’t operate if they didn’t have a large base of customers who pay monthly and never show up. If every last customer showed up, they wouldn’t have enough room to fit them in the building.

I don’t think I ever want to run a business like that. I want my best customers to be my best customers.

Update

On November 20, 2012, they updated the cancellation policy:

If you decide to cancel MoviePass within your first month of membership, you will be charged a cancellation fee of the difference between your monthly MoviePass rate and the total dollar amount of the movies you saw. If you’re paying $30 dollars a month for MoviePass and you saw 5 movies at a cost of $10 each, you would pay a $20 cancellation fee. If your subscription fees are more then the cost of the tickets, you will be credited back the difference.

After your first month of membership, there will be a flat cancellation fee that is based on how long you have been a subscriber. The breakdown is as follows:

If account is cancelled within months 2 or 3, cancellation fees are $75
If account is cancelled within months 4, 5 or 6, cancellation fees are $60
If account is cancelled within months 7, 8 or 9, cancellation fees are $40
If account is cancelled within months 10 or 11, cancellation fees are $20

A little complex, but at least it makes sense.