1. Everything Was ZIRPDo you remember MoviePass? The company is a relic of the Trump era and its trajectory explains part of why people are so sour about the economy in 2024. It’s a story about Silicon Valley and venture capital and fraud, all of which are very sexy. It’s also a story about interest rates, which are not sexy. But when you roll it all together, it’s a story about why people look around today and think everything is terrible. Because while the real economy is doing great, the MoviePass economy is dead. And it turns out that people really liked the MoviePass economy. Back in 2017, MoviePass offered consumers an amazing product. You paid $9.95 a month and in return MoviePass would buy you a ticket to see one movie a day, every day, with no exclusions. At the time the average price of a movie ticket was $8.97. So if you subscribed to MoviePass and saw two movies a month, the company lost roughly 200 percent of the gross revenue they extracted from you. Many subscribers saw more than two movies per month. In a rational world, MoviePass should have been trying desperately to prevent people from subscribing—because every new subscriber increased their losses. But in the real world of 2017, MoviePass tried desperately to get more people to subscribe. They succeeded. The service went from 20,000 subscribers in 2017 to 3 million subscribers within a year of instituting the $9.95 plan. By 2018, the company’s net losses were $400 million. By 2019, the company had ceased operations. In between, the executives at MoviePass (allegedly) engaged in some light fraud. The (alleged) fraud is not germane to our larger discussion, but it’s interesting. According to a complaint filed against MoviePass by the FTC, as the company sought to stop the financial bleeding it came up with a plan: What if MoviePass stopped letting subscribers access the service? Top executives decided to take the 75,000 highest volume users and lock them out of their accounts. To do this, they made up a cock-and-bull story about the accounts being hacked and the passwords being reset. And then, when these locked-out subscribers couldn’t access their accounts, MoviePass just kind of . . . ignored all requests from them to get back in. As Matt Levine noted at the time, “Giving people unlimited movie tickets for $10 a month is a good way to get rapid customer growth; telling people you’ll give them unlimited movie tickets for $10 a month, but not actually doing it, is a way to pivot to profitability.” What makes this even more interesting is that MoviePass was originally founded by two young, black entrepreneurs, Stacy Spikes and Hamet Watts. When they ran the business, it was rational—the subscription price was between $40 and $50 a month. Investors wanted more growth, so they brought in a couple of experienced executives—translation: middle-aged white guys—to run the company. These middle-aged white guys, Mitch Lowe and Ted Farnsworth, were the ones who came up with the $9.95 all-you-can-eat plan. When Spikes said, Hey this will bankrupt the company they fired him and then pushed Watts out, too. In addition to everything else, the story of MoviePass is a microminiature portrait of capitalism and race in America. 2. I Want My MoviePassObviously, MoviePass was never going to work as a business. MoviePass wasn’t a very big company—3 million subscribers isn’t all that much by tech company standards—yet Lowe and Farnsworth were everywhere. For a year it seemed like the two of them were booked on every financial show in existence and the interviews basically went like this:
The MoviePass press tour was kind of like an extended version of George Costanza trying to convince his in-laws that he owned a house in the Hamptons. It seems silly, but Matt Levine offers an important clarification: ... Join The Bulwark to read the rest.Become a paying member of The Bulwark to get access to this post and other subscriber-only content. A subscription gets you:
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MoviePass Is Why We Have "Inflation"
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