Carl Schramm Resignation from HMNY

This is the other Moviepass news of the day. A disgruntled board member called it quits today.

Carl Schramm who is an economist and is mostly an academic but also masquerades as an entrepreneur pulled the ejection button on HMNY.

In a bit of twisted irony he is currently writing a book called “Burn the Business Plan: What Great Entrepreneurs Really Do

Maybe he became a little disappointed with the process of entrepreneurship – Teddy and Mitch gangster style. Who knows?

It was well known that Schramm was on the outs with Ted and others on the board. He was a swing voter, and he was getting pulled in both directions, he didn’t like it, And he did not like the potential damage it was doing to his reputation.

When things are really tough, being on a board sucks! I know as I have been there! What people don’t really understand who have not done these roles is that board members can often end up as enemies of the current management. When things go really South, like they have for HMNY, the board gets the blame, even if they disagreed with management’s strategy. Even worse for BOD members, they risk getting sued- PERSONALLY! That’s right, if you sit on a board, and the company gets sued, you can have personal liability. This is why most companies buy BOD insurance, to protect board members from this risk.

Schramm did a nasty by quitting in a huff and throwing management under the bus for withholding information. This could be interpreted in a couple different ways.

  1. Schramm was simply doing some CYA to protect himself in these lawsuits underway
  2. The Management didn’t like Schramm and purposely made it difficult for him to provide input. This happens a lot with BODs. Emergency board meetings get held all the time when a company is in crisis. These are busy people with other jobs so they might miss a meeting. The board needs only a quorum to hold and meeting and vote, so it is possible to dodge BOD members who might disagree with management, and seem to be a pain in the ass.

Whatever the reason that Schramm left, it is unusual for a BOD exit to carry a fire bomb with it. Schramm will likely not get an invite to as many board seats as a result. Quitting in a public huff rarely achieves the desired results.

It may well be that Schramm took a run at getting Ted out as CEO. He knows that Ted is now a liability for getting better funding options for the company. Put simply, there are plenty of banks that would lend money to HMNY if wipeout Ted was no longer in the picture. My sources tell me that Schramm was well aware of this, and was the only one who could potentially sway the board.

Looks like Schramm lost that battle.

I look forward to reading Schramm’s book when it comes out. Certainly Moviepass must be an excellent case study for “burning the business plan”!!!!

It’s also important to note, Schramm did not sit on the Moviepass BOD, he was on HMNY board only. He may have thought Moviepass was a bad idea from the get go, we have no idea really.

What the Postmates Deal Means For Moviepass

Frankly I am mixed in my reaction to the Postmates deal.

On the plus side. It is a good brand that young people like a lot. I have 2 kids college age, they both use Postmates regularly, they like the service and recommend it. So there is a decent brand halo here, particularly for young audiences.

The deal means that HMNY and Moviepass are not exactly planning on dying anytime soon, and apparently they are able to convince other companies of this notion. Postmates would not bother doing a deal with Moviepass at all if they thought they were going to die in the immediate future.

I like that the company is looking to increase revenue from non subscription sources. At least they are executing on something here.

The new message of creating a “club” where subscribers receive different valuable offers is not a terrible idea. It is one I have suggested before here on this blog. Moviepass has a uniqueness to it that some easily forget. The location based debit card charge feature is something that can be lit up for things other than movies. Hopefully Moviepass can find partners who want to take advantage of that technology along with Moviepass’s audience size. Postmates could partner with local restaurants and other small businesses to do just that.

On the downside.

The odd thing in the messaging on this deal is Mitch has talked about ending the cocooning phase, and rallying around a “night out” concept for months now. Bit, Postmates is the ultimate hermit service. You can get about anything delivered right to your door. Mitch tried to acknowledge that in the PR with a hand wave to “we know our subscribers have at least one streaming service”. But that is a pretty lame data point. Who doesn’t have at least one streaming service these days?

Overall the news is positive. And near term death seems further and further away.

This does nothing to negate many other possible deals in the future, of anything it helps, which is also positive. Deals take time and build momentum if they prove out to be positive for both companies. Let’s hope for the best here.

Moviepass and Sinemia Have Every Reason to Merge

There are a lot of rumors going around that Moviepass and Sinemia could merge. I expect this will happen, simply because it makes total sense.

Key reasons it makes sense:

  • Businesses are 100% complementary – with likely very little customer overlap. Competing with each other only hurts both companies. Cooperating and merging can only help the outcomes for both organizations.
  • Moviepass and Sinemia are involved in a patent lawsuit where they have now both agreed to seal the settlement of the suit pending the completion of an arrangement for their international businesses. This likely means that the two companies are working out an international strategy to compliment what would be an obvious synergy in the United States. This would accelerate international expansion for Moviepass. It would quickly give Sinemia A big jump in customers in the United States.
  • Even with the brand damage done to Moviepass They have a significant head start over Sinemia. They also have a much more attractive name. Sinemia sounds like a bad disease.
  • The company’s products are almost identical at this point. It makes a little sense to have two companies offering almost exactly the same thing In a relatively new market poking each other’s eyes out.
  • I expect this to happen within the next 45 days given that was the time allotted to finalize the pending patent lawsuit settlement between the two companies. It makes total sense and in those cases it usually ends up happening.

A Little Perspective On NRG Numbers from Hollywood Reporter

Hollywood Reporter made a dust up this week with a new NRG survey showing that 47% of Moviepass Subscribers are considering leaving the service.

I am going to try and keep this one short. You all know that these surveys have a huge margin of error. You also know that the last survey was done when Moviepass was a Media darling giving away $20’s for $1’s so it should come as no surprise that the numbers were a fall from earlier.

What should come as a surprise is how good the actual numbers in the survey really are. Even with months of horrible press, and wild changes to the core service, wide outages, and well known customer service problems the company seems to have a very solid fan base.

  • 52% of customers are very likely to recommend the service
  • 44% strongly agree that Moviepass is a great deal
  • 48% are “very satisfied” with the service

I have been doing consumer research for more than 2 decades. I can happily report to you that these are actually damn good numbers. Particularly for a company that has been abused by the press and has been spastic in its PR and customer relations.

I will go out on a limb here. These are shockingly good numbers. I honestly think they seem a little too good given the circumstances. I mean seriously, 52% of customers are still VERY LIKELY to recommend the service! Who and where are these people! I mean I am a MP freak supporter – and even I have a hard time getting to Very Likely to Recommend.

If you have any experience in marketing statistics you know that “likelihood to recommend” is the gold standard for product satisfaction, and for creating word of mouth for marketing for your product or service. And the “Very Likely” designation is the top level. Don’t forget that there are multiple levels in the answering of this question. Including somewhat likely, likely, and the not so good, unlikely or very unlikely. So what this means is Moviepass still has a very solid fan base to work with.

Now onto the next piece that grabbed all the headlines here. 47% considering leaving the service. This is where Hollywood Reporter and NRG really went hard after generating a bold headline to drive clicks and interest to the story.

Look carefully at the slight of hand here. In this result in the info graphic from the story Hollywood Reporter included both the “very likely” and the “somewhat likely” groupings together to get to their alarming and headline grabbing 47% number. They did that for a good reason. They wanted to be able to create a headline that could be stretched to “Half of all Moviepass subscribers are considering quitting”

OK – let’s unpack that a bit. First of all, people are always considering things they may or may not do. There are literally thousands of considerations people are making all day long that they take zero action on. They consider getting a divorce, they consider going to the gym, they consider quitting their jobs. They consider thousands of things all day long that they never do. So the fact that a large number of people are “considering” leaving Moviepass has only some mild connection to if they actually will leave Moviepass.

This is no different than your cellphone service, your cable TV provider or others services you have and might loath paying, but there’s enough value there that ever after serious “consideration” you do nothing, and keep the service.

Is it a good number to have half of your base considering leaving. No not really. But with all the changes, and the fear that MP could go out of business, and new competition, it is only natural that the customer base is considering their options.

I can tell you that these numbers are strange, because the likelihood to recommend numbers are quite good, and so their is a lot of noise here in the considering to leave numbers.

The bad press is helping drive the weird numbers, along with a behavioral economics concept called “the endowment effect” and “loss aversion

You can read up on it- but very quickly here. People are irrational when it comes to losses vs gains. So even if Moviepass is still a great deal, people will react more negatively because they feel losses more deeply than they do the gains – or in this case the current new value associated with their Moviepass cards. This phenomenon is still active in consumers minds, and some will quit the service or consider it, even if the value is good for them, because of the associated endowment effect- feeling they have lost what they had. If Moviepass had added features, (god knows what else the could have given away!). Consumers attitudes would change far less. We are weird animals, we hate losing stuff more than we love gaining stuff. It’s true with stocks and investing too!

Well it was not as short as I had hoped here. But I hope this helps people understand the NRG survey a bit more. As usual there was a total pile on to the sexy 50% of Moviepass Users are bailing.

Don’t believe it – it’s not going to happen. With these numbers, Moviepass will be back to growing again in no time.

Ask yourself this question. If 52% of customers are Very Likely to recommend the service to others- do you really think the other half of MP customers are about to quit?

Think Long Term

Today is my parents 59th wedding anniversary. They are beautiful people, who I love with all my heart. They have a marriage that is strong and beautiful. They raised a wonderful family (I am biased) and they have 7 wonderful grandchildren. (Again biased).

Like any marriage, they have had their ups and downs. But not in a dramatic volatile sense. Not at all like Moviepass! or HMNY:-)

If my parents were a stock they would be a lot more like a PACCAR than HMNY.

PACCAR is a wonderful story that evolved from humble origins in a very specific industry and evolved to be a dynamic leader across many different important areas of trucking. And all along the way PACCAR benefited it’s many stakeholders many times over. They consistently outperformed the market for many years.

PACCAR has had 79 years of sequential profit. Along with a very impressive return to shareholders.

In a metaphorical sense, that sounds a lot like my parents. They started with nothing more than a love for each other, and an idea of a great future together. The next 59 years were full of hard work, evolving, and delivering great results. My parents are a living example of an organization worth investing in. They have outperformed most, and evolved well over the years.

My father, now retired,was a CPA who understood businesses, mathematics, the importance of thinking long term, and betting on the power of compounding.

He taught me the power of investing long term and the wonders of compounding interest at a very young age.

He was wise enough to invest early in Costco, Microsoft and a few other great companies over the years. Well before these companies had become household names. He saw small investments turn into substantial positions, and he has been eager to share the power of those experiences with his family, friends and clients.

My mother was a homemaker, in the most traditional sense. She was massively dedicated to the success of our organization – our family. And she would stop at nothing to ensure we all had a bright future. She was the best CEO you could ever hire. And her employees- us kids! Loved her and still do in retirement.

My parents have taught me that thinking and acting long term delivers superior and very satisfying results. It takes time to build something big, strong and meaningful. It takes work, sacrifice, and some flexibility to get there. And the journey truly is the joy of the experience that makes the investment worthwhile.

Will HMNY turn out beautiful like my parents marriage. I don’t known. So many end up in divorce these days!

What I do know. It takes years to develop something big, beautiful, strong and unique. Adjustments and flexibility keep the mission alive. Giving up is usually worse than sticking it out. Time can deliver incredible results.

Maybe Moviepass and HMNY can take a lesson from my folks!

Happy Anniversary Mom and Dad!