Getting usage down for Moviepass is the key reason management made the moves it did this week. Fewer than 15% of MP customers were seeing more than 3 movies a month according to Mitch Lowe, but that 15% had some HUGE users! And those hogs had to be fired.
Smartly, Lowe has now said that the company is going to focus on occasional users vs. pleasing the real big movie buffs who were breaking the system and risking bankrupting the company.
Lowe has stated many times that the average moviegoer sees approximately 4 movies a year, and with Moviepass that number typically doubles to about 8 movies a year.
For most normal people who have busy schedules and are not big movie goers I think that sounds like a reasonable number. People generally don’t change their behavior massively over the long haul. And most people have really busy lives and simply don’t have time to see a movie more than a couple times a month. And inevitably months roll by where you don’t get to the movies because you are busy doing other stuff ….you are traveling, or your sick ….you are visiting your grandma …you are lazing around watching football….or doing Netflix ….playing video games etc etc etc!!
At Moviepass the 80/20 Rule Was In Effect
In any consumer data set you will have a group that skews from the norm. When I was running Product Management for MSN we saw this type of behavior all the time, there would be a group of really heavy users – around 20% – who would consume 80% of the bandwidth of our NB and BB offerings.
Most of you are too young to remember when dial up Internet started the plans were first billed by the hour of usage. Back in those days Internet was slow and relatively expensive. BB prices were insanely expensive. Computing power and internet infrastructure was much less powerful and cost companies way more money. AOL changed the game when they switched their dial up plans to unlimited, it was a huge deal back then. Bigger than MP! People thought it might drive them under. Sounds familiar! Anyway when AOL made that move on a similar premise of MP, the more affordable they made consumptive behavior the more they thoughtful they could monetize via data, ads and commerce –all others had to follow suit. And what all ISPs of the day saw was the old 80/20 Rule in effect. Super users were expensive, but they were deemed to be worth it in order to drive usage and data.
The 80/20 Rule is so consistent in so many different businesses you would be amazed. From banking, to restaurants, to many many others businesses, you can almost always find an 80/20 Rule in full effect. When I owned restaurants – 20% of customers drove 80% of the profits. The “regulars” you call them. If you look for it – you can almost always find it. Sometimes it works for good, sometimes it works for evil.
So back to Utilization Rate. Moviepass essentially killed its 80/20 Rule with the 3 movie limit. Now the other side of the equation on utilization are the no and very low usage accounts. This was always a surprisingly large number at MSN, and colleagues of mine who have worked subscription businesses will all know this. People often forget about their subscriptions, or don’t use them for some extended period of time for any number of reasons. Just to give you an idea how big this is, at MSN we had around 500,000 paying customers on MSN who would never log in for multiple months in a row. This was off of a customer base of approximately 5 Million. And these people were paying $19.95 a month. We would even send the emails encouraging them to use the service, reminding them they had it, and they would not, and they didn’t cancel.
I think we have all done this, signed up for a music service, magazine, etc. I signed up for Gogo Internet when I was flying a lot, but many months I would not use it at all. For me it wasn’t worth quitting and starting it back up again. I just didn’t care that much.
What percentage of folks on MP won’t go in any given month is not clear to me yet. But at only 9.95 a month, and the 9 month wait to rejoin. There is not a lot of incentive to quit if you are going to skip a month or two of movies out.
My guess is the base will see 10% who go dark don’t use their pass at all for 3-5 months. Could be higher but that’s a decent guess. These folks will see higher churn, but the overall number of them will likely stay in
I think 65% will average out to the 8 times a month – that’s double the average moviegoer consumption. This will be the bulk of the customers some will go a little more than 8 a year some a little less, so it’s a average here.
I think 25% will consistently use the full 3 movies every month.
If you work the math on all this you end up with a 1.14 Utilization Rate.
I have added a tab to my model if you are interested in seeing the math.
Could I be off here? You bet your sweet bippie I could.
Should you buy stock in HMNY based on this? Your call.
Should you bet your retirement or college fund on it? Hell to the NOOOO!
Be smart- buy low fee index funds from Vanguard for 90+% of your portfolio.
If you like gambling- and like investing and researching stocks in the dubious pursuit of beating the market. Limit your investment to no more than 2% on any single stock.
Please don’t send me email telling me you lost your life savings on HMNY based on my recommendations. Because if you followed my recommendations you would have lost no more than 2% of your net worth on HMNY, and you would be up overall in from he Index funds that are doing wonderfully.
Thanks for reading!
BTW – I wrote this post -including doing the model-on my deck- on my phone while staring out at this view! So if you find some bad grammar spelling mistakes etc. chill out! As I am certainly very chill here today!