Subscription Commerce

Subscription Economy Shifts: MoviePass Closes, Ford Reverses And Porn Gets In The Game

subscription economy

After over two years of speculation — and a fair number of predictions of imminent doom — it seems MoviePass has finally, actually come to its last reel.

MoviePass is the service that came to prominence with its too-good-to-be-true offer of a $9.99 monthly fee that would allow the subscriber the ability to see a new movie in a theater every day for a month if they so choose.

The problem was too many customers made precisely that choice. MoviePass, and its parent firm Helios and Matheson Analytics, expected their service would increase the number of movies consumers saw — but did not accurately forecast just how often MoviePass subscribers — mostly young, single urban professionals would go to the movies. Since MoviePass didn’t have any special deal in place with the theaters the offered ticketing at, and since the average price of a movie ticket in urban areas where MoviePass was popular is far north of $10 a ticket, MoviePass was losing money every time their subscribers went to the movies.

Over the last 18 or so months the firm has attempted many course corrections, changing its pricing, changing how many movies customers could see, limiting the movies available through the service or the time they could see them —  but ultimately the firm could never quite find its footing on a path that would lead to profitability.

MoviePass parent company, Helios and Matheson, notified MoviePass subscribers on Friday that it would be interrupting the service effective Saturday.

“The Company is unable to predict if or when the MoviePass service will continue,” Helios and Matheson Analytics wrote in a press release. “The Company is continuing its efforts to seek financing to fund its operations.”

Whether MoviePass will go on is an open question. The data points to probably not, but the data pointed in the same direction when the firm ran out of money in December 2018, and still managed to battle back for another 10 months. Moreover, in the movie business, a sequel is never surprising.

“We still deeply believe in the need for the MoviePass service in the marketplace, to maintain affordable access to theaters and provide movie lovers with choices of where to go to the movies,” wrote CEO Mitch Lowe on MoviePass’s website. “Although we do not currently know what the future holds for the MoviePass service, we hope to find a path that will enable us to continue the service in the future.”

However, while they are looking for that future path, currently it would seem that there is no sneaky plot twist coming to save the subscription service, or at least not any time soon.

The lights, as they say, are coming up and MoviePass is signing off.

Because subscription services, as it turns out, are harder to do in reality than they ever appear to be in concept. MoviePass has millions of subscribers and a much-beloved service, until the fact that it was hemorrhaging money and had to reduce its service offering soured many on the experience.

However, making customers stay doesn’t mean much if one also can’t make them pay — which MoviePass never quite got a lock on.

Also, they weren’t the only high profile firm pulling up stakes and formally moving off the subscription field.

Ford Reverses Out Of Subscriptions 

Last week the news broke that Ford will be officially selling off its monthly vehicle subscription services, Canvas, for an undisclosed sum to vehicle subscription start-up Fair. The move comes as part of Ford’s $11 billion restructuring project underway through 2022.

Ford acquired San Francisco-based Canvas, (previously known as Breeze) through its consumer financing arm Ford Credit in September 2016. It began offering variable-term leases with flexible payment options to San Francisco-area residents under the name Canvas in 2017 — eventually, the service also expanded to L.A. Under the terms of the sale, Fair will acquire all of Canvas’ assets, including nearly 100 employees.

Sam Smith, executive vice president of strategy and future products at Ford Credit, told CNBC the company “learned a lot about subscription services, fleet management and the technology” from Canvas.

Fair was Ford’s second expensive lesson in mobile commerce in 2019 — earlier this year it ended operations of Chariot, a shuttle-based ride-sharing service it acquired in 2016 for roughly $65 million.  Ford expanded Chariot from San Francisco to seven cities before ceasing operations in March — seven months after Streetsblog NYC reported the service was “a big, expensive failure.”

Also, notably, subscription failures have been painful fits for companies like Volvo, Cadillac and Porsche that have launched them. Each has had to modify their businesses; Cadillac’s “modification” was pulling the plug entirely.  Scott Painter, CEO and founder of Fair, conceded that it is possible to be profitable in the car subscription business — but not easy.

“It is not an inherently unprofitable business,” he said. “We are growing very fast, so we are going to continue to invest in our business for some time but at its core, the unit economic of this business are very positive. We already have cohorts in our business that are profitable. I think that’s an important distinction between Fair and a lot of companies that are just sort of investing blindly in customer acquisition costs and growth.”

Painter further noted that while Ford is dialing back, the acquisition is an opportunity for Fair to step on the gas pedal with the boost Canvas’ assets offer.

“We just became a much bigger, more dominant platform,” he noted.

And speaking of showing signs of dominance…

Spotify Cracks Down On Account Sharing 

Perhaps tired of people in their 20’s sneaking onto their parents’ Spotify paid account, the firm will soon be requiring that everyone on a family plan live at the same address. The goal is to prevent subscription abuse.

For $15 a month a family subscription buys up to six separate Spotify accounts that all enjoying premium membership perks like add free listening and on-demand playback.  Individual plans, by comparison, are $10 a month.

Since $2.50 is less than $10, friend groups have been known to form into “families” for Spotify subscriptions — and Spotify has decided it is no longer offering a discount to people willing to stretch a definition to get one. As of August, the family subscription is defined in its terms of service (ToS) as “for families residing on the same address.” The ToS further note that Spotify will occasionally be looking to verify that fact.

Last year, the music streaming service asked individual members to confirm their location by giving their GPS coordinates. The pilot program was abruptly ended due to privacy concerns, though it seems it will be back on as the mechanism Spotify is using to verify families are all in the same place.  Spotify has said that the location data that it will require will be encrypted, and will only be used to verify family plan subscriptions.

Whether this will push more Spotify individual subscriptions — as the firm clearly hopes — or it will just push consumers to services with more lenient family policies like Apple, remain to be seen.

So speaking of Apple…

A Grace Period To Better Prevent Churn 

Apple announced last week it is making changes to how in-app subscriptions work for app store apps by giving developers the option to better battle the endemic problem of churn by making it possible to offer consumers a grace period to fix subscriptions on the verge of lapsing.

Lapses occur for many reasons — and while some are intentional, many are not.  Cards get turned off, expire or are lost. Consumer move and billing ZIP codes change. The customer didn’t want to go — but once they are gone getting them back can be a hassle. Apple’s new grace period allows developers to opt into a billing grace period that essentially gives Apple extra time to collect the payment on the app’s behalf. The service is new to iOS but has been available on Android in the Google Play store since 2018.

“Google’s implementation just works, developers don’t need to write additional code,” Jacob Eiting, the CEO of in-app subscription startup RevenueCat,  told TechCrunch.

“However, as always, I’m glad to see Apple investing in the subscription experience on iOS. It’s the best way for app developers to monetize and creates much better alignment between developers and users than any other strategy,” Eiting added.

Apple’s grace period can last for six or 16 days, depending on whether the subscription duration is weekly, monthly or longer. During that period, the consumer’s access runs uninterrupted — and if the renewal happens within the window, the app developer feels no interruption to their revenue stream.

Moreover, while most of the week’s news was about fighting chum, collecting value or getting out of the game — there was one undeniable growth story.

Subscriptions Come To Porn 

The pornography industry is a profitable, but murky environment, when it comes to the flow of funds such that it is difficult to know precisely where the billions of dollars generated from websites powered by ads and premium subscriptions are going.

However, in the digital commerce era when anything and everything can be bought on subscription — it seems the golden age of the independent pornographer has been hatched as sites like Snapchat make it possible to create direct-to-consumer (DTC) porn for legions of avid subscribers.

“There’s no in-person stuff to deal with,” said Dolly,  as a worker who spoke CNBC said about her start-up. “You make your own rules, you make your limits.”

The DTC models use services like  Twitter, Instagram and Snapchat to promote their premium offerings on sites like OnlyFans, Fancentro and Patreon, where they can charge a recurring subscription.  The subscriptions don’t bring in vast sums — Dolly reports $500 to $1,000 a month at the moment. However, sites like OnlyFans and FanCentro have changed the business quite a bit — because they provide an entire management system (CMS) to help creators run their business and handle subscription billing all from their smartphone.

The sites keep a portion of the revenue — between about 5 percent and 25 percent — and the rest goes to the talent.

Goddess Tierra, another DTC model that CNBC spoke to,  has been in the online porn business for 13 years and notes the new tools are a game-changer. Once, she said, she had to learn HTML to manage her business, now she can buy a simple package, and focus more on her craft.

“Everything’s so easy now,” said Tierra. “You just need to know how to brand yourself.”

Tierra typically makes at least $10,000 a month — so it seems she is quite good at branding herself.

Though it seems as one takes a broader look at a week where subscriptions owned the headlines — it might be something of an overstatement to call everything “so easy now.”  The team at MoviePass, for example, could probably offer a few very solid counter-arguments.

Because, but for a very few things that one can always sell profitability — succeeding at subscriptions is harder than matchmaking a consumer to a service or good they are going to want to enjoy over and over again.  It is finding a way to make the offer — and still make money — and also keeping the customer on board and paying their bills.

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