Potential Why Companies Like MoviePass Struggle

LOS ANGELES - Aug. 14, 2018 - PRLog -- I am often asked by active investors to evaluate companies, the intangible word that is overused is "potential." I can define profit, asses loss, envision future earnings even create a derivative for the industry performance but there is no formula for potential.

An entrepreneur starts a company with a purpose, to change the status quo. The market tells them there is a chance, a glimpse of hope of what they are doing is so different – it is revolutionary. Companies like MoviePass live on potential, they attract investors and sell the future income on hope.

A couple weeks ago MoviePass had its 'Mission Impossible hiccup' where they were unable to pay for tickets. I had been following their business since last Fall and I thought the $9.99 was too good to be true because before the price was $40 per month. I would hear the CEO give his explanation on how his company was changing the way people watched movies. He would explain the concept, while the show commentators would often interrupt and ask, "How is this profitable?"

The all-you-can see concept was not profitable. After three price changes in the past two weeks, MoviePass has finally moved its pricing model to a maximum three movies a month for $9.99. Didn't they see this coming? The answer is yes and no, the accountants probably said this is not sustainable, the attorneys would argue liability while the analysts would weigh in on projections. Then the executives would bring back that golden word – "potential."

Every company wants to be the next Tesla or Uber. The long ball game of monopoly money that says building intellectual property and a solid customer base will ensure growth in the future. It is hard for companies that must play the short ball game to make it. Like every business, the market dictates that it adheres to supply and demand. MoviePass decreased their price, to increase demand; what they gained in popularity they lost in profitability.

Can they recover? I would like to hear your thoughts.

By Dane Flanigan

Dane Flanigan is a business consultant who helps companies build strategies to grow sales.  https://www.DaneFlanigan.com