Internet Value Podcast

 What internet services are valued most? How much paid to have services taken away
 Social media  $300
 E-commerce  $850
 Video streaming  $1150
 Online maps  $3000
 Email  $8500
 Internet search  $17500
 Social media companies are worth more than internet search
o Have to start from scratch on new social media apps, all the networks already exist and
may be lost when you move

MoviePass Million Subscribers (Dec 27, 2017)

 Movie theatres trying to compete with surging popularity of streamers  changes have not
moved the needle and actually are declining ticket sales
o Reserve seats, reclining seats, bigger screens, better sound & projection
o Greater demand for shorter exclusivity periods before going to VOD
 Cut-rate subscription-based plan  full year access (one movie a day) for 9.95/mo
o 1M subscribers in 4mo vs took Netflix 3yrs (DVD rental time) & Spotify at 5mo
 Theatres paid full price for every admission; subscribers given a membership card that is billed
the amount via MoviePass app  independent of theatres
o Criticism is that MoviePass will not be able to turn a profit
 Believes can breakeven, but true value is in data about consumer tastes and
habits  computer science & machine learning
 Wants to grow big enough to demand discounted tickets or share in concession revenue
 96% of subscribers retained, 75% millennial
o Depends on more people paying than will actually go
o Movie tickets can be almost double the price in major city
o No value at $50/mo or $35/mo  only 20k users by early 2017 (founded in 2011)
 Cinemark introduced own subscription service (8.99/mo for 1 movie and 20% discount on
concessions)
 Increasing attendance for undercard movies

Guy Who Owns MoviePass (Jun 2018)

 Spending >$21M/mo, only have $43M in cash and payments on deposit w/ merchant processors
= plummeting stock
 Wants to sell studios info about trends, predictive analysis on which movies will perform well
and push movies to its subscriber base
o Don’t plan to sell data
o Locates where people are so they can find the nearest movie theatre and also purchase
the appropriate ticket
 Users can no longer see movies more than once
 Tracks viewing habits to give better recommendations & advertise w/ studios
 o Movies present slate for the year, MoviePass gives feedback based on viewing habits,
partners w/ studios to push ads to people who would be interested given MoviePass’s
data on viewing habits
 MoviePass users spend more on concessions (since don’t have to pay for price of ticket) 
highest margins for theatres
o Increased attendance  longer tail for movies beyond opening weekend
 Theatre partners have contracts that are a test period of 1-5yrs, theatre gives 15-25% discount
to MoviePass on tickets, MoviePass pushes people to partner theatres
 Likened to Orbitz for hotels and Uber for taxis
 Plan was always to buy & produce own movies  guarantee a box office, anticipate how many
tickets they will buy for it
o Have a stake in American Animals (film)  push subscribers to movie, drive ancillary
revenues from deals w/ HBO, Netflix, Amazon Prime or Apple
 Emails, campaigns, push notifications
o Eventually only subscribers will be able to see a movie acquired by MoviePass along w/
other exclusives w/ theatres & then direct to Netflix or Amazon
 Provide free concessions for MoviePass exclusives
 Anticipate break-even or cash-flow positive at 5M subscribers

Does the MoviePass subscription product create value? Can MoviePass capture some of
the value, if any, that it creates? Use as much numerical information as possible. 

MoviePass Supplemental

 Avg US ticket price in 2017 was $8.97

o Smaller cities avg is $7.50
o Large cities avg is $14
 Avg concessions revenue was $4.46 in 2015
 Use FB as a benchmark based on stock market valuation and daily active users over the time
period

TV Power Games: Friends & Law & Order

 Many TV shows are worth little, only a few shows generate a high value
 Law & Order
o Plot-driven, not about character development
 Tend to have 30-40 speaking parts per episode, 3-5x what other shows have
 Extra 75-80k per episode in labour costs
 Cast changes are frequent and easy to implement
o Strong negotiating power with both actors and networks
 550M 3-yr package deal for franchise series (low-end, but most expensive
negotiation in TV history in 2003)
 Friends
o Success of show based on marketing as an ensemble (full group interviews and shoots)
o Actors banded together to increase salary per episode as show became successful
  Eventually NBC paid WBTV 10m/episode and WBTV paid 1m/actor/episode
 Price per episode barely covered salaries, but WB was making
4m/episode in reruns only
 Outside option
o Actor’s outside option = mobility from TV to film increases actor’s bargaining power
 TV star can turn out a big opening week, and movie stars may also be more
willing to do TV  but performers may now feel more desire to move into film
b/c of fame
 Added value
o What is the drop in value if a given player walks out of a deal?
o Law & Order, Cheers, MASH  actors have low added value  successful despite cast
changes