(2022-09-12) The Other Moviepass Economy

The Other "MoviePass Economy". Back in 2018, Kevin Roose wrote a wonderful short piece: "The Entire Economy Is MoviePass Now. Enjoy It While You Can." The main thrust was that the US economy—especially the economy as it's experienced by young people with pretty good jobs in big cities—was increasingly full of unsustainably cheap consumer products financed by VC largesse (Edit: a reader notes that MoviePass is a bad example of this because it wasn’t VC-financed).

A year and a half later, MoviePass was bankrupt.

MoviePass was poorly-implemented, but the general concept turns out to be popular.

Memberships are everywhere:

Amazon Prime is a famous example of this model,

Apple has had music and iCloud for a while

Disney has rearranged their business around direct-to-consumer subscriptions

Doordash's Dashpass is a $9.99/month program with $0 delivery fees

Instacart+ has a similar offering at the same price point.

If you're less interested in staying stationary and having goods delivered to you, you can sign up for Uber One's membership and get discounted rides (and deliveries)

Subway recently sold out of all of its Footlong Pass monthly discount plans.

Is the future of consumer spending going to be dozens of 5% discounts every month, and a thousand dollars a year of subscription fees to pay for access to them?

The increasing prevalence of subscriptions represents three trends

First, as markets get more competitive, the challenge moves from altering customer behavior to winning share (zero-sum game) among customers who engage in a particular behavior

Economically, part of what you're doing when you sign up for an app subscription is that you're buying your consumer surplus upfront.

*if you're confident that you know what demand looks like from individual customers, and you can persuade them to switch from buying incrementally profitable products to buying low- or no-margin ones in exchange for a one-time fee, you can turn the consumer surplus into profit instead. (Price discrimination)

companies can approach that asymptote because of the second powerful force in a maturing industry: it gets much more predictable.

When Uber offers you a five minute faster ride for $10 more, part of what they're doing is measuring the value of a minute of your time

once a company can model the long-term lifetime value of a subscriber, that changes its optimal pricing for non-subscribers: temptingly cheap introductory pricing can be paid back quickly through subscriptions, while users who stick around for a while but don't convert to a paid plan will probably end up seeing higher prices.

It's notable that there's some convergence among these app offerings.

Lyft doesn't have an Uber Eats-scale food operation, so they included Grubhub's in their offering. (And Grubhub doesn't have a ride-sharing service to bundle with its food delivery, so...).

The natural lifecycle of bundles is that they grow as they get optimized, then hit some external shock that leads to radical unbundling. Cable went through this cycle

In categories with infrequent purchases, we might see more loyalty programs show up, especially bundling across those categories—infrequently-purchased products have the daunting challenge that they need to re-acquire their consumers every time.