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I think buying swag from startups to sell after they fail would be a better business model than the moviepass model.

This was a classic case of, “we lose money on every sale, so we’re dropping prices to make up for it in volume.” EVERYONE knew this was a bad idea, but enough B.S. thrown into a slide deck convinced enough investors that this was a smart gamble and not a clearly dumb one. Maybe the insiders knew something that everyone else didn’t, or maybe they were pitching a quick exit, or possibly just lying to their investors. Maybe in a parallel universe they pulled it off.

But I’m still thinking how cool it would be to have a collection on vintage/retro T-shirts from failed startups. You could even have a subscription plan if it got big enough, or you could buy “options” from startups to buy their remaining swag for a discount if they ever went under.

> I think buying swag from startups to sell after they fail would be a better business model than the moviepass model.

I wish somebody would start fuckedcompany.com v2.0. I used to hit that site every day. Good times.

I bought theranos.online last year for basically this purpose. It sits unused but I want to either have a fuckedcompany 2.0 type of thing or just sell assorted fucked company adjacent shirts.

I still occasionally wear my fuckedcompany.com T-shirt. It is in the "laundry shirt" stage, headed towards the "you must like that shirt a lot" stage.

Facial reactions to it tell me who was there at the time.

And the SFW "luckedcompany.com" with the same backend but different theme.

There’s http://startupgraveyard.io/

> I think buying swag from startups to sell after they fail would be a better business model than the moviepass model.

If this is your thing, and you happen to find yourself near the Bay Area, I highly recommend stopping by local thrift stores. So many failed startup shirts!

The thrift stores in Redmond are kinda similar - except it’s all internal Microsoft merch for failed internal projects - or just really weird things like a family photo frame with the SQL Server 2000 logo molded into it.

> a family photo frame with the SQL Server 2000 logo molded into it.

I just... how could this be real?

"SQL Server 2000, save the things that matter"

It was just was. It took me by surprise when I saw it too. I probably should have bought it just for the reaction from my houseguests - the question is: what person’s photo should I have put inside of it?

Do you have any recommendations on shops? I'll be in the Bay on Tuesday and would love to pick up a couple of shirts

Any of the Goodwill stores in the South Bay.

I still have my NTK tshirt from 2001 which joked about this: https://web.archive.org/web/20030606070350/http://www.geekst...

"I got £80million in venture capital for my .com idea and all I have left is this lousy t-shirt"

(Visiting the shop through wayback is quite a trip; see the bottom where they have to carefully explain this newfangled "Paypal" thing https://web.archive.org/web/20030812152554/http://www.geekst... )

I worked for a startup that also did this, and also went out of business a couple years ago. I'm curious - is "selling for less than it costs to make" a legit business strategy?

Uber has been doing it for years. The actual plan has a key second step:

1. Sell at discounted prices to grow quickly, capture market share and public image 2. Raise prices to profitability once you have an advantageous position in the market and consumers either love your brand or they have no options to switch to once your prices go up. Alternately for startups, you can sell the business once you have an established position and let someone else worry about profitability, or sell to another big company that wants to kill their competition.

The key in the plan is step 2. However, for MoviePass, there was no way they were going to get to step 2. There was every reason for the theaters to compete with MoviePass instead of making deals with them. Most people only visit one brand of theater (whichever meets the cleanliness/price ratio near their house), and each chain could make their own subscription plan cheaper without cutting a deal with MoviePass. So MoviePass was never going to get to step 2 where they had an advantageous market position, because their one key feature- being able to be used at multiple chains- wasn't compelling. So they cut their subscription to $10/month, which consumers loved, but everyone knew that it wouldn't fix the problem with the business model, and they were basically just giving free movie tickets to consumers with investors money.

They also took the money before having to reimburse the tickets, so it acted as taking in a short term loan.

>But more seriously, as someone who has followed MoviePass since 2011

I was confused and had to look up the history[1], because I thought they were only around since August 2017 [2].

As it turns out, 2017 was when they shifted over to the "one movie a day for $9.95 a month" (paid for at the retail level with no special buy-in or discounts from theaters), which is what made them a household name.

So, just an FYI if were confused like me.

Someone else probably has more details about the clusterfrak regarding all the sudden blackout days and surge pricing and running out of money and denying your ticket after you got to the theater.

[1] https://en.wikipedia.org/wiki/MoviePass

[2] which I remember I was visiting my brother when I started hearing about it

> AMC and Regal would ultimately figure out that If they were serious about a subscription plan, it would make more sense to build it in house/keep it limited to its own brands, rather than paying a middle man for customers that might not have chain loyalty.

Yeah, from the start MoviePass reminded me directly of that quote attributed to Steve Jobs (about Dropbox) that the company was a "feature", not a product.

Except Dropbox is now a 12 year old company. So I don't see how that was insightful?

It reminds me of The Sharks saying "a product is not a company". It's a virtually meaningless statement.

Dropbox market cap is crazy and they are trying to pivot to something else like paper.

Are they profitable? Despite what the techno digerati have you believe, a successful company is not based on how the market values it but whether they can get people to give them more money than it costs to produce a good or service.

There is no better evidence that Dropbox is just a feature than for the same price that Dropbox charges for 1Tb of storage, you can get the full Microsoft Office Suite for up to six users and a total of 6TB of storage.

Just as a caveat, I have 0 affiliation with Dropbox (I don't think I even know anyone who works there).

> Are they profitable?

Profitability isn't the end-all metric for a company. Amazon famously circles around the profitable/not-profitable line frequently and few people have doubts about Amazon's viability as a company.

Dropbox reported ~20% growth in revenue YoY and seems to have dumped most of that into R&D (you can see their R&D costs have grown by nearly as much as their revenue has). Other operating expenses remain mostly the same.

> There is no better evidence that Dropbox is just a feature than for the same price that Dropbox charges for 1Tb of storage, you can get the full Microsoft Office Suite for up to six users and a total of 6TB of storage.

Ok, but a growing subset of people clearly choose Dropbox. There are huge advantages to being a first mover that are sometimes insurmountable, even for gigantic companies. The zune was in many ways "superior" to the iPod, but we all know how that story ended.

Amazon is not the greatest example. Amazon retail is still a poor low profit margin business with huge overhead and if that’s all Amazon was - a company that sells physical products - they would still not be worth anything near what they are worth.

Most of Amazon’s profit comes from AWS where they do have economies of scale and relatively high marginal profits. What are the chances that Dropbox will ever find a high margin profitable pivot? What is their customer acquisition cost? The lifetime value of a customer? What type of pricing power do they have.

Everyone loves to point at Amazon as evidence that all of these money losing companies will be highly profitable one day but it hasn’t happen.

Let’s not forget that out of all the big tech companies - Facebook, Amazon, Apple, Google and Microsoft. The only one that wasn’t profitable before they went public is Amazon.

Other operating expenses can’t remain the same. Storage cost real money on a marginal basis unlike software (Microsoft) and search (Google) which has close to zero marginal cost.

"What are the chances that Dropbox will ever find a high margin profitable pivot?"

I always thought that was selling ("aggregated") access to user's files.

> "Amazon famously circles around the profitable/not-profitable line frequently"

I dont agree with this common saying. Amazon was founded in 1994, IPO in 1997, and made a profit by 2003. Amazon's philosophy is to reinvest money, thus they swing between profit/loss. Amazon went from selling books online to everything online + AWS + Echo + Go Store, etc etc. So it took Amazon to make a profit, but they truly were growing, not paying people to buy movie tickets.

Conversely, usually when people say 'look at Amazon' when talking about profitless companies, we are talking about companies that spent a decade + private, IPO with huge valuations, slowing growth, and huge losses with no profit in site.

Dropbox for example, founded in 2007 and IPO'ed 11 years later with an 8 billion valuation. A 100$ investment in Amazon would have yielded 127k$. To give you that kind of growth, dropbox would have to reach a market cap of 10+ trillion. This is a huge problem because people are treating these unicorns like growth companies, when their best years are behind them and with their valuation, its mathematically impossible for them to have the huge growth that companies such as Amazon, Netflix, Google had.

I think rules need to be enforced / changed to prevent companies from staying private so long. This shenanigans is going to cost generations saving for retirement significantly.

I’m puzzled by who you think is suffering by having companies stay private like this?

> This is a huge problem because...

Why is it a problem?

Suck it up; if you’re an investor do your due diligence, just like with any other company.

It’s a problem because if you’re not a “qualified investor” you don’t get to take advantage of most of the gains as long as the company stays private.

Because the public market is clearly being used as a greater fool pool for bad investments.

I would not even call Netflix a success story until they can prove they will retain customers when the currently most popular content is being pulled

I agree and they have already proved they couldn’t. They use to say that their investment in content will keep attracting users even when its not new - ie their library content has value.

But they admitted that they didn’t sign up as many new customers last quarter because they didn’t have big new releases to attract customers.

They are still taking on billions of debt for both licensing deals and to create new content while their major upcoming competitor - Disney+ - has multiple income streams from their content and most of the cost of content has been repaid multiple times by the time it reaches Disney+.

Streaming is also a feature and not a standalone product for Amazon, Disney, AT&T and even Apple. None of these companies live or die based on their streaming product, it’s just a check mark.

Disney will not have the large catalogue that netflix has. If you like Disney $6 a month is great but this won't put netflix out of business.

But Disney seems to have all the franchises that everyone wants to see. Add to that the major broadcasters are also pulling content, it's not just Disney. NBC, ABC, CBS are all pulling their content from Netflix and creating their own Disney+-like competitors to Netflix. HBO never even put it on there (they have had HBO Go for a while).

Netflix has a large catalog, but most of it is either crap or owned by other studios and networks. They are all taking their content back to start their own service.

> Profitability isn't the end-all metric for a company.

Profitability is a proxy for "going concern" in most of the companies including Dropbox.

> Profitability isn't the end-all metric for a company. Amazon famously circles around the profitable/not-profitable line frequently and few people have doubts about Amazon's viability as a company.

This is basically accounting fiction. Amazon is profitable; they just reinvest their profits so aggressively that they’re writing off tomorrow’s expenses against today’s revenues.

I switch from Dropbox to OneDrive for this very reason. OneDrive works fine for me (it even works better for photo and video sharing) and for the same price as DropBox I also get 1TB, Office365 online, for the iOS and Android and two desktop install licenses. And an outlook.com account. Terrific deal.

It is really a no brainer. I kept my free dropbox account thinking "I'm just going to use this for the stuff I want to share because I hate the OneDrive client and just store photos/videos in OneDrive"

But now the reverse is true and I don't know the last time I used Dropbox.

Dropbox gives you 2TB for $10/month.

Office 365 Business Essentials, which is the cheapest plan and comes with 1 TB of storage (as you said) is $5/user/month*6users = $30/month

So same price for the storage, but you also get the web and mobile versions of the Office apps. The desktop versions cost extra. I've gotten along fine the last few months with just web and mobile though.

• https://www.dropbox.com/buy

• https://products.office.com/en-us/compare-all-microsoft-offi...

Edit: I guess having 6 accounts isn't the same as 6 contiguous TBs though.

Office 365 Home for 6 users is $79.99 a year

With Dropbox if you have 1TB and someone shares a folder with you that has 1TB, your total allowed storage is still 1TB. With Office, you can share folders across users and the storage is contiguous.

No, but they have extremely high GM and continually are generating more FCF year of year:

https://www.marketwatch.com/investing/stock/dbx/financials

https://www.marketwatch.com/investing/stock/dbx/financials/c...

It would be safe to say that they are "printing cash".

It’s easier to give the impression that you’re “printing cash” when a considerable part of employee compensation is paid by “giving away the company” (stock compensation expense is around 15% of revenue).

They also leave out in their free cash flow calculation some relevant things (capital leases). Amazon for example provides three free cash flow calculations, Dropbox only the good-looking one.

https://www.cnbc.com/2018/03/21/dropbox-may-have-intentional...

Fair enough.

But this doesn't neglect the fact that they're at 70% GM. They're spending 750M/750M split between SGA and R&D, which means you could basically cut those both out significantly (assuming support/hosting costs are in the COGS) and the company stops growing (on a $1B+ revenue top line) but just starts printing cash. The ~$100M in capital leases is a rounding number then. Not to mention, since their data centers appear to be capital expenditures, it means they have the possibility of extracting even more ROI out of that in the long term.

PS - your article is from 2018 speaking about 2016 and 2017 numbers. Anything updated since? Dropbox has continually increase FCF YoY regardless...

So do you think they are just wasting R&D money and it isn’t an engine to keep the company a going concern? Do you also think that the rest of the tech industry could cut their R&D and stay relevant?

Servers breakdown, while we don’t have any statistics of how often Dropbox needs to replace hardware, we do know how often hard drives fail at scale from Backblaze’s frequent reports.

> So do you think they are just wasting R&D money and it isn’t an engine to keep the company a going concern?

Yes and no. They are trying to grow the product breadth (collaboration for example) so they can upsell enterprise businesses. That's where most of the R&D is going.

> Do you also think that the rest of the tech industry could cut their R&D and stay relevant?

Yes - easily. I've personally worked with over a hundred of them and you'd be shocked to understand how sticky software is once it's been implemented. This is the dirty little secret you never heard about when discussing software valuations.

> Servers breakdown, while we don’t have any statistics of how often Dropbox needs to replace hardware, we do know how often hard drives fail at scale from Backblaze’s frequent reports.

As I understand it, this is where Dropbox's major capital expenses are going right now. I don't have any information on where it hits the P&L and if it's calculated in the CF statement. However, having worked with similar businesses before and calculated pro formas, there is very clearly an ROI (similar to AWS, Google and Facebook all building out their own data centers).

I'm not an expert in Dropbox financials, I was just pointing out that the numbers are not necessarily as good as they seem and some care is needed to compare it with other companies. I have no idea how much the capital lease adjustment would represent. If your point is that from a valuation perspective it looks better than many other companies I agree. But I'm not sure it is so easy to "print cash". If they stop developing and marketing the product revenue will decline, they are not in a segment where you can milk a stagnant product for long.

> If they stop developing and marketing the product revenue will decline, they are not in a segment where you can milk a stagnant product for long.

I would argue the exact opposite. This is one of those products where most people just "set it and forget it". As long as the desktop sync continues to work as it does for all major OS's then they most certainly can milk their product for cash.

> I was just pointing out that the numbers are not necessarily as good as they seem and some care is needed to compare it with other companies.

I mean, you can make the argument that any company comparison requires "care" when analyzing it. This is literally why analysts still exist.

> But I'm not sure it is so easy to "print cash".

I think we're getting bogged down in semantics here. For most users of Dropbox, it's literally just a file sync - that's it - and it already works fairly flawlessly (compared to their competition at least). Which means at 70% GM it requires very little effort to continually advance the product. ~$700M alone is being used to continually fuel growth.

Fun question:

Q: Do you know when NetSuite turned a profit for the first time?

A: 2009[0] Yes that 2009, when the economy went to shit. Weird huh?

[0] - https://a16z.com/2015/05/15/a16z-podcast-why-saas-revenue-is...

As long as the desktop sync continues to work as it does for all major OS's then they most certainly can milk their product for cash.

iOS and MacOS have changed how they have handle third party syncing a few times over the past 4 or five years. Microsoft and Apple are both adding features to make Dropbox unnecessary and Microsoft has a large enterprise and consumer marketing budget to chip away at Dropbox’s profitable enterprise base.

While Google isn’t as entrenched in the enterprise as Microsoft, it is becoming more entrenched in education and it gives away a lot more storage for free.

If you think any software maker can just sit on its laurels, see what happened when MS tried that with IE.

Disclosure: I work for Microsoft but not on OneDrive or Office or any of that stuff.

I love Dropbox (well, OLD Dropbox, I do not like the new desktop app at all) and have been a paying user basically since you could pay to use it (and a general user since it launched in what, 2007? 2008?), but Steve Jobs wasn't wrong. The original service Dropbox offered has indeed become a commodity. Dropbox (like Box before it), has had to pivot into other areas like "collaboration" and has had to change its focus from consumers to small business/enterprise in order to grow, and even then, it's struggling.

I don't actually think MoviePass and Dropbox are that analogous though. Sure, both are middlemen (or "features") and reliant on their potential competitors, but Dropbox's value prop strikes me as better.

MoviePass could have licensed its technology around geo-fencing/ticket-buying to theater chains so they could do their own subscriptions -- the impact wouldn't be as big, but there is a services story there. But MoviePass is always tied directly to the theater chains and the margins there aren't negotiable and won't change. Whereas Dropbox might be reliant to an extent by the OS makers it supports -- and Apple/Google/Microsoft might be able to theoretically build in better native integration with their services vs Dropbox -- but Dropbox can still come up with solutions and be elegant and cross-platform in a way that is better than the platform options. Whereas MoviePass can't do anything unless it wanted to try to start its own theater chain.

You mixed that up! Apple's competitor to Dropbox isn't cross-platform but Google Drive and Microsoft OneDrive definitely are.

In contrast MoviePass was truly 'cross-platfrom' while the new alternatives (A-List etc Al) mostly work within one theater chain.

And before any of those, there was Yahoo Briefcase. Years before.

iCloud Drive has a Windows client.

Dropbox atleast had an awesome Linux client. I don't know about one drive. But Google teases a Linux client then routinely tells us to fuck off.

Dropbox as just a cloud drive fit the description, and perhaps the fact that they are more than that and have since stuck around that it fits the quote too?

It’s like many aphorisms or random links people like to post here because it’s a cheap low effort way to make people think they’re smart. (It doesn’t.)

That said, there are a fair number of would-be products that seem fairly clearly destined to be a component of another product.

Then I fucking wish there were more features than products being made. It just works, recently, doing its one thing and never getting in the way. Its not trying to upsell me or limit behavior to only "partner" devices/services. Not spamming me. Not pretending its selling some sort of "lifestyle" to justify overpricing. Etc!

Of course Dropbox is doing All. Of these because it's a company that has to grow.

I have an Uber T-shirt if you're interested.

Shots fired. Its not unbelievable tbh.

Depends. If they lose to AB5, it's immediately over. You see, Uber is not a cab company masquerading as a tech company. No, it has become the latest attempt in a very long list of various form of attempts to essentially roll back the New Deal, undo all the progress organized labor made. Recommended reading: Invisible Hands by Kim Phillips-Fein, this covers the first few decades closing with Reagan (and almost starting with him, too). https://www.wwnorton.co.uk/books/9780393337662-invisible-han... If you consider it from that angle, then pouring billions into it is not that much of an investment. But if AB5 forces Uber to make their drivers employees then the "gig economy" is practically over and with it, Uber as well.

Or, it could just be a perfectly natural market response to blatant regulatory capture and customer abuse on the part of the incumbent taxicab industry.

The problem is that it's both.

> natural market response

with 5.2B quarterly loss and no path to profitability, natural market, sure, sure.

Well the response is natural. Successfull? Hell no.

> Last year, I bought a MoviePass t-shirt from the company’s merch site in anticipation of just this event. I’m going to wear it tomorrow.

You can probably sell it to the HBO prop dept for next season of Silicon Valley for $$$$$

In what context would they want to have a character wearing swag from a defunct startup? (I've only seen up to midway through season 3 btw.)

Wouldn’t have to be a plot point. Could just be a funny in-joke for the right character.

But which existing character and joke?

Probably the guy with the car and the doors. He can give more "wisdom" like this "wisdom" while wearing it:

https://www.youtube.com/watch?v=BzAdXyPYKQo

(To be clear the joke is he's a moron but everyone listens to him because he has money)

Apropos this shutdown, Silicon Valley is also shutting down and its last season is slated to premier October 27, 2019.

I was interning at Mozilla the summer it premiered and watched the S1 finale in a bar in SF... it was harder than you'd think to find a spot. Apparently it hit a little too hard with some folks :)

I love how you collect shirts of failed companies & wear em on msdn shows, it’s like a underhanded memento mori of sorts.

The Groupon office lobby had a picture of Andrew Mason on the cover of a magazine, surrounded by magazine covers of famous dotcom meltdowns. I always loved that. Well, that and the cat UFO.

See https://amp.businessinsider.com/images/4cec169bccd1d5e76e060...,

https://www.businessinsider.com/groupon-office-tour-2010-11#...

Thank you for noticing! Honestly, I like to be subversive (because if I can, why not!), and I also genuinely think it is a good thing to remember that as you allude, "we all die" or more to the point, "no company/product/language/technology is guaranteed a forever."

Thanks for reminding me!

I think I'll get a Rust T-Shirt and save it for a few years. It'll be like the "Oberon" T-Shirt I still have.

> AMC and Regal would ultimately figure out that If they were serious about a subscription plan, it would make more sense to build it in house/keep it limited to its own brands

This ignores countless counter-examples where entrenched companies completely missed the boat, despite plenty of time and obvious advantages. Although I understand how people could think this, it's how most business is taught to people for some reason but price competition and existing prior competitors (surprisingly) doesn't matter nearly as much in the disruption game as they do among big businesses in stable markets. But people tend to serve business advice as one-size-fits-all.

This seems to be more about the weird nature of the film marketplace than matters of competitive advantage.

Undoubtedly just how bad MoviePass's business model sans cooperation from the theater chains (who would eventually just do their own thing) is partially unique to the film exhibition marketplace -- but I wasn't making a sweeping statement about all businesses or disruption, I was talking about the actual MoviePass business model which would never ever ever ever work without cooperation with the theater chains (or, as I said, studios. But the studios are difficult because of the Paramount Decree).

I don't claim to be an expert at many things and I'm far from the smartest person in the room, but MoviePass hits my sweet spot because it encompasses the two industries I've studied/spent my career/life around, and the math for MoviePass just never works out.

Initially, the goal was to buy discounted tickets or have partnerships with the theater chains. The theater chains balked and refused to work with MoviePass, which led to the hack of using a pre-paid credit card and buying tickets at RETAIL prices. AMC and MoviePass actually did have a partnership at one point (2015) in a few select cities but if anything, all that partnership did was give AMC the data it needed to know how it could create its own service.

MoviePass thought it could leverage the theaters by claiming it was responsible for a large percentage of box office traffic -- but all its data really did was show that people really liked spending $10 a month to see unlimited movies. None of MoviePass's attempts to show that it was a market maker in terms of pushing subscribers towards a certain film worked (it didn't help that the films that studios were willing to advertise via MoviePass were often not very good) and MoviePass's brief sojourn as a film financier/distributor itself basically encompassed Gotti starring John Travolta (a truly bad film that no other major studio would distribute -- it should have gone straight-to-video/streaming/whatever -- which was the original plan. The producers literally bought it back from Lionsgate b/c Lionsgate smartly realized it was not worth spending money on putting in theaters), which was a flop -- and to add insult to injury, a flop whose audience was almost entirely MoviePass subscribers (meaning MoviePass basically paid for the film twice).

Again, I'm not making any larger statements about disruption. But this business, in this industry (which it should be noted, has fairly inflexible pricing and the theater chains themselves are largely only profitable because of concessions), with this ridiculous business plan was never, ever, ever going to work. And even if Regal and AMC had partnered with MoviePass, Regal and AMc would just have taken those lessons and launched their own loyalty subscription services.

> paying a middle man for customers that might not have chain loyalty

Is chain loyalty a thing with movie theaters though? Don't people decide what movie to watch and then pick a theater?

At best I think that in locations with lots of choices (> 2) there may be a specific theater a customer doesn't like. But even then... how many customers are there that will absolutely refuse to go to theater X even if it means missing out on "super amazing film Y"?

I wonder if the real problem was that MoviePass's main demographic might have been people looking to go to the movies on the cheap. These folks aren't buying popcorn, candy, and pop... the main (only?) profit center for theaters. In the end all that's been accomplished is filling seats at a loss (or minimal profit).

> MoviePass t-shirt [ .. ] wear it tomorrow.

Hah, I did this with my Amiga t-shirt the day Commodore went bankrupt. (Except for the part about buying the shirt it in anticipation of bankruptcy.)

What’s the Paramount Decree?

EDIT: Ah there’s a SCOTUS case that would prevent them: https://en.m.wikipedia.org/wiki/United_States_v._Paramount_P....

It's supposed to prevent studios from owning exhibitors. The one addition I'd add to your Wikipedia link, is that in the 80s, deregulation weakened many parts of the Paramount Decree, which is why you saw scenarios in the 90s/00s like Sony (a studio, thanks to its purchase of Columbia Tri-Star), also owning a theater chain (Loews, once stylized Sony Loews).

Slightly related -- the United States v. Loews case [1], which bans block booking, would make movie bundling difficult for a MoviePass like company too.

[1]: https://en.wikipedia.org/wiki/United_States_v._Loew%27s_Inc.