“How much of my life is being effectively subsidized by investors?”
Kevin Roose in the NY Times has captured a question that’s been on my mind for a while — “How much of my life is being effectively subsidized by investors?”
The NYT piece positions it as:
“It’s called the 75 Cent Dollar Store. We’re going to sell dollar bills for 75 cents — no service charges, no hidden fees, just crisp $1 bills for the price of three quarters. It’ll be huge.”
Companies like MoviePass allow me to watch as many movies as I like for $80 a year. A single movie ticket in SF is ~$18, which is the cost-basis MoviePass is paying. Clearly this is a pretty good deal — I only have to see 5 movies during the 12 months and I’m in the black.
The shortfall is made up by investors who are betting on the longterm viability of the company, of course.
This is nothing new — Amazon sold goods at a loss for years (and in some categories still does) in order to win market share, and many of their experiments such as Prime Now and Fresh are apparently still loss-leaders while they figure stuff out.
Many of Uber and Lyft’s rides are at cost or at a loss, although apparently both services net-out profitable in the US across all rides.
MealPal is another service I recently experimented with — $6 for a pre-made takeout lunch at many of SF’s top lunch outlets. I often collected entrees I’d preordered with their app for $6 that were being sold for $12–15 to walk-in customers. I can only assume the cost-basis of the meals means MealPal are making loss (hopefully the restaurants aren’t).
Apps I rely on heavily such as Evernote don’t have advertising and I don’t pay for them. Yet I am gaining massive business value from their value proposition while avoiding paying for them, because I don’t need to. It feels weird.
If done correctly, this long-term thinking does work — Amazon is testimony to that and Uber & Lyft are not far behind. But there are many examples of where the economics simply doesn’t add up and I still feel uncomfortable about getting something of value I’m not paying appropriately for.
I don’t actually have a conclusion other than to point out that it may not last if the investor money runs out. So enjoy it while it does!
What services do you rely on that are losing money and thus effectively subsidizing you with their use?
