So we have yet another example of a business taking massive losses for the sake of establishing a dedicated user base. It's interesting because we see this same model manifesting itself in the brokerage business. Just this past week, we saw the Firstrade announcement saying that they were offering commission-free trading. In other words, there's the notion that businesses can attract tons of customers by essentially offering them super-low-cost or even free services in exchange for their loyalty. Obviously, a business can't afford to do that indefinitely so at some point in the future the gameplan will be to slowly implement fees or raise prices in hopes of retaining those early adopters and turning a profit. It's a hell of a gamble... that's for sure. From my experience in business, no customers like to hear that your prices are going up, whether it's today, tomorrow or sometime in the future. Netflix did actually pull off a small price increase but MoviePass might not be so lucky.
It's probably worse than that and I think it has already been suggested here: they KNEW it was a failed business plan but they did it to get incredibly rich before bankruptcy. Notice on the FirstTrade front page, they have those Chinese language links (direct "call" to foreign accounts in a US based operation on a front page??) and they've got options and IRAs. Compare that with how slow and steady Robinhood has been in what they've been willing to offer. FirstTrade smells fishy.
They can always use the Enron defense: we are stupid, not criminals. After all, as Baron pointed out, nowadays growth is everything, profit might come later...