May 9, 2018
NEWS ANALYSIS — The rollercoaster existence of movie ticket subscription service MoviePass took another precipitous plunge May 8, with shares of parent Helios and Matheson Analytics (HMNY) closing down more than 31% at $1.45 per share.
To the absolute shock of no one paying attention.
The company, in a regulatory filing, disclosed it had $15.5 million in cash left in the coffer, while operating a business model that burns through $21.7 million monthly offering subscribers daily access to a theatrical screening for a $9.95 monthly fee.
To be sure, HMNY said it has another $29.7 million in deposits from associated merchants and annual subscribers; but doing the math doesn’t give that fiscal tally much of a lifespan.
Why? In January, CEO Mitch Lowe boasted MoviePass was buying one of every 35 theatrical tickets used in the United States. It had more than 2 million subscribers, with 5 million projected by year’s end.
In April, the company — in a shrewd move — acquired ’80s leftover Moviefone from Verizon’s Oath portfolio, in a deal that gave Verizon a 9% stake in MoviePass.
Then it surprisingly announced it had bought a fiscal stake in John Travolta’s biopic Gotti — after Lionsgate dropped the movie from its release slate.
“This is an ambitious movie for which we’re thrilled to offer exclusive opportunities, such as exclusive tickets to the U.S. premiere event, word of mouth screenings and other related events to our nationwide subscriber base,” said Lowe.
Lofty measures that seemed to impress believers while confusing the media.
Unfortunately, to make a loss-leader business model work requires more than hype and marketing. For MoviePass, its millions of subs have to frequent the cineplex as often as they would the gym. Not often, or at least less than once a month.
AMC Theatres, the nation’s largest exhibitor, disclosed that in April the average MoviePass subscriber frequented its screens nearly three times (2.75), for which the service paid AMC $12.03 per visit.
“Now, I took the calculator out … and I got to a number that was considerably larger than $9.95,” Adam Aron, CEO of AMC Theatres, said on the chain’s fiscal call.
So too, apparently, did the HMNY brain trust, which began modifying user policy rules — seemingly by the week. Initially, MoviePass blocked admittance to select theaters (in pricier regions), and then limited access to select movies, i.e. blockbusters such as Black Panther and Avengers: Infinity War, to no more than one screening per subscriber.
“We hope this will encourage you to see new movies and enjoy something different!” the company wrote on its support page.
In reality, the move enabled HMNY to cut its cash deficit by more than 35% during the first week of May, according to the filing.
Wall Street had seen enough.