Former Helios and Matheson Analytics CEO Ted Farnsworth just doesn’t know when to quit.
A day after stepping down as CEO of the parent to shuttered MoviePass ticket subscription service and related businesses (MoviePass Films, Moviefone), Farnsworth reportedly is cobbling together a group of investors to buy select MoviePass assets.
According to The Wall Street Journal, which cited HMNY internal documents, including Farnsworth’s resignation letter, the executive eyes continuing MoviePass Films, which generated several original releases starring Bruce Willis.
Whether Farnsworth — a longtime MoviePass cheerleader along with the service’s CEO Mitch Lowe — would bring back MoviePass is unclear.
Launched in 2017, the $9.95 monthly ticket service offered subscribers daily access to a non-3D theatrical screening. At its peak, MoviePass had more than 3 million subscribers eager to take advantage of a business model that hemorrhaged money.
The service sought to make deals with exhibitors who were paid face value by MoviePass for every ticket used by subscribers in exchange for user data.
Chains such as AMC Theatres, Regal Cinemas and others wouldn’t bite, opting instead to launch competing ticket services.
Despite several attempts to re-invent the MoviePass business model, investors pulled the plug on HMNY shares — especially after two reverse-stock option split attempts.
Whether investors would line up behind Farnsworth for another edition of MoviePass remains to be seen. HMNY could also sell the assets to a third party.
Subscription theatrical movie service MoviePass will shut down Sept. 14 at 8 a.m. (EST), according to a letter from CEO Mitch Lowe on the site.
“Over the past several months, MoviePass worked hard to relaunch its groundbreaking subscription service and recapitalize the company,” he wrote. “While we were able to relaunch the service for some of our subscribers with an improved technology platform, our efforts to recapitalize the company have not been successful to date.”
He wrote that subscriptions will be refunded.
“MoviePass will be providing subscribers with appropriate refunds for their period of service already paid for,” he wrote. “Subscribers will not need to request a refund or contact MoviePass customer service to receive a refund. Subscribers will not be charged during the service interruption.”
Fiscally challenged MoviePass suspended service midday July 4 for an indefinite period of time to revamp its app.
The eight-year-old movie ticket subscription pioneer, in an email to subscribers, said the stoppage was in order to “provide the level of service you deserve.”
“We have listened and we understand the frustrations of our subscribers,” Mitch Lowe, CEO of MoviePass, said in the July 3 email. “We plan to make this improvement by utilizing an enhanced technology platform, which is in the final stages of completion.”
During the shutdown, MoviePass will not take on new subscribers. Existing subs will be credited for the number of affected days once the service continues.
Owned and operated by Helios Matheson Analytics, the service at its peak generated more than 3 million subscribers paying $9.95 for daily access to theatrical releases.
The business model quickly proved unsustainable as MoviePass paid exhibitors face value for each ticket consumed by subscribers. Unable to reduce ticket fees and market subscriber data to exhibitors, the service hemorrhaged money — losing $329.3 million, on revenue of $232.3 million in 2018.
In March Helios said it received nearly $6 million in funding from an unidentified investor.
“There’s never a good time to have to do this,” Lowe said. “But to complete the improved version of our app, one that we believe will provide a much better experience for our subscribers, it has to be done.”
Regardless, movie subscription service appears here to stay as exhibitors grapple with burgeoning over-the-top video competitors.
AMC Stubs A-List service has more than 800,000 subs, while rival Regal Cinemas is working on its own branded service. Atom Tickets and Cinemark have separate subscription plans in place.
MoviePass, the fiscally-challenged theatrical ticket subscription service, has reportedly shed about 90% of its peak of more than 3 million subscribers from June 2018.
According to BusinessInsider, which cited internal data obtained from the former high-profile service, MoviePass has generated just 13,000 new subs since launching an “uncapped” plan in February affording subs daily access to a theatrical screening for $9.95 monthly fee.
The new plan, which was a reboot of a previous price point that attracted 100,000 subs in 48 hours after launching in 2017, also enables MoviePass to throttle frequent users.
MoviePass owner Helios and Matheson Analytics disputes the subscriber tally, calling the data “incorrect” without elaboration.
Regardless, the MoviePass business model paying exhibitors face value for every movie ticket consumed by subscribers remains financially unsustainable.
The service hemorrhaged hundreds of millions of dollars, sending HMNY stock into a nosedive. Company shares were delisted from Nasdaq earlier this year.
Stacy Spikes, who co-founded MoviePass in 2011, sold it to HMNY in 2017 and was fired from the company in 2018, told BusinessInsider the $9.95 price point was never intended to be permanent.
“[It was] thought of as a promotional thing, in a way celebrating HMNY buying us. But we hit 100,000 [subs] in 48 hours. So I’m like, ‘OK, turn it off. We reached our goal,’” Spikes said.
The executive concluded that $12.99 was the least MoviePass could charge, while a $75 option including Imax and 3D screenings was considered as well.
“But the overriding voice [at HMNY] was, ‘No, this is awesome, look how fast we’re growing.’ And it was this moment of ‘but $10.’ It doesn’t fly. Now the plane is falling,” Spikes said.
In fact, when HMNY CEO Ted Farnsworth and MoviePass CEO Mitch Lowe were photographed joyfully in front of an AMC Theatre on Times Square after surpassing 1 million subs, Spikes had a different reaction.
“That photo changed [MoviePass’] relationship in the marketplace,” he said. “The tone turned it more adversarial [with exhibitors]. Up to that point, MoviePass had been the underdog champion for going to the movies.”
Indeed, AMC Theatres, which had initially been supportive of MoviePass under CEO Gerry Lopez, became increasingly less so under new CEO Adam Aron.
Aron made it a point to repeatedly question the MoviePass business model on fiscal calls and in press releases – despite generating millions in revenue from MoviePass subs.
Last year AMC launched the AMC Stubs A-List subscription service, which has generated about 700,000 subscribers paying $19.95 monthly for access to three screenings weekly in any format.
AMC recently raised prices to $21.95 or $23.95 depending on the market subscribers live in.
Spikes says the initial success of MoviePass, AMC Stubs A-List and Cinemark’s service underscores market demand for a subscription business model.
“The good side was cinema had not been taken seriously since Netflix really got its footing,” he said. “So what I liked about that was this had risen to the zeitgeist of conversation. Seventy-five percent of [MoviePass] members were under the age of 26. Cinema was an event people cared about again. So while there is a sadness around the brand, I was happy to see that this is front and center.”
Helios and Matheson Analytics March 22 announced the appointment of Robert Damon as CFO, replacing Stuart Benson, who resigned from the parent of the MoviePass theatrical ticket subscription service March 15 to take another job.
Benson’s departure followed the disclosure HMNY had incorrectly recognized about $5.9 million in revenue from MoviePass subscriptions that had been suspended.
Damon, who has worked as a consultant to HMNY for a year, was chief accounting officer for SFX Entertainment for three years through 2016. Previously, he was Katz Media Group CFO for 17 years.
HMNY earlier this month revised its third-quarter net loss to $146.6 million — nearly 7% more than a loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.
CEO Ted Farnsworth and Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or suspended.
“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.
With senior management exiting and its parent’s stock de-listed, fiscally challenged MoviePass is bringing back the infamous daily theatrical access plan for $9.95 monthly that helped generate millions of subscribers — and generate hundreds of millions of dollars in losses.
Of course there’s a catch. Subscribers who pay upfront for a year get the same $9.95 rate MoviePass allows users to one theatrical screening daily. The rate increases to $14.95 on a month-to-month basis. MoviePass also offers a $19.95 plan with fewer screening limitations.
“We are — and have been — listening to our subscribers every day, and we understand that an uncapped subscription plan at the $9.95 price point is the most appealing option to our subscribers,” Ted Farnsworth, CEO of parent Helios and Matheson Analytics, said in a statement.“While we’ve had to modify our service a number of times in order to continue delivering a movie-going experience to our subscribers, with this new offering we are doing everything we can to bring people a version of the service that originally won their hearts.”
Whether the service can sustain the old pricing remains to be seen. MoviePass pays exhibitors face value for every screening subscribers attend. Without breaks on ticket fees or some sort of revenue sharing, MoviePass loses money when subs regularly go to the movies.
With its corporate (Helios and Matheson Analytics) parent’s stock delisted, theatrical ticket subscription service MoviePass is again attempting to reinvent its business model and relevance — this time without relying on exhibitor cooperation and revenue.
Following the previously announced MoviePass Entertainment Holdings integrating film production and exhibition, MoviePass said it plans to implement a new business model that prioritizes “self-generated” revenue.
Specifically, the fiscally-challenged ticket service plans to focus on “technological innovation” and “high-quality” content production through MoviePass (theatrical subscription service); MoviePass Films (original content production company) and Moviefone (multimedia media information and advertising service).
“Spending the last several months analyzing the many different aspects of our prior business model, in terms of what worked and what didn’t, I believe we’ve been able to illuminate the path forward,” Ted Farnsworth, CEO of HMNY, said in a statement.
MoviePass CEO Mitch Lowe said the ticket service has gained a “tremendous amount” of insight into moviegoers and the industry over the past 18 months.
Indeed, the service, which launched to much fanfare offering consumers daily access to a theatrical screening for a monthly $9.95 fee, could never financially pay for the loss leader business model without exhibitor help — which the service never received.
As the fiscal losses mounted, HMNY’s stock plummeted. Exhibitors AMC Theatres and Cineworld launched their own ticket subscription services.
MoviePass, however, has apparently been successful in content production.
MoviePass Films, through co-founders co-founders Randall Emmett and George Furla, continue to generate films, including dramas with Bruce Willis (10 Minutes Gone) — the first of three titles with the actor, and Al Pacino and Meadow Williams in current production, Axis Sally.
In addition, Border, a Cannes-winning film MoviePass Films co-distributed with Neon Rated, was nominated for an Academy Award for Best Makeup and Hairstyling.
“We now have a winning combination that we believe will drive consumers to our films and re-energize casual moviegoers to go more often and see great films in local theaters,” said Lowe.
MoviePass, the beleaguered theatrical ticket subscription service, is set to roll out new monthly pricing plans it hopes will financially stabilize the service and restore investor confidence in corporate parent Helios and Matheson Analytics, among other goals.
In an interview with Variety, MoviePass CEO Mitch Lowe said the new tiered pricing plans – ranging from the existing $9.95 to $24.95 – would be dependent on where subscribers lived.
As a result, consumers living in rural areas would likely see no change to the $9.95 fee (dubbed “select”) affording access to three movies per month at select times, while moviegoers in major markets such as Los Angeles and New York would pay $14.95.
A $19.95 “red carpet” option – which mirrors the fee of a competing service from AMC Theatres – enables rural subscribers access to three screenings at any time in any format (Imax, 3D, 2D). The option costs $24.95 in major cities.
“We have a lot to prove to all our constituents,” said Lowe. “We don’t just have to prove ourselves to our members, we also have to prove ourselves to the investment community, our employees, and our partners.”
Indeed, the service’s well-chronicled missteps largely revolved around an unsustainable business model that paid exhibitors full price for every ticket consumed by subscribers paying less than $10 per month for daily access to a theatrical screening.
With MoviePass unable to convince exhibitors to share in the financial risk in return for enhanced foot traffic and sharing user data – the latter triggering data breach concerns – the service began to hemorrhage money and alienate consumers and investors.
In HMNY’s most-recent fiscal report, the company reported a loss of $137 million and just $6.2 million in cash available. The parent’s stock is worth pennies and in risk of being delisted by Nasdaq – despite a reverse-stock split last summer. A planned second reverse-stock split was abandoned after failing to generate enough shareholder approval.
“Expectations weren’t met,” said Rodes Ponzer, head of marketing. “The creative memes and the consumer vitriol, we understand it. We told customers [theatrical access] was un-limited and we didn’t meet their expectations. Now we’re going to set their expectations properly.”
The New York Attorney General’s office reportedly has opened an investigation into fiscally-challenged Helios and Matheson Analytics, corporate parent of theatrical ticket subscription service MoviePass.
CNBC, citing a source familiar with the investigation, reported NY AG Barbara Underwood is investigating whether HMNY mislead investors about its fiscal health – a situation underscored by the company’s stock currently trading at 2 cents per share, despite a recent 1-for-250 shares reverse stock split.
“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement to CNBC. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors. We look forward to the opportunity to demonstrate that to the New York Attorney General.”
Notably, HMNY has yet to mention the investigation on its website despite the fact it is seeking shareholder support for another reverse stock split, this one combining 500 shares into one.
A stock split is typically used by publicly traded companies seeking to lure investors (by reducing the cost of shares) or artificially buttressing a stock’s valuation – the latter employed by HMNY to push shares above Nasdaq’s minimum $1 valuation and avoid being delisted.
HMNY’s fiscal woes have been driven by MoviePass offering subscribers daily access to a theatrical screening for $9.95 monthly fee – a disrupting business model that is financially unsustainable. MoviePass now limits subscribers to three screenings monthly.
Regardless, HMNY has continually told investors its finances are sound and that steps have been taken to reduce costs. The company’s most-recent regulatory filing tells a different story.
HMNY reported a $109 million net loss in the fiscal period ended June 30, with just $15 million in cash available.
Fiscally challenged theatrical ticket subscription service MoviePass needs a new message and corporate owner Helios and Matheson Analytics needs a financial miracle.
The two entities Oct. 17 announced the appointment of Maayan Nave as executive director and president of global communications. Nave will lead all marketing, strategic communications and public relations initiatives for HMNY, MoviePass, MoviePass Films and MoviePass Ventures with existing communications teams in New York and California.
Nave, owner of a marketing communications agency operating in Tel-Aviv and New York, previously spearheaded all global communications for the sparkling water brand SodaStream, where he reportedly oversaw more than 60 PR, social media and guerilla marketing agencies in 45 markets around the globe.
Nave’s marketing activities have been recognized by some of the world’s top marketing competitions awarding SodaStream with the Euro Effie 2017, Golden Drum 2016, Sabre Award 2017, PR Daily’s Campaign of the Year and others.
“Maayan is an inspirational strategic leader, his global experience and proven success are a major asset to HMNY’s and MoviePass’ disrupting mission,” Ted Farnsworth, CEO of HMNY, said in a statement.
“Maayan is an epic disrupter with vast experience in both financial and consumer worlds and the right person to lead our marketing and communications efforts,” added Mitch Lowe, CEO of MoviePass.
All skills will be required as MoviePass attempts to resurrect a $9.95 monthly subscription service that has downsized from one-movie-per-day access to three titles monthly. In the process, HMNY has seen its stock freefall to less than a handful of pennies per share – despite a reverse stock split. A second reverse stock split is now planned.