MoviePass Eyeing Content ‘Oasis’

NEWS ANALYSIS — Helios and Matheson Analytics (HMNY), the cash-poor corporate parent of theatrical ticket subscription service MoviePass, keeps swinging for the fences. Now it wants to buy a film production company.

HMNY May 30 announced it has acquired the option to acquire indie film house Emmet Furla Oasis Films (EFO Films), whose titles include Lonesome Survivor, Broken City and End of Watch, among others. If completed, HMNY would co-0wn with EFO new business subsidiary MoviePass Films.

With HMNY’s stock trading around 40 cents per share, the deal is another corporate Hail Mary with EFO’s Randall Emmett and George Furla serving as co-CEO’s of the new company.

HMNY would own 51% of MoviePass Films, with EFO Films owning 49%. HMNY CFO Stuart Benson would serve in the same position at the new venture, with Ted Farnsworth, CEO of HMNY, serving as chairman of the board.

Mitch Lowe, CEO of MoviePass, would have a seat on the board.

“Since we began disrupting the movie industry with our unprecedented low cost movie theater subscription service, MoviePass, we have envisioned owning and developing our own content and using the power of our several million subscribers to bolster the success of our films,” Lowe said in a statement. “I believe this partnership with EFO Films will accelerate those efforts.”

Indeed, MoviePass cut its teeth in the content business earlier this year acquiring rights to American Animals with Orchard, and John Travolta’s Gotti biopic — the latter after Lionsgate dropped the film from its release schedule. Both movies are slated to be released in June.

How owning a film production company will help MoviePass, whose loss-leader business model enables subscribers daily access to a theatrical screening for $9.95 a month, is anyone’s guess.

With more than 2 million subscribers, MoviePass is a hit with consumers and a fiscal goldmine for exhibitors. But the business is burning through more than $21 million on a monthly basis, which left HMNY with about $15.5 million in cash, according to its most-recent fiscal filing.

Hedge fund Citadel Securities apparently believes the hype. It acquired a 5.4% stake in HMNY May 29, for about $1.7 million.

MoviePass Pushes Fiscal Lifeline Fantasy

NEWS ANALYSIS — The corporate parent of fiscally-challenged subscription ticket service MoviePass reportedly claims it has a $300 million lifeline that can keep operations afloat for at least a year.

Helios and Matheson Analytics (HMNY), which owns more than 90% of MoviePass, has been shrugging off its plunging stock valuation (down 98%) as investors question a business model burning through more than $20 million a month offering subscribers daily access to a theatrical movie for a $9.95 monthly fee (or $6.95 based on an annual fee).

The company, in its most-recent fiscal statement, said it had just $15.5 million in available cash. The news sent the stock freefalling to less than 50 cents per share at the close May 23.

Now, MoviePass president Mitch Lowe and Ted Farnsworth, CEO of HMNY, are telling anyone who will listen that they have access to a $300 million line of credit that can sustain operations for more than a year.

But as Business Insider reports, the line of credit isn’t really a line of credit or much of a lifeline. It’s more of a fiscal Hail Mary.

The credit is known as a “at-the-market” (ATM) sale that enables HMNY to sell shares on a daily, weekly or monthly basis to generate funds without impacting the company’s market valuation.

“It’s kind of a science,” Lowe told Business Insider. “It’s a third party that manages it on behalf of HMNY, but essentially some days they might sell, some days they might not sell. It’s all kind of based on what they believe will have the least impact on the valuation.”

But to make the ATM work requires investors willing to buy shares. And with the stock down nearly 8%  at 45 cents per share in early-morning trading May 24, who is going to buy?

Death Spiral: MoviePass Parent Stock Falls to 61 Cents

Helios & Matheson Analytics (HMNY), corporate parent to movie ticket subscription service MoviePass, May 10 saw its shares decline for the 11thstraight day to 61-cents per share – the lowest the stock has traded since the Great Recession of 2008.

HMNY, a data-driven investment firm, has been so sure of the MoviePass business plan affording subscribers access to a daily theatrical screening for $9.95 monthly fee, it owns 92% of the company, installing Mitch Lowe, ex-visionary with Netflix and Redbox, as CEO and company spokesperson.

The result has been a lot of media hype, film festival sponsorships, film acquisitions (?) and more than two million subscribers – the latter burning through $21.7 million in HMNY cash monthly.

The fiscal black hole is because MoviePass pays theater chains face value for any ticket used by subscribers. So, while the service has indeed jumpstarted theatrical foot traffic, it has done so with a loss-leader business model that is hemorrhaging investor money.

HMNY this week, in a regulatory filing, warned it had just $15.5 million in available cash. And Wall Street took notice.

Observers say that unless MoviePass restricts user access – to three movies monthly, it will collapse. And with Solo: A Star Wars Story, hitting screens May 25, subscriber usage could balloon.

“It is not the only way to demonstrate a sustainable subscriber business model, but it is the easiest to sell to investors,” Nehal Chokshi, analyst with Maxim Group LLC, told Bloomberg.

MoviePass Running Out of Money. Who Knew?

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.

MoviePass Looking to Avoid ‘Facebook’ Fallout

NEWS ANALYSIS — Movie theater subscription service MoviePass’ recent announcement offering first-time annual subscribers access for $6.95 a month – 30% below the standard $9.95 rate – underscores increasing consumer concern about data privacy.

CEO Mitch Lowe said the price cut is an attempt to make the moviegoing experience “easy and affordable” for everyone. Apparently, paying less than $10 monthly to watch one theatrical screening per day amounts to fiscal overreach for consumers.

Or could it be in reaction to Lowe’s loose lips at a recent industry event (first reported by Media Play News), dubbed, “Data is the New Oil: How Will MoviePass Monetize It?” in which he bragged about MoviePass tracking subscriber activities before and after screenings?

“We watch where you go afterwards,” he said without concern.

Of course, Lowe had no idea about the looming Facebook data tsunami and ensuing fallout after the social media behemoth admitted selling the personal data of 50 million subscribers to a foreign consulting firm with ties to the 2016 presidential election.

The debacle has reportedly cost Facebook more than $60 billion in market capitalization, scrutiny by the Federal Trade Commission, calls for increased regulation and founder/CEO Mark Zuckerberg’s pending grilling before Congress.

Not to mention increasing public distrust how Internet giants Amazon, Google, Yahoo and others track user behavior and what they do with that information.

To be sure, Lowe rushed out an email to subscribers claiming his comments about MoviePass data mining had been mischaracterized.

Wedbush Securities analyst Michael Pachter isn’t so sure.

“The media reaction since indicates that many do not believe it was a ‘mischaracterization,’ especially given Facebook’s recent debacle with Cambridge Analytica,” Pachter wrote in a March 26 note.

Indeed, MoviePass hasn’t explained what it does, or will do, with the subscriber data – other than market/leverage it to exhibitors for reduced ticket prices or a percentage of concession sales — a reality, Pachter contends, harbors ongoing concern about the service’s long-term viability.

“Additionally, we now harbor concerns about the potential for consumer backlash should [MoviePass] collect certain data without consent, or improperly use the data it collects,” he wrote.

MoviePass CEO Mitch Lowe Clarifies Location Tracking Comments

After Media Play News reported data tracking comments from MoviePass CEO Mitch Lowe March 2 at a Los Angeles conference, numerous news outlets picked up on the quote: “We watch how you drive from home to the movies.”

The full quote reads as follows: “We get an enormous amount of information. Since we mail you the card, we know your home address, of course, we know the makeup of that household, the kids, the age groups, the income. It’s all based on where you live. It’s not that we ask that. You can extrapolate that. Then because you are being tracked in your GPS by the phone, our patent basically turns on and off our payment system by hooking that card to the device ID on your phone, so we watch how you drive from home to the movies. We watch where you go afterwards, and so we know the movies you watch. We know all about you. We don’t sell that data. What we do is we use that data to market film.”

In response to the reaction to Lowe’s comments on tracking, Lowe wrote an open letter to MoviePass customers:

“While speaking at a conference in Los Angeles, through a mix of exuberance about our future and joking around, I mischaracterized how MoviePass locates our members and I need to fix that. It has raised a lot of concerns and I understand why.

First and foremost, I apologize for these comments and the concern they caused. At MoviePass, we take customer privacy extremely seriously. I would like to eliminate any misconceptions that we’re collecting location related data.

The MoviePass app currently uses standard location services capabilities on an opt-in basis. There are only two events that would prompt MoviePass to identify a member’s location. These include when a member requests to search for theaters nearby and when a member requests to check into a theater. Both events require both the app to be open and for the member to request the action.

MoviePass does not track and has never tracked or collected data on the location of our members at any point when the app is not active. In our recent update with Apple, we removed the background tracking capabilities. MoviePass does not use and has never used this feature.

Our goal at MoviePass has always been to encourage people to see more movies as they were meant to be seen — in the theater. We want to make our service available at a price anyone can afford and everyone can enjoy. While we do create partnerships with theaters and studios in which we offer statistical data on ticket use and other trends, we never share our members’ identities or personal information or personal data with anyone.

MoviePass takes its members’ privacy extremely seriously, and our current Terms of Use and Privacy Policy accurately state the ways in which we use data. If, in the future, MoviePass desires to expand how it uses data, we will amend our Privacy Policy and notify our members so that they will be afforded the opportunity to opt in or opt out of the MoviePass service. This is what our customers expect, what the law requires, and how we’ve always handled data. We want to assure everyone that we treat our members’ data with the utmost sensitivity. Your trust and enjoyment are the lifeblood of our service.”

CEO Mitch Lowe Says MoviePass Will Reach 5 Million Subs by End of Year

Editor’s Note: Because of the wide pickup of this article’s section on MoviePass data collection, I have expanded the quote from Mitch Lowe: “We get an enormous amount of information. Since we mail you the card, we know your home address, of course, we know the makeup of that household, the kids, the age groups, the income. It’s all based on where you live. It’s not that we ask that. You can extrapolate that. Then because you are being tracked in your GPS by the phone, our patent basically turns on and off our payment system by hooking that card to the device ID on your phone, so we watch how you drive from home to the movies. We watch where you go afterwards, and so we know the movies you watch. We know all about you. We don’t sell that data. What we do is we use that data to market film.”

 

Subscription theatrical movie service MoviePass expects to reach 5 million paid subscribers and account for roughly 20% of movie ticket purchases by the end of the year, said CEO Mitch Lowe at a presentation March 2 during the Entertainment Finance Forum presented by Winston Baker in Hollywood.

The service currently has more than 2 million subscribers and accounts for 6% of ticket purchases, Lowe said.

The $9.95 a month service (less for a year subscription) allows subscribers to attend one screening per day at participating theaters. The service is growing the theatrical audience, Lowe said, and more frequent attendance is boosting films that typically make under $50 million at the box office, which have been increasingly pushed out by sequels and franchises released by the studios. It’s also bringing in audiences that had eschewed theaters.

“Our goal is to reenergize moviegoing to the movie theater,” he said, noting that “over 50% of our subscribers are millennials, the people who are abandoning theater the most.”

The service pays theaters the price of each ticket and is looking for discounts and revenue sharing from theaters in exchange for the audience boost. Lowe said he’s just looking for the same kind of discount a retailer such as Costco gets for purchasing a big block of tickets.

Not all theaters have been happy with that plan, notably goliath AMC. Lowe counters that the increased traffic is helping theater chains such as AMC sell more high-priced concessions and that the chain should let MoviePass share in that windfall.

“I think eventually they’ll come around,” Lowe said, though he said there was no “active dialog.”

Another plan to boost MoviePass’s bottom line is to glean income from all of the data the service collects from subscribers.

“We know all about you,” he said at the keynote, appropriately titled “Data is the New Oil: How Will MoviePass Monetize It?”

The data collection information elicited some nervous laughs from the industry crowd, many of whom raised their hands to show they were MoviePass subscribers.

“We get an enormous amount of information,” he said, noting the company knows subscribers’ addresses and can glean demographic information based on where they live. The company also can track subs via the app and a phone GPS.

“We watch how you drive from home to the movies,” he said. “We watch where you go afterwards.”

That sort of data fits into a long-term revenue plan.

“Our bigger vision is to build a night at the movies,” he said, whereby MoviePass would direct subscribers to places to have dinner before or after a screening, for instance, getting a cut from vendors.

As a former executive at entertainment industry disruptors Netflix and Redbox, Lowe said theaters are ripe for change.

“Online, at home, all the other forms of entertainment had all this innovation,” he said. “The theater hasn’t innovated — at least in the business model.”

The key is alleviating consumer anxiety around purchases, he said.

“In 1999 at Netflix when we came up with the disc by mail, all-you-can-eat program we eliminated late fees that Blockbuster had built their business on, and removing that anxiety got people to consume documentaries and foreign films that they never would have rented from Blockbuster,” he said. “And that’s what we’re doing [at MoviePass]. We’re kind of providing movie insurance.”

As a disruptor veteran, he’s also faced doubt about low pricing and seen success despite the initial criticism.

“[MoviePass’s $9.95 a month] may seem like it’s a deal too good to be true,” he said. “That’s what they said about us at Netflix. That’s what they said about us at Redbox.”

He added, “We’ve essentially just copied the Netflix model but in the theatrical window.”

Lowe’s experience at Netflix also leads him to be optimistic about subscriber expansion at MoviePass.

“We went public with Netflix in 2002, and at the end of the year, we all made bets on how big we could get, so just to show you how bad I am at this — I was near the top by the way— mine was 1.7 million subscribers, and I think the highest was 2 million at the time,” he recalled. “Of course, it’s 105 million now, so I do believe 20 million subscribers for MoviePass is definitely doable over a four year period.”

Helios & Matheson Ups MoviePass Stake

Technology investor Helios & Matheson Analytics (HMNY) Feb. 16 announced it has upped its ownership stake in MoviePass to 78% from more than 53%.

MoviePass offers subscribers daily access to one theatrical screening for a $9.95 monthly fee. The New York-based service has more than 2 million subs.

HMNY acquired the additional stake following a $45.5 million cash advance to MoviePass from Dec. 19 through Feb. 15, according to a regulatory filing.

“We could not be more thrilled to hold a bigger stake in MoviePass, as the [theatrical ticket subscription service] phenomenon has become a major disruption to the entertainment industry,” CEO Ted Farnsworth said in a statement. “The partnership continues to be a great benefit to both MoviePass and Helios and Matheson shareholders.”

The stake follows a $105 million public offering from a shelf offer of more than $400 million.

Data and Analytics Driving MoviePass to be Discussed at Conferences

The data and analytics initiative behind the business model of MoviePass, the movie ticket subscription service headed by former video rental dealer Mitch Lowe,  will be the topic of the first bi-coastal keynote address at the Smart Content Summit West (Feb. 27, Los Angeles) and Smart Content Summit East (March 8, New York).

Lowe, MoviePass’s CEO, and Ted Farnsworth, chairman and CEO of parent company Helios and Matheson Analytics Inc., will both take the stage in Los Angeles with a keynote conversation titled “Innovation Across the Entertainment Industry; the MoviePass Effect.”  This will be followed 10 days later by a solo keynote conversation by Farnsworth at Smart Content Summit East called “Disruption in the Entertainment Industry; Monetizing the MoviePass Effect.”

Helios and Matheson acquired a majority stake in MoviePass last August. MoviePass subsequently announced that it would lower its monthly subscription price to $9.95, for which subscribers are entitled to see up to one movie per day in theaters.  At the time, Farnsworth stated that the service wanted to increase the size of its subscriber base in order to provide viewing data to content creators and advertisers.  Following the subscription price reduction, MoviePass subscribers increased from 400,000 to 1.5 million as of January 2018.

Prior to joining MoviePass, Lowe was President and COO at Redbox. Previously, he was a co-founding senior executive and VP of Business Development and Strategic Alliances at Netflix, a position in which he facilitated many of the early studio negotiations and subscriber acquisition programs. Before that he owned Video Droid, a video rental retailer in the San Francisco Bay Area.

Netflix Interested in MoviePass?

NEWS ANALYSIS: Wall Street loves scuttlebutt. Rumors and speculation make stocks do crazy things.

On the morning of Jan. 30, shares of Helios and Matheson Analytics, majority owner of theatrical ticket subscription service MoviePass, edged up slightly (2%, the day after rising 9%) on talk Netflix is an interested suitor.

MoviePass has been in the news lately as a significant disruptor of the theatrical ecosystem. The service gives members access to one screening daily for a $9.95 monthly fee. In less than six months more than 1.5 million people have signed up.

What piques Wall Street attention about MoviePass – besides the disruptor subscription business model – is the fact that CEO Mitch Lowe once was a senior executive at Netflix and is often credited with co-launching the streaming video behemoth. Lowe also once headed Redbox.

Of course there is no official word from Netflix, considering many observers characterize the “news” as crazy.

MoviePass pays theater operators full value for tickets used by subscribers. The service is now trying to extract revenue-share agreements with major chains as it has with about 1,000 independent screens.

The company says it has driven significant attendance to theaters. Market observers contend MoviePass accounts for about 4% of foot traffic at AMC Theatres, the nation’s largest chain.

Indeed, Netflix has a tortured history with theaters. It doesn’t much care for them. The service contends the 90-day theatrical window is archaic in today’s tech-savvy market with ubiquitous access.

Netflix, which is planning to bow upwards of 80 feature movies through next year, makes original movies – such as the big-budget futuristic cop drama Bright – available globally for streaming concurrent with theatrical.

As a result, theaters passed on the Will Smith- Joel Edgerton buddy film that reportedly generated 11 million streamings in the first 72 hours upon launch. Ditto for Okja, the $50 million Korean sci-fi drama and Cannes Film Festival nominee.

Regardless, Wedbush Securities Michael Pachter says suggestion of Netflix’s interest in MoviePass is as much amusing as baffling.

“That makes no sense to me whatsoever,” Pachter said. “Remember, Mitch Lowe was a co-founder of Netflix [with Reed Hastings and Marc Randolph], and presumably, they’re no longer best friends.”