MoviePass Parent CEO Says Fraud Undermined $9.95 Monthly Service

With MoviePass re-introducing its loss-leader $9.95 monthly service affording subscribers daily access to any non-3D/Imax theatrical screening, Ted Farnsworth, CEO of parent Helios and Matheson Analytics, says the service reboot won’t self-destruct like the last one.

In an interview with The New York Post, Farnsworth says the initial $9.95 unlimited plan launched in the summer of 2017 paying exhibitors face value for every ticket consumed by subscribers didn’t fail due to a flawed business model, instead fraudulent use of the plan contributed to the service hemorrhaging hundreds of millions of dollars.

Ted Farnsworth

According to Farnsworth, 20% of Movie Pass subscribers abused the service by acquiring tickets for friends and family not enrolled, binge-watching select movies and/or buying tickets just to go to the bathroom.

He said the abuse, which according to MoviePass resulted in the loss of “tens of millions” of dollars, won’t happen again due to new fraud-detection software installed in the system.

“It definitely would have been a different story if we knew last summer what we know now,” Farnsworth told The Post. “We never had anything in place so that we could test those systems. Right now, we know so much more, we’re so much smarter.”

Indeed, without exhibitors discounting ticket prices or engaging in revenue-sharing deals to reduce costs, MoviePass resorted to blacking out access to select titles in high-traffic theaters in New York and Los Angeles, among other cities.

That led to mass cancelations among the service’s 3 million subscribers.

MoviePass 2.0 now can check legitimate use by monitoring the sub’s location through the service’s app on a user’s smartphone. If the user watching a movie isn’t connected to the service through their phone, MoviePass will know about it.

“Now, if somebody goes to 15 or 20 movies [in a month], they’ll be flagged and then we monitor them to make sure that they are watching the movie,” Farnsworth said. “And if they are, that’s fine.”

While that type of legitimate subscriber nonetheless contributed to HMNY shares being delisted as investors fled the company, Farnsworth said the typical MoviePass sub watched 1.7 movies monthly, which included the fraud data.

“Even if you [limit ticket access] or took a movie out of opening weekend, the same [number] of people went to that movie,” he said. “You either see it today or you see it next week.”

MoviePass claims it has seen an 800% spike in new subscribers since bringing back the $9.95 plan on March 20.

“We wouldn’t have gone back to what we had originally if we weren’t prepared for it,” Farnsworth said. “We would have sat there with our cap plan, kept doing our thing, kept going along.”

HMNY shares closed March 22 up more than 6% to 1.2 cents per share – 98.8% below Nasdaq’s $1-per-share minimum.

 

 

MoviePass Parent Names Consultant as Interim CFO

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.

Robert Damon

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.

 

 

MoviePass Restores $9.95 Daily Screening Plan

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.

 

Khalid Itum Departs MoviePass; CTO and Human Resources Executives Transition to Consultants

MoviePass March 13 disclosed that Khalid Itum, hired last December to oversee daily operations at the fiscally-challenged movie theater subscription service, is leaving the company.

Khalid Itum

“Itum will be leaving MoviePass to pursue his entrepreneurial and travel pursuits,” a spokesperson told Business Insider in a statement.

The departure comes as chief technology officer Joey Adarkway and Jake Peterson, head of human resources, transition from fulltime employees to consultants.

The personnel moves come the day after corporate parent Helios and Matheson Analytics disclosed, in a regulatory filing, that MoviePass lost nearly $10 million more ($146.6 million) in the most-recent fiscal filing than was originally disclosed.

Meanwhile, HMNY appears to be successfully churning out content through its MoviePass Films unit headed by co-founders Randall Emmett and George Furla. The company’s content include 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.

“As previously stated, MoviePass has moved in a new strategic direction, and will be refocusing our business model to create a more closely connected relationship between our subscription service and original content production unit, MoviePass Films,” said the spokesperson.

 

 

MoviePass Lost More Money Than Originally Reported

In another blow to fiscally-challenged theatrical ticket subscription service MoviePass, parent Helios and Matheson Analytics March 12 issued a revised financial statement revealing the service lost millions more than originally reported.

HMNY said its revised third-quarter (ended Sept. 30, 2018) net loss topped $146.6 million — nearly 7% more than a net 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.

HMNY attributed the error to overstatement of subscription revenue, including $700,000 of revenue from terminated MoviePass subscriptions by Costco; false recognition of about $5.9 million of revenue from certain suspended subscriptions that had not yet been consented to by subscribers.

The company also identified a non-cash error related to the accounting of derivative securities, which resulted in an understatement of net loss of approximately $2.9 million. HMNY said the error underscored a “material weakness” relating to subscription management.

CEO Ted Farnsworth and CFO Stuart 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 in a suspended state.

“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.

HMNY, which had its stock delisted by Nasdaq for failing to meet the $1 minimum share value, has struggled to sustain the MoviePass business  model that enabled subscribers daily access to a theatrical screening for $9.95 monthly fee.

 

MoviePass Reinventing Business Model — Again

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.

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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.

 

AMC Theatres Ticket Service Tops 700,000 Subscribers

AMC Theatres said its Stubs A-List subscription ticket service added 100,000 subscribers in January and February to increase its membership base above 700,000.

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AMC Theatres launched A-List (priced from $19.95 monthly) on June 26, 2018 and was originally expected to hit 500,000 members 12 months after launch. Membership includes access up to three movies per week, in every available AMC showtime and format, including Imax at AMC, Dolby Cinema at AMC, RealD 3D and Prime at AMC.

AMC said its conventional Stubs A-List membership program has totaled 14 million attendees, including the purchase of traditionally-priced tickets for family and friends.

AMC Stubs Premiere and A-List members receive a $5 credits for every 5,000 points earned, which translates to a 10% credit toward future AMC purchases.

“With every passing milestone, Stubs A-List is proving to be a huge benefit to our guests, our studio partners and our shareholders,” CEO Adam Aron said in a statement. “Members are watching more movies than they did before A-List was created, and they’re bringing their friends and family members along, who are paying for their tickets at full price.”

 

Report: MoviePass Parent Expected to Delist

With its stock flatlining at a penny per share, Helios & Matheson Analytics — parent of fiscally-challenged theatrical ticket service MoviePass — is expected to delist from Nasdaq.

Bloomberg, citing market data, said HMNY could delist as early as the end of the business day on Feb. 12 — resuming trading as an over-the-counter stock.

HMNY spun-off MoviePass in January in an attempt to jumpstart investor confidence after the pioneering $9.95 monthly over-the-top ticket service resonated with consumers at the expense of a stable business model.

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Successive fiscal quarters generated fiscal losses in the hundreds of millions, compounded by the launch of a competing ticket service from AMC Theatres that resulted in a free-falling HMNY stock.

While MoviePass Films continues to produce low-budget movies, MoviePass took another PR hit when Variety reported that a senior executive recently hired to help turn the service around had been charged in 2010 with stealing thousands of dollars from a previous employer.

MoviePass Parent Schedules Second Reverse-Stock Split Vote

Helios and Matheson Analytics, parent of fiscally-challenged theatrical subscription ticket service MoviePass, Jan. 30 announced it plans to hold a special shareholder meeting March 15 in Los Angeles to vote on a second reverse stock split.

The proposed one-share-for-500 shares, which if passed would affect shareholders of record on Jan. 16, follows a previous reverse stock split (1-for-250 shares) eight months ago.

That split resulted in the HMNY stock briefly reaching $22.50 per share, before plummeting below Nasdaq’s $1 minimum threshold in less than a week. HMNY’s stock currently trades at about a penny.

The company in November canceled a vote for the second split after it couldn’t muster enough shareholder support. Apparently that sentiment has changed.

HMNY has until the summer to regain compliance or face the risk of delisting.

 

 

MoviePass Looking to Market Ticket Subscription Technology to Theaters

MoviePass, the beleaguered subscription theatrical ticket service, is looking to market its technology to exhibitors.

Dubbed a “red label” solution, the strategy is to enable theater owners a means of offering a proprietary subscription ticket service to consumers.

In addition to MoviePass, AMC Theatres and Cinemark currently offer monthly ticket subscription plans.

“Our new business strategy is stabilize, optimize and grow,” Khalid Itum, EVP of MoviePass, told Variety, which first reported the move.

MoviePass in August 2017 turned the exhibition service on its ear offering a $9.95 monthly service that enabled subscribers daily access to a theatrical screening.

While the loss-leader pricing concept resonated with millions of consumers, paying for it proved to be a debacle for MoviePass and its corporate parent Helios and Matheson Analytics (HMNY).

With the service hemorrhaging hundreds of millions of dollars, it has introduced seesaw measures to rein in costs, alienating consumers in the process.

MoviePass now charges from $9.95 to $24.95  monthly for theatrical access depending on market location. A new unlimited plan is also in the works.

HMNY’s stock has taken a beating on Wall Street, with shares in risk of being delisted for failing to meet the $1-per-share minimum. The corporate parent this week filed papers looking to spin off MoviePass to a subsidiary in hopes of resuscitating the penny stock.

HMNY subsidiary MoviePass Films got a boost this week after its film, Border, was nominated for an Academy Award in the “Best Makeup and Hairstyling” category. Announced last September, MoviePass Films partnered with Neon Rated LLC to co-release the Cannes award-winning film from writer and director Ali Abbasi.

The Swedish fantasy film is based on the short story of the same name by Ajvide Lindqvist from his anthology “Let the Old Dreams Die.” It won the Un Certain Regard award at the 2018 Cannes Film Festival and was selected as the Swedish entry for the Best Foreign Language Film at the 91st Academy Awards, though it was not nominated.