Ex-Helios and Matheson Analytics CEO Looking to Buy MoviePass Assets

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.

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Whether Farnsworth — a longtime MoviePass cheerleader along with the service’s CEO Mitch Lowe — would bring back MoviePass is unclear.

Ted Farnsworth

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.

MoviePass Reportedly Sinks to 225,000 Subscribers

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.

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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.

MoviePass co-founder Stacy Spikes

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.”

MoviePass Raises $6 Million in Funding

Helios and Matheson Analytics, the cash-strapped parent to MoviePass and MoviePass Films March 26 announced it has raised a $6 million in financing.

Helios plans to use the proceeds to accelerate MoviePass’ product development, fine tune its subscription technology, and increase MoviePass Films’ investment in new content.

In addition to working capital purposes, Helios will use the net proceeds to redeem approximately $870,000 of Helios’ outstanding non-convertible senior notes that were issued on Oct. 4, 2018 and Dec. 18, 2018, and to pay certain fees due to the placement agent and financial advisor and other transaction expenses.

“We are building the infrastructure, data and tools that we believe will power the next generation of MoviePass,” CEO Ted Farnsworth said in a statement. “We believe this new funding will allow us to double down on our development of transformative technology, while fueling our continued expansion.”

In connection with the financing, Helios agreed to convert the 60,000 shares of preferred stock to 1 million shares of common stock, among other stock warrants. As a result, each share of preferred stock is convertible into 16,667 shares of Helios’ common stock – or more than 666 million shares of common stock priced at a penny each.

The financing comes as Helios cited user fraud for ongoing financial challenges to its theatrical subscription ticket service MoviePass. The service has hemorrhaged hundreds of millions of dollars, contributing to Helios’ shares’ being delisted by Nasdaq.

 

 

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.

 

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 Parent Narrows Q3 Fiscal Loss; Touts Subscriber Usage Decline

MoviePass parent Helios and Matheson Analytics Nov. 15 disclosed that subscribers of its fiscally-challenged theatrical ticket service consumed 0.77 movies per month in the third quarter (ended Sept. 30) compared to 2.2 movies in April.

The 65% usage drop is noteworthy in that it underscores management’s efforts to reduce monthly overhead costs related to reimbursing exhibitors full ticket price every subscriber screening.

Key to MoviePass’ survival is reducing the number of subscribers screenings — not subscribers. HMNY didn’t disclose MoviePass subscriber numbers, which topped 3 million before the service began implementing significant restrictions to the $9.95 monthly service.

“During this transitional period for Helios and MoviePass, we have been focused on reducing our burn rate and striving to improve our business model and we are very encouraged by our Q3 financial results,” Ted Farnsworth, CEO of Helios, said in a statement.

HMNY, which just canceled a special shareholder meeting after failing to secure enough investor interest in a second reverse-stock split, is desperately trying to rewrite the narrative on a money-hemorrhaging ticket subscription service that posted a loss of $105 million through June 30.

Indeed, the company posted a loss of $28.5 million, which it attributed to a $75.5 million (70.6%) gross margin improvement. Revenue increased $7.2 million, or 9.8%, to $80.5 million compared to the prior-year quarter.

MoviePass Films Invests in Sports-Themed Documentary

MoviePass Films, the theatrical ticket subscription service’s content acquisition unit, Nov. 1 announced an agreement with Art of Sport, the newly-formed, sports-centric distribution entity behind upcoming feature-length documentary, In Search of Greatness.

MoviePass Films, which is owned by MoviePass parent Helios and Matheson Analytics, has come on as an investor and strategic marketing partner ahead of the film’s early-November theatrical release.

In Search Of Greatness, directed by documentarian Gabe Polsky, best known for Red Army, which debuted in Cannes in 2014, and his work on Nat Geo’s Emmy-award-winning TV show, “Genius,” examines the importance of creativity in determining athletic ability, in addition to analyzing the roles nature and nurture play in the development of young athletes.

The film, which includes interviews with hockey legend Wayne Gretzky, superstar wide receiver Jerry Rice, and soccer icon Pele, opens in 11 major U.S. markets on Nov. 2, and expands to theaters across North America by mid-month.

“We are pleased to be able to continue supporting independent creators and helping them bring their artistic visions to life on the big screen,” MoviePass Films chairman Ted Farnsworth and co-CEO Randall Emmett, said in a statement.

The investment follows a busy month of deal-making for the MoviePass Films. In September, it partnered with indie distributor Neon to co-release Reinaldo Marcus Green’s Sundance award-winner Monsters and Men (currently in theaters), and is preparing to co-release the second film in that partnership, Ali Abassi’s Cannes award-winner Border (which debuts in theaters this week).

MoviePass Films also recently wrapped production on its Bruce Willis-starrer 10 Minutes Gone and green-lit Neil Marshall’s The Reckoning, which starts production in Wales in January. The MoviePass Films team intends to produce 10-12 films annually, in addition to acquiring 8-10 films per year, starting in 2019.

MoviePass Films via MoviePass and Moviefone, will mount a marketing campaign to support the film’s success, while in theaters. In Search of Greatness will be made available to MoviePass subscribers as a “Bonus Movie,” which will not count toward their monthly in-theater movie ticket allotment. MoviePass™ subscribers will also have a chance to attend the films’ red-carpet premieres and receive other special perks throughout the duration of the partnership.

 

 

MoviePass Parent Spinning Off Ticket Subscription Service

Helios and Matheson Analytics, the fiscally-challenged parent of MoviePass, Oct. 23 announced that its board of directors has approved a plan to spin off the money-losing theatrical ticket subscription service.

To do this, HMNY is creating a new subsidiary named MoviePass Entertainment that would take ownership of MoviePass and other film related assets, including MoviePass Ventures, Moviefone and MoviePass Films.

“Since we acquired control of MoviePass in December 2017, HMNY largely has become synonymous with MoviePass in the public’s eye, leading us to believe that our shareholders and the market perception of HMNY might benefit from separating our movie-related assets from the rest of our company,” Ted Farnsworth, CEO of HMNY, said in a statement.

Indeed, with HMNY’s stock valued at 3 cents per share and facing delisting by Nasdaq, Farnsworth said the plan is to make MoviePass Entertainment a separate publicly-held company.

If permitted to do so under Delaware law, HMNY would distribute a minority of the outstanding shares of MoviePass Entertainment common stock as a dividend to stockholders of HMNY, with the company retaining control of MoviePass Entertainment.

HMNY debt holders would be entitled to participate in any distribution of MoviePass Entertainment shares to the extent required by the terms of such notes and warrants.

Following any distribution of shares of MoviePass Entertainment and/or MoviePass Entertainment becoming a separate public company, HMNY plans to continue focusing on data analytics and consumer centric technologies.

“We believe this new vertically integrated entertainment ecosystem, if achieved, would provide a sharper market focus, and that the combination of these four business lines under the MoviePass Entertainment umbrella would produce substantial synergies that we believe will generate value for our shareholders, subscribers, and business partners,” said Farnsworth.