Grab a shovel and a big enough body bag for your red debit card, because it looks like Moviepass is knocking on death’s door.
Moviepass is the popular movie subscription service that used to let subscribers see one movie a day for only $10 a month.
After a year of such a great deal, the company announced last August that it would limit subscribers to three movies per month and would select the features moviegoers were allowed to see.
Now it looks subscribers may not see any movies on Moviepass’ dime in the near future.
Helios and Matheson Analytics Inc. (ticker: HMNY), the parent company of Moviepass, announced on Oct. 24 that they will spin off the dumpster fire disaster.
Essentially, HMNY, the company who has helped provide funds for Moviepass’ operations, has decided to cut them off.
When a company spins off one of their subsidiaries, it means that the subsidiary will be traded separately as its own stock.
When Moviepass is allowed to be traded on a market, the unfortunate shareholders of HMNY will also earn some small stake of the new stock.
For example, when Moviepass goes on its own, shareholders will hold a majority of say 90 percent in HMNY and the remaining ten percent will be designated to ownership in Moviepass.
If you want to see something spooky, check out HMNY’s stock price and financials.
Currently, HMNY trades on the NASDAQ stock exchange for about two cents.
Before they acquired Moviepass on Aug. 15, 2017, HMNY traded for $672.5 back on Aug. 11, 2017. For investors, the stock has plummeted by over 99 percent.
It’s clear HMNY have burned through money with their ownership of Moviepass.
The company reported losses of close to $105 million on June 30 and can’t afford to lose anymore (as if it weren’t enough at $1 or 2 million).
A number of factors have driven HMNY to sink this low.
A big reason is how Moviepass CEO Mitch Lowe never had a backup plan for the inevitable time when popcorn would hit the fan.
As Moviepass amassed a staggering three million subscribers in a year, Lowe never changed the company’s policies until circumstances got extremely worse.
Things got so bad that the company had a lot of “technical difficulties” for a week to deter subscribers from using the service so they could pay a $6.2 million emergency loan by Aug. 2 (which they did, somehow).
Since the scare of the emergency loan, “technical difficulties,” and the moment when Lowe actually decided to look at the company’s balance sheet, the CEO has made a different change to Moviepass every other day or week.
In Aug., the subscription plan seemed to change at the blink of an eye.
At one moment, Lowe announced subscribers could see any movie they want to, but only three per month.
Then, the CEO came back days later and told subscribers that he would pick the movies they could watch.
If Lowe had a backup plan ahead of this disaster, maybe the service could’ve survived longer. For example, Lowe could’ve said, “at one million subscribers, we will raise the price to $15, then limit subscribers to any three movies a week.”
However, Lowe never planned accordingly and his company has one foot in the grave.
While Lowe scrambled to create a fallback, competitors like AMC and Sinemia have rolled out their own movie watching plans.
AMC announced their Stubs A-List service in July and has since gained 325,000 subscribers. The subscription allows members to see three movies a week at an AMC theater for a monthly price of $20.
Meanwhile, Sinemia released the same deal as Moviepass in Sept., but at $30 a month. Sinemia CEO Rıfat Oğuz has said he has seen a spike in subscribers and claims their plan has a more sustainable business model.
As the other services flourish, how long will Moviepass last on its own?
According to finance professor Andreas Christofi, Ph.D., not very long.
Christofi said, “They were outfoxed by a more innovative subscription model and it will be hard to regain lost subscribers to competitors.”
The exact time for Moviepass’ demise isn’t determined yet, but Christofi mentioned, “for the moment, they are eating HMNY’s lunch.”
Although Sinemia and AMC are growing, Christofi saw a different side to the popcorn bucket.
“However, investors who lost money on HMNY will have a bitter taste in their mouths for this kind of investment and that might make financing tough for the whole industry,” Christofi concluded.
HMNY has left Moviepass for dead, but hopefully the competitors who are slashing the prices of movie tickets will survive for theatergoers.
PHOTO TAKEN from Slick Deals
