MoviePass might be out of luck. Well, if Elon Musk claims he can’t save the movie-ticketing app, then who could? Buzz60’s Susana Victoria Perez has more.
Rob Davidson gave up on MoviePass last week.
A year and a half after signing up, Davidson, 32, a public contracts worker in San Diego, abandoned the subscription-based movie ticketing app after he grew frustrated with limited access to Hollywood megahits and restrictions on how often he could see a certain movie.
“For as long as I had MoviePass, the one thing that you can say is that they are always inconsistent,” he said.
Davidson isn’t the only one fed up. Subscribers and experts say the issues leave them worried that MoviePass is looking shaky despite the company’s reassurances last week that it has shored up its finances.
The ticketing service struggled over the past two weeks. After burning through all of its cash, MoviePass had to apply for an emergency $5 million loan two weeks ago, which it has since paid back.
But the damage may have been done: MoviePass has experienced technical difficulties since it ran out of cash, and its stock value has plunged. Its parent company, Helios and Matheson Analytics (HMNY), closed at 7 cents per share Friday afternoon. A week prior, the stock had risen to $14 after a 1-for-250 reverse stock split.
“We must reduce availability for big new-release titles, such as “Mission: Impossible –Fallout” and other popular new releases, at least for a while,” MoviePass CEO Mitch Lowe told subscribers.
Though MoviePass told the world it is “still standing” on Aug. 2, people say these changes might be a case of too little, too late.
MoviePass did not respond to requests for comment.
Great prices – not so great profit
Launched in 2011, MoviePass once charged up to $50 per month. But with a growth of just 20,000 subscribers over six years, the company lowered its monthly fee to $9.95 a year ago to attract more people.
It worked: MoviePass now has over 3 million subscribers. However, it also spelled the beginning of the end, said Daniel McCarthy, an Emory University marketing professor.
“When someone wants to watch a movie, MoviePass will sell to them at a loss,” he said.
MoviePass is currently paying most theaters the full price of a ticket. The average price for a ticket is about $9, with many major cities’ theaters selling at $15 and higher. That means MoviePass can be put in the red if lots of subscribers living in a big cities see just one movie per month.
Davidson is the kind of customer who could be costly to MoviePass. He sees an average of eight to 10 movies per month.
And these customers’ costs add up for the ticketing service. In a Securities Exchange Commission filing in April, HMNY disclosed that it estimated its average cash deficit was over $20 million a month for the seven months through April.
Though MoviePass is accepted at over 90 percent of theaters nationwide, most chains won’t sell tickets to the company at a discount, according to George Belch, a San Diego State University marketing professor. That makes it much harder for MoviePass to reduce its cash deficit.
MoviePass “thought they were going to get cooperation from the theaters, and the theaters have really balked at it,” Belch said.
Additionally, some experts say MoviePass tried to generate revenue through collecting data on its users. The company gathers information, such as home addresses and movies viewed, Lowe, the company’s CEO, said at the Entertainment Finance Forum on March 2 in Hollywood.
“Because you are being tracked in your GPS by the phone . . . we watch how you drive from home to the movies,” Lowe said at the forum. “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.”
Lowe predicted at the forum that MoviePass will have five million subscribers by 2019, and envisions the movie ticket app turning cash-flow positive next year as well.
However, McCarthy said MoviePass overestimated the amount of money it could bring in through data collection.
“MoviePass was banking too much on that (data collection) being a core source of value for subsidizing a severely under-priced product,” McCarthy said.
Inability to cover costs has added to the company’s woes. MoviePass experienced a temporary outage July 26 when it ran out of money. The technical difficulties continued over the weekend and into the next week.
These movie outages have outraged customers. Neeka Karimian, 22, a recent college graduate from northern Virginia, found herself out of luck when she wanted to see the new “Mission Impossible.”
“I wanted to go to the movies a few days ago,” Karimian said, “but when I opened the app, (it) was saying there weren’t any showings (at all the movie theaters around).”
MoviePass experienced a major service outage, after parent company Helios + Matheson Analytics reportedly ran out of money Thursday.
What is the future of MoviePass?
For MoviePass to survive, McCarthy said the company would have to “dramatically increase the prices” to be sustainable. Meanwhile, Belch said MoviePass needs to create a more “enticing value proposition” for movie theaters to gain their support.
The uncertainty over the company’s survival has led subscribers to become skittish.
Adrian Gomez, 24, a customer service worker in Los Angeles, is an ardent supporter of MoviePass. Since joining in December 2016, he watches as many as four movies a week now, up from about two movies a week before he subscribed.
However, Gomez is not optimistic about the company’s future and has begun discussing a Plan B with friends. “I don’t see how they can rebound from something like this,” he said.
Todd Flatland, 35, a claims adjuster in Washington, is in the same boat as Gomez. He called a lot of the criticism of MoviePass “unfair,” but said he doubts the company’s changes will be enough to keep it alive.
“I would be surprised if MoviePass was around in a year,” he said. “Because they keep trying to put band-aids on the problem, they’re not realizing that the ship is sinking.”
Gomez and Flatland said they will remain subscribers for the time being – something MoviePass CEO Lowe requested in a recent email to customers.
“We count on your support and loyalty while we implement these necessary steps for the company you’ve grown to love,” Lowe wrote.
MoviePass officially has some competition.
Filling the potential MoviePass void
Despite its problems, MoviePass has helped a struggling theater industry, McCarthy said. MoviePass subscribers contribute to 6 percent of the industry’s total box office receipts, according to the company’s statement.
“MoviePass is a wake-up call whose structure is necessary to improve the financial condition of the movie operator,” McCarthy said.
But with MoviePass’s survival in danger, other companies are waiting in the wings to take its place.
One of MoviePass’s most prominent competitors is Sinemia, founded in 2014. The company’s subscriber base has grown by 50 percent each month for the last 13 months, Sinemia founder and CEO Rifat Oguz said. In January, Oguz told Bloomberg that the company’s app has 350,000 users.
“While we haven’t grown as fast as MoviePass, we’ve grown steadily by offering two tickets for $9.99 a month with more flexible options and features, instead of unlimited tickets,” Oguz said in a recent email to USA TODAY. “Sinemia’s offering and pricing have been crafted with financial stability as the primary focus, allowing both our users and our company to benefit.”
Also on the scene is AMC Theatres, which expanded its movie-watching membership service in June. AMC Stubs A-List, which adds onto AMC’s Stubs reward program, allows moviegoers to attend up to three movies a week for $19.95 a month. According to the company, AMC Stubs A-List has around 175,000 customers.
“We believe that our current and future loyal guests will be interested in this type of program,” Adam Aron, CEO of AMC Theatres, wrote in June.
While MoviePass limits customers to standard screening, both AMC Stubs A-List and certain Sinemia subscribers can see movies in 3D as well as IMAX. However, MoviePass “will be rolling out support for IMAX and 3D films for an added fee,” according to a recent company blog post.
If MoviePass falls, Flatland said he plans to sign up for the AMC’s program. Davidson already made the switch after canceling his MoviePass subscription last Monday.
AMC’s program allows for “over 150 movies that you can see in a year for $20 a month,” Davidson said. “Anybody should sign up for that.”
Contributing: Mike Snider of USA TODAY; Kelly Tyko of the USA TODAY NETWORK
Follow USA TODAY intern Ben Tobin on Twitter: @TobinBen
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