TechCrunch reported today that since last Thursday (5/3) MoviePass’s parent company Helios & Matheson has lost over 63% of its stock value going down from $2.13 a share to $0.79.
For the unfamiliar, during the past 6-8 months, MoviePass has garnered a huge following and uptake in users by promising users access to a movie a day at theaters for a meager entry price of $10 a month.
Basically, at this pricing MoviePass losses money on every active user. If a user watches at least one movie at full price, that user is a cost not profit for the company. Add on top of that maintenance and development costs of the app as well as the physical shipping cost of the debit card – it’s a pretty strange business to be in.
The company claims that it can turn a profit by one of two ways. 1) By aggregating user data and selling it to interested parties. The company has demonstrated somewhat that push notifications and promotion on their platform can drive sales to a particular movie. It can, in theory, than drive movie advertisers to pay them a sum to be promoted to MoviePass users. 2) Somewhat like the gym membership model, they can have lots of registered users and hope they do not use the product – however at $10 a month this is not sustainable by the point above that every user is pretty much a loss.
So what’s in the future for the company? The $10 pricing tier may have to increase. Or additional limitations may have to be added like number of movies users can watch.
I believe that the next 2 to 3 months may be make it or break months for the company. Running at such heavy losses, the best thing that can happen for MoviePass is that Hollywood does not release movies worth watching. In essence, MoviePass has a strange relationship with the movie industry. For one, must-watch movies have to come out for customers to subscribe to the MoviePass service, however they should not be released often so the service is not used.
Here is the list of upcoming blockbusters:
- May 18 – Deadpool 2
- May 25 – Solo: A Star Wars Story
- June 8 – Ocean’s 8
- June 15 – Incredibles 2
- June 22 – Jurassic World: Fallen Kingdom
- July 6 – Ant-Man and the Wasp
Of course this isn’t all the movies that is being released in the next coming weeks, but Marvel, Star Wars, and Pixar (all Disney affiliates) are huge franchises that millions of viewers will go see in theaters.
Time will tell what happens to MoviePass.