Will the Nutty Moviepass Business Model Finally Cause the Collapse of the Company?

I have reported on Moviepass in the past and questioned whether their business model could survive  (See:What the Hell is Wrong With AMC Theaters?).

Essentially, for a fee of $10 per month, Moviepass will pay for all your movie purchases for the month. Movie tickets generally cost between $12.00 and $15.00.

Allowing people, on an individual basis. to buy as many movie tickets as they want and paying for them for a fee of $10, just never struck me as a winner (SEE: Praise Janet Yellen!: I Get to See All the Movies I Want in a Month for Just One Payment of $10.00.

Now it appears the model is close to breaking down.

Tim Bradshaw reports for the Financial Times:

Last week a regulatory filing by MoviePass’s parent company, Helios and Matheson Analytics, laid out just how fragile the business model is.

“MoviePass has experienced significant net losses since inception,” Helios and Matheson writes in its annual report. On $10.4m in revenues, it reported an overall $150.8m net loss for last year, largely due to the costs of acquiring and financing MoviePass.

“MoviePass currently spends more to retain a subscriber than the revenue derived from that subscriber,” it said. “This results in a negative gross profit margin.”

As a result, the company’s auditors “expressed substantial doubt about our ability to continue as a going concern”, Helios and Matheson said — a warning that accountants do not deploy lightly...

Shares in Helios and Matheson plunged 33 per cent on Thursday, after the worrying disclosure was accompanied by a planned $30m discounted share offering to help “support the operations of MoviePass”.

Bradshaw is also correct in reporting that there are many other such wacky business models in the Silicon that are not public so we can't see their finances. They are only supported by whacky Fed money printing. They will all be gone when the next bust phase of the Fed created boom-bust phase kicks in.

He writes:

What makes MoviePass different to all those venture-backed start-ups in Silicon Valley is that its parent company is publicly listed, so the high-stakes business model, which many start-ups pursue, is more visible.

 

-Robert Wenzel