It’s never really been a question of “if” MoviePass would fizzle out before it was able to turn a profit, it was more a question of “when.” That answer is apparently coming very soon.
The service made waves when it launched, offering moviegoers the ability to watch a movie every day for a flat subscription fee. The pricing structure has fluctuated until it settled on a plan offering a single film per day priced at $9.95 per month. Not everyone was a big fan of the model, including AMC Theatres. However, the proof was in the subscriber base, which grew from 400,000 in September 2017 to two million in February 2018 and three million by June 2018. It didn’t hurt that they dropped the subscription fee to $7.95 per month in February and $6.95 in March.
While the service was a boon for moviegoers, they should have been asking themselves a couple questions this whole time. Number one, how is MoviePass making money? Number two, how long can this gravy train keep going?
The answer to the first question is, to paraphrase the infamous quote “If you’re not paying for it, you’re the product,” MoviePass’ business model is more akin to “If you’re not paying that much for it, you’re the product.” The company has been collecting data on its customers from the start, including their preferences, purchases, schedules, and everything else. In turn, that data is valuable to a whole lot of advertisers and, in theory, MoviePass would be able to grow to the point where they dictate terms to movie theaters and even film studios based on control of that data. The company even started acquiring and distributing films to flex its growing muscles.
However, to get to that point, it would need to grow its subscriber base far beyond three million and that would require a ton more money and time, neither of which it appears that MoviePass actually has. To that point, they quietly tried to remove the unlimited pass in April to cut costs but the backlash was so fierce they had to reinstate it. Then came reports that the company was losing money furiously and needed to raise capital ASAP. All of which fueled speculation that the end is near for either the company or at least the company’s current business model.
That seems a whole lot more likely after Thursday when, as CNN reports, MoviePass was unable to actually pay theaters for movie tickets sold to customers. Also, they reported that the company needed to borrow $5 million in cash on Friday in order to pay its merchant and fulfillment processor.
The company acknowledged on Twitter that it was having issues preventing customers from purchasing tickets and recommended waiting to hear about a resolution before using the service again. In other words, don’t buy any movie tickets through us for the time being.
We've determined this issue is not with our card processor partners and will be continuing to work on a fix throughout this evening and night. If you have not headed to the theater yet, we recommend waiting for a resolution or utilizing e-ticketing which is not impacted.
— MoviePass (@MoviePass) July 27, 2018
The really bad sign for the company, however, is taking place on the stock market. The company’s stock took a nosedive on Friday from $7 to $3.58 by mid-morning. This was on the heels of a reverse stock split that happened earlier in the week in order to boost the price from $0.08 to $21. In other words, valued at the pre-split amount, Friday’s stock price would be around $0.015. Which is not very good.
All of which is to say, if you are a MoviePass subscriber, we hope you saw lots of movies for cheap while using it because those days are just about over.