For more than seven decades, everyone who’s anyone in the movie world and alot of people who aspire to be have migrated to the French Riviera in May for the biggest movie event of the year: the Cannes Film Festival. The Festival which combines glitzy, star-studded, red-carpet movie premieres with days of screenings, meetings, networking, and, if you’re in the know with the right people, the parties are amazing.
With the constant parade of beautiful people coupled with the clicking of the paparazzi, it quickly descends into spectacle. Sitting off to the side, taking calls from journalists and anxious analysts, is one worried Ted Farnsworth, President of Helios and Matheson, parent company of the increasingly infamous MoviePass. Ted is literally fiddling in Cannes while his version of Rome burns to the ground. The toast of Sundance has quickly turned into the laughing stock of Cannes. In many ways it is a tragic tale, another example of a company seduced by the bright lights of the movie business only to be blinded by their glare and then plunging over a cliff.
It’s been quite the ride for publicly listed Helios and Matheson Analytics since acquiring MoviePass. The big movement came last August with the changing MoviePass’s business model to offering a $9.95 monthly subscription to see one movie per day last August. The media gave the plan huge exposures; it gave the head of AMC huge headaches. The subscriber base went up from 20,000 to 2 million in very short order.
The company’s 52-week share price high was $38.86 in mid October as excitement built around the explosive subscription growth, and the potential of even providing the necessary shift to the movie-theater business model. But, this week, on the 11th of May, Helios and Matheson was trading around 60 cents on the NASDAQ Exchange. That’s a 98.5% drop. In 2016 NASDAQ had threatened to de-list the company due to it small amount of shareholders, now there is a danger it could be de-listed due to its plunging stock price.
The first recent tailspin for HMNY came this April when it filed its 10-K to the SEC and reported a loss of $150.8 million in 2017. The company’s independent auditor also said it had “substantial doubt” that HMNY would be able to stay in business over the next year. That scared investors and the stock dropped 50% from its highest price the week before the 10-K filing. Essentially, independent accountants are saying that the parent company of MoviePass will likely fail.
This week, the long speculated upon opinion was confirmed; the business model of MoviePass could not be sustained. MoviePass’s parent company Helios and Matheson Analytics warned in that same 10-K that it had about $43 million of cash available even as it has been spending average of nearly $22 million a month. MoviePass has a two month window to turn itself around. Supposedly recent shifts in policies at MoviePass including no repeat viewing had seen a reduction of monthly expenditures of 35%. Still the future is not at all rosy.
Reached in Cannes while sucking a Pina Colada, the always analytical CEO of Helios and Matheson Ted Farnsworth played down his firm’s money woes. “Not worried at all,” he said to media, echoing his position at last month’s CinemaCon convention “ that profitability and even revenue mattered less, in the long term, than the company’s fast-growing subscriber base and the loyalty and data that came with it.” Plus, he was also quoted as saying , “the company can sell its stock if it needs more cash.” Cue fiddle.
The future does not look very bright for our friends at MoviePass but something good has emerged out of all of this. The thing that has been made apparent is the surprising fact that moviegoers will turn out under a subscription model if the subscription is priced right. If applied correctly this could be a model that could bring back spark to this languishing industry.
Regal’s owner, the good folks at Cineworld, in the United Kingdom have put out a subscription package for unlimited movies at a $25 per month . Cinemark has a subscription offer of $9 per month for one movie with some perks involving concessions. The idea of a movie-theater subscription in some ways is a throwback to pay television. The trend in television for several years has in fact been toward un-bundling, simply put people should pay only for channels they want instead of large fee. In the past we often had to pay for channels we did not even want.
The key thing that MoviePass has demonstrated is that consumers , including myself and most likely you dear reader, still like to watch movies, but not for the prices that theaters are charging. The average ticket price has risen from $4.69 in 1998 to $7.18 in 2008 to a record $8.97 last year, according to NATO. During that time, ticket sales dropped from 1.45 billion in 1998 to 1.25 billion last year, a 25-year low. If you live in a big city, you’re probably going to pay more than $9 for movie tickets.
Even though it looks like the MoviePass experiment will end badly, it has reminded this business of ours that millions of Americans, even though they have endless streaming movie options at home, still value the movie going experience. The average user of MoviePass saw 2.2 movies per month.
My thought is that a $20 a month subscription fee model coupled with a reduction of box office price by 15% could really see a revival in this business. Now to be frank, I also think given all the emerging revenue sources driven by theatrical motion picture exhibition, the studio should reduce their box office share by 15% as well. Come on guys share the wealth.
The trick is that someone just needs to figure out what that true value perception is for moviegoers and after that we all should diligently work to sustain it.
Start thinking of developing some form of either an affinity program or if you are so motivated a subscription plan for your own theatre or drive-in. Maybe just maybe some folks should look at creating a subscription model for concessions. Hey, that’s thought….
