MoviePass Suspends Service Citing Technical Problems, Plans to Recapitalize Company
By Todd Spangler, Variety.com
- Jul. 4, 2019
Starting July 4, MoviePass will be out of commission for the next several weeks — at least — with the struggling theater-subscription service provider saying it needs to fix technical issues and finish work on a new version of its app.
There was also a hint that the money-losing MoviePass business is running low on funds. The company, in announcing the temporary shutdown, said it “plans to use this time to recapitalize in order to facilitate a seamless transition and improved subscriber experience once the service continues.”
As of March 21, 2019, MoviePass’ parent company — Helios and Matheson Analytics — said it had cash on hand of about $2.8 million and $13.1 million on deposit with its merchant and fulfillment processors related to MoviePass subscription revenue. Helios and Matheson said it netted $5.56 million in new financing from “certain institutional investors,” which closed March 25.
Helios and Matheson’s net loss more than doubled in 2018, to $329.3 million, on revenue of $232.3 million, according to its latest financial filing. The company took a $38.5 million write-down for the third quarter of 2018 related to the impairment of goodwill in the MoviePass business, and it said it expects to record an impairment charge of $35.9 million for Q4 for MoviePass.
MoviePass said it put the service on hiatus starting at 5 a.m. ET on July 4. The company said the suspension is due to “maintenance-related issues.” It didn’t provide details on what the problems are or how the new MoviePass app will be enhanced.
“Once we have resolved these technical problems, the service will be live again. We estimate this process will take several weeks,” MoviePass said in a tweet Wednesday.
During MoviePass’ shutdown, subscribers will not be charged and they’ll be automatically credited for the number of affected days once the service continues, according to the company. In addition, MoviePass currently is not accepting new subscribers.
In a statement, MoviePass CEO Mitch Lowe said the suspension is required to complete work on an improved version of the MoviePass mobile application. “There’s never a good time to have to do this,” Lowe said. “But to complete the improved version of our app, one that we believe will provide a much better experience for our subscribers, it has to be done.”
The number of MoviePass subscribers plummeted from more than 3 million last year to just 225,000 in under a year, according to Business Insider report in April. A MoviePass spokeswoman disputed the report but declined to provide current subscriber figures.
The subscriber plunge stemmed from MoviePass’ change in August 2018 to eliminate the one-movie-per-day plan, priced at $9.95 per month. The new $9.95 plan allows subscribers to see just three movies each month. This year, it rolled out a refashioned “unlimited” option, for $14.95 per month, to again allow customers to see one movie daily but warning that movie choices will be restricted based on “system-wide capacity.”
Helios and Matheson is the target of a securities-fraud probe by the New York Attorney General, which is looking into whether the company misled investors. MoviePass also is the target of a class-action lawsuit by subscribers claiming the change in the “unlimited” plan was a deceptive “bait-and-switch” tactic.
Helios and Matheson Analytics currently owns approximately 92% of the outstanding shares of MoviePass, after closing a deal to acquire control of the service in December 2017. Helios and Matheson fully owns MoviePass Ventures, which was established to acquire completed indie films, and 51% of MoviePass Films, a joint venture with Emmett/Furla Films. The company also owns Moviefone, which it bought from Verizon last year.