Extending its unusually public experimentation with its business model, MoviePass parent Helios & Matheson Analytics introduced a new subscription scheme and finally saw its stock rally after a drastic two-week plunge.
Gone is the previously planned price hike to $15 a month from $10. Instead, the company is targeting the 15% of users a month who are “stressing the system,” in the words of chairman and CEO Ted Farnsworth. They will do so by limiting the use of the subscription service to three movies a month. The new plan will take effect August 15.
Shares immediately jumped 45% on the news, rising past 10 cents a share. After a 1-to-250 reverse stock split, they had briefly and artificially risen to $14 late last month, only to crater on the disastrous decision to black out certain high-demand films like Mission: Impossible – Fallout amid a cash crunch. The blackout created a social media storm and led to many obituaries being written for the service, which executives insisted last week were premature.
“We have heard our MoviePass Community and we will not be raising prices to $14.95 a month,” the company said in a press release. “The new plan is focused on usage by the bulk of our subscribers who have historically used MoviePass to attend three movies or fewer a month. Additionally, the new plan addresses past misuses which imposed undue costs on the system, including ticket scalping, unauthorized card usage and other activities, which in the past necessitated the use of certain remedial measures that have sometimes been inconvenient for our subscribers.”
Starting August 15, subscribers will get up to three movies a month, including “many studio first run films,” a $5 discount on tickets beyond that, and no peak pricing. By including the stipulation about “many studio first run films,” the company appears to be reserving the right to limit access to certain popular movie titles as it looks for ways to slash expenses.
Because only 15% of MoviePass members see four or more movies a month, the company said it expects the new model to have “no impact whatsoever on over 85% of our subscribers.”
Translation: Business as usual. Except that for the wild ride of MoviePass, there has generally been no such thing. Executives’ quotes from the release are worth relaying in their full, unexpurgated form. To wit:
“We are well aware that during our journey to innovate moviegoing — a form of entertainment that over time has become unaffordable and broken — we’ve encountered many challenges. However, any industry-wide disruption like MoviePass requires a tremendous amount of testing, pivoting, and learning,“ said Mitch Lowe, CEO of MoviePass. “We discovered over several months of research that our customers value a low monthly price above nearly everything else, so we came together to create a plan that delivers what most of our loyal MoviePass fans want, and one that, we believe, will also help to stabilize our business model. While most of our loyal subscribers shared the passion for this new accessible movie experience and experimented fairly, the fact is that a small number have used our business model to a point where it was compromising the business’ long-term stability. As is true with any new company, we’ve evolved to accommodate what has become an unprecedented phenomenon. We are now creating a framework to provide the vast majority of subscribers with what they want most – low cost, value, variety, and broad availability – and to bring some moderation to the small number of subscribers who imposed undue cost on the system by viewing a disproportionately large number of movies. We believe this new plan is a way for us to move forward with stability and continue to revitalize an entrenched industry and return moviegoing to everyone’s financial reach.”
Farnsworth added, “All along, we’ve known that we need to invest heavily to prove our business model and bring enough subscribers into the business to truly understand their usage patterns and allow us to leverage ancillary revenue opportunities. However, one year and 3 million plus members later, it has become clear that a small number — only 15% — of the subscriber base has been stressing the system. We believe this new business model will immediately reduce our burn so we can refocus our efforts where they belong: making a permanent and positive change in this industry by creating an amazing theater-going experience and building a company that continues to benefit our nationwide community.”