Business

MoviePass’ future is uncertain as company stays unprofitable

In this day and age, going to the movies is quite expensive and is slowly becoming an outdated form of leisure time. Founded in 2011, MoviePass allows moviegoers to avoid this expense by offering them a movie a day for an affordable rate of $9.95 a month. Unfortunately, an auditor speculates that the company will not be able to stay
in business.

An auditor for MoviePass’ parent organization, Helios and Matheson Analytics Inc., expressed uncertainty about the company’s total profit in The Verge. “MoviePass auditor has doubts about the company’s business model after significant losses.”

From a story in Business Insider, the reason for these doubts is attributed to “negative cash flows from operating activities,” meaning that cash outflows exceeded
cash inflows.

The auditor’s statement rebuts MoviePass’ CEO Mitch Lowe’s prediction that “the company would be ‘cash-flow positive’ by 2019.” MoviePass needs to increase its profits in order to stay in business, as stated by Helios and Matheson Analytics CEO Ted Farnsworth. This, however, will not be an
easy task.

When signing up for MoviePass, a user receives a customized Mastercard with their name on it. The card is then used after you confirm the movie time on the app. However, this is inconvenient as the tickets cannot be purchased online; one must be within 150 feet of a theater.

An article published by WIRED  hints at the idea that MoviePass is giving its money away: “The more subscribers MoviePass signs up, the more money it loses.”

The company reimburses the theater for the tickets, regardless of how many people show up. In addition to this, it provides customer service for millions of customers across the nation.

MoviePass’ business model of one movie a day is no longer available to new subscribers who opt in for the package offering film tickets and a trial for iHeartRadio. MoviePass now limits these subscribers to four movies a month.

However, this should not discourage new members, as a representative of MoviePass stated, “the previous version of MoviePass will eventually be available to new subscribers again.”

Earlier this year, MoviePass revealed how it plans to make money. In a statement to Variety, Lowe said he wants to gain more subscribers from “Kansas City and Omaha,” where tickets are cheaper than in Manhattan and Los Angeles.

Additionally, the company has been trying to get a cut from AMC Theatres’ ticket sales and concession profits, according to Deadline Hollywood.

According to an article published by Investopedia, in order for MoviePass to remain in business, it must form partnerships with multiple corporations. The company has begun this endeavor by collaborating with smaller studios and distributors to advertise movies such as Forever My Girl and I, Tonya through various forms of social media.

Furthermore, Investopedia reported that the company “announced they would begin acquiring and distributing films themselves under a new division named MoviePass Ventures.”

MoviePass also needs to make deals with various movie theater chains such as Regal Entertainment Group in order to sustain its business. MoviePass is not receiving a dime out of theaters’ large profits from concessions.

In a WIRED interview with Lowe, he expressed his views on moviegoers’ expenses, stating that they spend “an average of $13 on popcorn and soda, which is more than double the norm.”

With MoviePass’ current dilemma, action should be taken immediately. Partnering up with Regal and AMC would be a move in the right direction. After gaining a substantial amount of subscribers, the company can demand more from the big movie theater chains. This initiative could save MoviePass from its downfall.

Investopedia published a article that stated, “a public presentation from January 2018 claims that when the service hits 3 million subscribers, MoviePass could become cash flow positive.”

Moviegoers, however, are enjoying the service. MoviePass projects that it will reach 5 million subscribers by the end of this year.

April 30, 2018

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Brandon Tingle


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