Future of MoviePass cast in doubt after service failure

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MoviePass, the subscription-based movie ticket service, was forced last week to borrow $5 million after it reported it could not pay its bills, raising new questions about the embattled company’s viability.

Helios and Matheson Analytics, its parent company, said in a regulatory filing on Friday that MoviePass had experienced a ”service interruption” the day before because it could not make ”required payments to its merchant and fulfillment processors.”

In a message to subscribers on Friday, the company’s chief executive, Mitch Lowe, apologized for the outage, during which some of its three million subscribers could not check in to see movies, and said the service was ”up-and-running with stability at 100%.”

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It’s far from the first time MoviePass has dealt with technical glitches and unexpected shifts in service. But after the outage, observers on Sunday sharpened their criticism of the company, which in 2011 set out to transform the industry amid rising theater ticket prices and increased competition from movie streaming services.

Michael Pachter, a research analyst at Wedbush Securities, is one of the critics who has said the $10 MoviePass charges its subscribers per month, for which they can see one movie at a participating theater per day, does not come close to covering its costs.

A movie ticket costs roughly $10, so if a subscriber saw more than one movie per month, the company would likely lose money, he said.

In April, the company disclosed to regulators that it was losing roughly $20 million per month since September, and that auditors, citing ”significant net losses” and problems with capital, doubted its ability to continue.

Movie theater companies are introducing their own subscription plans. In June, AMC began offering a plan called AMC Stubs A-list that will allow subscribers to see three movies a week for a monthly fee of $19.95.

Mr. Pachter predicted last week’s outage will not be the last to affect MoviePass.

”The $5 million was that last breath of oxygen,” Mr. Pachter said on Sunday. ”And now we’re deciding if we’re going to cut off their oxygen.”

Neither MoviePass nor Helios and Matheson responded to requests for comment on Sunday.

In previous interviews with The New York Times, Helios and MoviePass executives said they had access to financing that could keep the company afloat.

The company has grown since last year to three million subscribers from 20,000 after it slashed its monthly price, though a consulting firm estimated that nearly one-third of MoviePass subscribers believed the service would not last.

”We love the idea that everybody thinks that we’re going to fail,” Mr. Lowe told The Times in April. ”It’s exactly what people told us at Netflix and Redbox. And then suddenly they all turned around and realized we were too big to stop.”

Mr. Lowe was an executive at Netflix from 1998 to 2003 and served as president of Redbox, the DVD rental company, from 2009 to 2011.

Mr. Lowe thinks MoviePass’s increased subscriber base can help buoy the company and that it will eventually make money by striking bulk ticket pricing partnerships with theaters and charging studios fees to promote new films to members, among other strategies.

The same optimism rippled through Mr. Lowe’s message on Friday to MoviePass subscribers, though he declined to share the reasons behind the outage.

He wrote that the company’s mission was to make ”moviegoing accessible to everyone and to enhance the power of discovery — but we need your support as we refine our model for the long-haul.”

Eddie Yoon, founder of EddieWouldGrow, a think tank and advisory firm on growth strategy, said MoviePass is on a ”razor’s edge.”

Mr. Yoon, who has written about MoviePass for the Harvard Business Review, said the outage last week should prompt the ticket service to change its strategy, possibly by cutting costs and culling some of its users.

”I almost believe that they’re going to have to do something rash or significant,” Mr. Yoon said.

Mr. Pachter, however, believed the outage signified the ”end of the end.” He pointed to a troubling line in Mr. Lowe’s message that said ”certain movies may not always be available in every theater on our platform.”

On Saturday, the company said on Twitter that customers continued to have problems checking into movies, one day after Mr. Lowe indicated the service was stable.

”We are very sorry to users having issues checking-in this evening,” the company said.



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