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Is the end near for MoviePass?

MoviePass sounds too good to be true. We may soon find out if it actually is.The parent company, Helios and Ma...

Posted: May 10, 2018 2:12 PM
Updated: May 10, 2018 2:12 PM

MoviePass sounds too good to be true. We may soon find out if it actually is.

The parent company, Helios and Matheson Analytics, only has about $15.5 million cash on hand, plus another $27.9 million in accounts receivable, according to documents filed Tuesday with the US Securities and Exchange Commission.

Unless the movie subscription service can come up with more money, MoviePass might not be around for much longer. The firm said that it burns through about $21.7 million every month operating the service, which charges users $10 a month to see a movie every day.

"They appear to have enough cash to last two months," said Michael Pachter, an analyst for Wedbush Securities. "Sounds like a terrible business model to me, and I can't imagine that any sophisticated investors will view it differently."

So far, they don't appear to be. Shares of Helios and Matheson have been tanking for months, and stock prices fell even further this week. Shares are trading for less than a dollar, plunging 46% Wednesday.

Related: MoviePass brings back its movie-per-day subscription

The MoviePass model has drawn attention - and raised eyebrows - since it went public last August with its $10 price point.

In most places, that's just about the cost of a single movie ticket. That means that MoviePass loses money when its customers use a pass, since it must pay theaters for the tickets.

Part of the solution has been to grow subscribers as quickly as possible. MoviePass announced in February that it had reached 2 million subscribers, just one month after it topped 1.5 million. Executives have targeted 5 million by the end of the year.

Helios and Matheson CEO Ted Farnsworth says that should help make the business profitable. In a statement to CNNMoney on Wednesday, he added that the company always knew MoviePass would burn through a lot of money.

"We have access in capital markets to over $300 million," Farnsworth said. "So there is plenty of cash available to sustain the subscriber growth and movie-going habits of our users."

Farnsworth did not elaborate on the $300 million figure in his statement, and he was not immediately available for further comment.

Is MoviePass too good to be true?

Adding more users isn't the company's only business plan. MoviePass has said that it hopes to eventually become profitable by selling more advertising. It has also said in the past that the company collects data on its subscribers it wants to monetize - though executives have walked back the extent to which it uses that information in the wake of the recent Facebook data scandal.

In any case, it's not clear whether MoviePass can generate additional revenue fast enough to please investors, said Eric Wold, an analyst at B. Riley FBR.

"The subscriber growth, I don't think, is an important metric. It's really the usage that you're generating and the data that you're collecting," he said. "You're not at the point where that data is valuable, and I don't know if investors will make that bet ... because it's not going to happen overnight."

Farnsworth, meanwhile, said MoviePass has found ways to cut its expenses. His statement mentioned that the service's "burn rate" has been slashed by 35-40% in the last few weeks because of new "abuse prevention measures." The company announced last month that it would bar subscribers from seeing the same movie more than once.

Again, Wold was skeptical. He questioned whether the new restriction would end up driving some customers away, especially fans of the new "Avengers" or "Star Wars" who might have been banking on MoviePass for repeated viewings.

"I think that's going to be a negative to some people who signed up initially," Wold added. "I wouldn't be surprised if you saw people somewhat turn away from the service now."

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 708779

Reported Deaths: 13226
CountyCasesDeaths
Marion966191721
Lake51761946
Allen39224672
Hamilton34549405
St. Joseph34157541
Elkhart27356432
Vanderburgh22081394
Tippecanoe21853212
Porter17935299
Johnson17544374
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Floyd7563176
Wayne6906198
Grant6844171
Boone6556100
Morgan6405138
Dubois6085117
Marshall5786108
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Ohio55811
Unassigned0408

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1054807

Reported Deaths: 18991
CountyCasesDeaths
Franklin1225191356
Cuyahoga1074592069
Hamilton783261168
Montgomery50176996
Summit45557909
Lucas40298765
Butler37768570
Stark31513895
Lorain24246473
Warren23910293
Mahoning20946583
Lake20067362
Clermont19459229
Delaware18085130
Licking16149207
Fairfield15757197
Trumbull15627460
Medina14922259
Greene14706236
Clark13660293
Wood12806185
Portage12431196
Allen11352229
Richland11067198
Miami10548214
Muskingum8717127
Wayne8594209
Columbiana8569226
Pickaway8439121
Marion8390135
Tuscarawas8387240
Erie7600154
Hancock6730123
Ross6707146
Geauga6553146
Ashtabula6530165
Scioto6295101
Belmont5634158
Union558447
Lawrence5470102
Jefferson5343147
Huron5314114
Darke5273121
Sandusky5189120
Seneca5139120
Washington5087107
Athens503856
Auglaize476284
Mercer471984
Shelby456590
Knox4397108
Madison423959
Putnam421799
Ashland413488
Fulton410567
Defiance404296
Crawford3883101
Brown386955
Logan374476
Preble371098
Clinton362160
Ottawa357978
Highland347459
Williams328674
Champaign321557
Jackson308551
Guernsey307549
Perry290549
Fayette278048
Morrow275939
Hardin264764
Henry264366
Coshocton259857
Holmes253499
Van Wert239262
Pike233831
Gallia233446
Adams229152
Wyandot227553
Hocking209759
Carroll189447
Paulding168838
Meigs141738
Noble132937
Monroe128941
Morgan106823
Harrison105636
Vinton81614
Unassigned02
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