MoviePass in Trouble After Service Temporarily Shuts Down
MoviePass, the popular subscription-based movie service, is facing some serious financial troubles after the company was forced to borrow $5 million because it couldn’t pay its bills. Helios and Matheson Analytics, the parent company of MoviePass, wrote in a regulatory filing that its “service interruption” was caused due to a failure in making “required payments to its merchant and fulfillment processors.”
Mitch Lowe, the CEO of MoviePass, issued an apology to the company’s 3 million subscribers after they were unable to use their cards to pay for movies. He assured customers that the service was “up-and-running with stability at 100%.” This, however, does not seem like the end of troubles for MoviePass.
Since 2011, the company set out to transform the way we consume movies after the industry experienced setbacks due to a rise in movie ticket prices. MoviePass was hailed as a sure thing from its customers, but many experts warned that the business model was not sustainable in the long run. With a monthly price of $9.99, it is a seemingly impossible thing for the company to ever turn a profit, especially when some movie tickets can cost upwards of $14 for a single ticket. If a customer sees more than one movie a month, they are essentially losing money by having to subsidize the cost of each ticket.
Earlier this year, MoviePass disclosed to regulators that it was losing about $20 million per month ever since September of last year. It has since had to rely on several streams of credit to continue operating, with Lowe assuring investors that the company would begin to turn a profit after reaching a certain amount of subscribers.
In the effort to increase revenue, MoviePass implemented surge pricing, a confusing pricing tier that asked for customers to pay a small fee for high demand films. This includes movie premieres, showtimes after 1 pm, and practically all weekend showings. The fees range from $3 – $5 with no rhyme or reason behind how each cost is calculated.
This last $5 million seems to be the final gust of wind to this house of cards, and could potentially spell the beginning of the end for MoviePass. There have already been several competitors gaining ground on the company, including Sinemia, a service that allows for customers to see three movies a week for $7.99 a month. AMC Theatres is also offering their AMC Stubs A-list service, which allows for customers to see three movies a week for a monthly fee of $19.95.