Why is MoviePass Down? It Temporarily Ran Out of Money

DooKey

DooKey

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MoviePass had "technical difficulties" yesterday and as a result many subscribers weren't able to check in until they got to the theater to see their movie. However, it wasn't technical difficulties that caused the problem it was simply a matter of running out of money. With that said, I've always thought MoviePass was too good to be true with a subscription fee of only $6.95 per month. Anyway, I don't know about anybody else but I was taught that you'll go broke if you spend more than you take in. It looks like that sage advice really is true.

Popular movie-ticket subscription service MoviePass experienced an outage on Thursday, still ongoing for some, which the company attributed to "technical issues with our card-based check-in process," on its Twitter feed.
 
Sonicks said:
Temporarily?

Can it poof money into existence like the "Federal" Reserve?
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They apparently borrowed $5M (and promise to repay $6.2M -- 24% interest) with half due on August 1st, and the rest on August 5th. Either they're expecting to get a lot of subscription revenue on the 1st, or they might make it through two more weekends before they permanently run out of money.
 
The movie studios have never had any real reason to see this work. It would seem moviepass has weeks left. Having to take a leg breaker loan to get through a few weeks makes that clear.

What the major studios need to do is spin their own joint owned company to offer... realistically priced plans, and offer other consumer plans / streams / digital downloads ect.
In Canada Ciniplex whom run the majority of Canadian theaters offers things like digital download discounts on movies you have seen in theater. The major studios should partner with the major theater chains in the US, create a movie pass like sub with a more sustainable pricing structure and back it up with back end commissions to the theater chains if theater goers (sub or not) accept discount offers on downloads or even physical copies.

I guess my point is there are plenty of ways the studios themselves could make a sub idea profitable for everyone involved. (without simply selling user info) For movie pass though it seems their model is simply not sustainable without support and likely help from the studios and/or theater operators.
 
So let's recap the week for MoviePass.

Around about Wednesday their parent company does a 250-1 reverse split, bringing their stock price from (mind you, HMNY was at $38 or so before the MP investment) $0.08/share to $21/share. The market said, naturally, "hey, there's more room to short here" and immediately dropped the price. They're back to around $2.12.

Yesterday, they ran out of money and couldn't pay their card processors.

Beginning of the end, use it while you still can! This result was obvious once they announced their new price point ($9.99/mo), it was simply unsustainable and any leverage from growth would need a decent amount of time to prove itself, time they didn't give themselves with a price point that makes them lose money on even one transaction.
 
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toast0 said:
They apparently borrowed $5M (and promise to repay $6.2M -- 24% interest) with half due on August 1st, and the rest on August 5th. Either they're expecting to get a lot of subscription revenue on the 1st, or they might make it through two more weekends before they permanently run out of money.
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Who the hell would be stupid enough to loan them money? They are never getting it back, interest or no interest.
 
ChadD said:
The movie studios have never had any real reason to see this work. It would seem moviepass has weeks left. Having to take a leg breaker loan to get through a few weeks makes that clear.

What the major studios need to do is spin their own joint owned company to offer... realistically priced plans, and offer other consumer plans / streams / digital downloads ect.
In Canada Ciniplex whom run the majority of Canadian theaters offers things like digital download discounts on movies you have seen in theater. The major studios should partner with the major theater chains in the US, create a movie pass like sub with a more sustainable pricing structure and back it up with back end commissions to the theater chains if theater goers (sub or not) accept discount offers on downloads or even physical copies.

I guess my point is there are plenty of ways the studios themselves could make a sub idea profitable for everyone involved. (without simply selling user info) For movie pass though it seems their model is simply not sustainable without support and likely help from the studios and/or theater operators.
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AMC has a nice offering, it isn't 30 days of movies, but it's 3 movies a week, includes IMAX, RPX, etc. plus you can use all 3 in one day. It's a bit more then MoviePass was, but the wife and I were leaning towards AMC's anyway. Since 3 times a week even if it's done in one day as a "movie day" is pushing how much we go to the movies and it still would pay itself off fast.
 
The problem is the Movie Companies. They forced the Theaters to buy digital projectors (and absorb the expense) and charge them more and more money to for the rights to show the movies. Theaters are forced to raise the prices of tickets and refreshments higher and higher to absorb the costs. It's ironic that Hollywood is so Marxist when they all are making obscene amounts of money while screwing Theaters and movie goers. MoviePass does not hurt the studios but it does hurt the Theaters who are already struggling.
 
toast0 said:
They apparently borrowed $5M (and promise to repay $6.2M -- 24% interest) with half due on August 1st, and the rest on August 5th. Either they're expecting to get a lot of subscription revenue on the 1st, or they might make it through two more weekends before they permanently run out of money.
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Those are terrible rates. That's a sign in and of itself.

For the actual interest rate annualized (for giggles), rounding to a two week loan for simplicity:

APR = ((Loan Fee/Loan Amount) / (Loan Days/365) * 10000) / 100

APR = ((1200000/5000000) / (14/365) * 10000) / 100 = 625.72% APR

Where'd they go, payday loans? A Kansas tribe?

*Edited* Used the wrong equation initially
 
they claim they're good for the next several years.
They can continue burning money.
 
damicatz said:
Who the hell would be stupid enough to loan them money? They are never getting it back, interest or no interest.
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According to the SEC filing, this guy loaned them the money. Actually on closer look, it's not clear how much they're going to owe, since the filing says "the principal amount of Six Million and Eight Hundred Thousand Dollars ($6,200,000) " and later that the first payment is "up to Three Million and Four Hundred Thousand Dollars ($3,100,000) of the Principal outstanding" ... I don't know if the words or the numbers take precedence here, or if they'll update the filing with everything matchy matchy.
 
Derfman said:
AMC has a nice offering, it isn't 30 days of movies, but it's 3 movies a week, includes IMAX, RPX, etc. plus you can use all 3 in one day. It's a bit more then MoviePass was, but the wife and I were leaning towards AMC's anyway. Since 3 times a week even if it's done in one day as a "movie day" is pushing how much we go to the movies and it still would pay itself off fast.
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Yup. Plus AMC's offering is much more sustainable, because they don't have to pay retail ticket prices, and they benefit from the concession boost (unlike MoviePass).
 
bugleyman said:
Yup. Plus AMC's offering is much more sustainable, because they don't have to pay retail ticket prices, and they benefit from the concession boost (unlike MoviePass).
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AMC also has an existing revenue stream to hold them through any adjustments to the plan they need to make over time. MoviePass likely can't make enough money if they raise prices only on new users, and will have trouble retaining users if the raise prices on existing users, if they can even raise their prices (some people signed up for a year at a specific price, if i recall correctly).
 
toast0 said:
They apparently borrowed $5M (and promise to repay $6.2M -- 24% interest) with half due on August 1st, and the rest on August 5th. Either they're expecting to get a lot of subscription revenue on the 1st, or they might make it through two more weekends before they permanently run out of money.
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Who in their right mind would give them money?
 
RealBeast said:
You must not read enough sites loaded with BTC worshipers. :rolleyes:
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Heh, no. I try to avoid them, in fact. Block chain is cool and potentially very useful, but I wish I had a dime for every time someone was convinced that "This will change everything!11!!"
 
Well I'm watching them closely because shit, they drop some more, from where they are now to say .15 cents a share, on the ropes, ready to die, and someone buys them up. They could jump considerably overnight and that could be a damned gold mine. So I'm going to watch, and I'm not looking at it like a regular investment, no sir-e, it's a day at the dog races betting on the long-shot to win for sure.
 
Exavior said:
Who in their right mind would give them money?
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Gambling on a 24% return for a [very] short-term loan is entirely reasonable. It's an astronomically higher APR than gets charged for unsecured credit cards all the time.
 
damicatz said:
Who the hell would be stupid enough to loan them money? They are never getting it back, interest or no interest.
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Are they stupid? realistically look at how life works now. You got Netflix, anyone could make the same argument about them. You have google, giving away search and phone OS, you have facebook giving away social media. Then you have things like bitcoin that materialize hundreds of billions of value out of thin air. So if you are looking at this from an outside perspective how do you know?

Second one thing nearly all these big projects have in common is that they have a critical mass to achieve and actually if they hit that critical mass they end up being successful. If Netflix didn't blow up and hit critical mass they also would be a failure, face book lost money for what? A decade or so. So for a bank or an investor it actually isn't a bad idea and actually its one of the most common business practices in start ups now days.

formulate a business idea
sell the product for a loss or give it away free (now its really hard for anyone to compete with you) now you build a giant customer base, duh cause your giving someone something that is losing money.
Build a customer base that is so massive it cannot be ignored by anyone all the while gathering more investor money.
Once you hit critical mass of customers you now have all sorts of negotiation power.
You also have a huge advantage in that it cost you less per customer to service the customers. In massive companies its pennies.

So imagine that movie pass had hit big chances are some billionaires would come in and float them hundreds in millions in investments. Then they can use that to further grow their business. Eventually they are so big any movie studio must accept their customers or go bankrupt, then they start negotiating all sorts of fun stuff. Like maybe one chain of cinemas only allows movie pass holders to see the first showing of certain movies, they can negotiate tiny payments to the movie theater for each viewing. They start buying some popular venues and making them so the only way you can get in is with a movie pass, its like a membership. Eventuallly just like Netflix, facebook, google, and countless other companies they are a profitable healthy business.
 
That's a real shame. I'd not been to the theatre for years. Paying all that for a horrible theatre experience wasn't worth it. Movie pass got me to go again. Guess I'll just go back to waiting for it to hit Redbox and not deal with sticky floors, screaming babies, people with terrible BO, having your seat back kicked, and talking people.
 
bildad said:
That's a real shame. I'd not been to the theatre for years. Paying all that for a horrible theatre experience wasn't worth it. Movie pass got me to go again. Guess I'll just go back to waiting for it to hit Redbox and not deal with sticky floors, screaming babies, people with terrible BO, having your seat back kicked, and talking people.
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And as failed businesses go, this one is unlikely to hurt its customers too much. They paid peanuts for the opportunity to see movies.

Though there's still the question of where the data they mined from their customers will go once they liquidate. That's likely their largest asset, and they will definitely sell it to someone.
 
I still don't understand what data they can mine, what movies I see? You can only use their CC for movies. TBH, I'm a 9.99 a month subscriber. I use the service when on the road for business (2 weeks+ a month) I sometimes see movies that I may not be interested in just to do something when not working (skyscraper to name a recent one). That right there is bad data for movie pass.

However they've started charging a surcharge of $2-$3 for just released / weekend movies. You also have to take a pictures of the ticket stub via the app within so many hours of purchase. The extra money, PITA pictures and now this. I'll be cancelling my sub.

The movie theaters should have embraced movie pass as it got me into theaters more then I normally would. They will now be loosing out on their overpriced popcorn and sodas sales from me.
 
rudedog said:
I still don't understand what data they can mine, what movies I see?
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They were mining location data while the app was running. They later claimed that they didn't save it or use it when the Internet had a freak-out about it. Whether that's true or not I suppose will be seen when they inevitably liquidate their assets.
 
Babbster said:
They were mining location data while the app was running. They later claimed that they didn't save it or use it when the Internet had a freak-out about it. Whether that's true or not I suppose will be seen when they inevitably liquidate their assets.
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Because of my travels I must have some strange location data. 2 movies in Vegas , 1 in Seattle and 2 in DC in two weeks. Hopefully that will skew the data on them LOL.
 
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bildad said:
That's a real shame. I'd not been to the theatre for years. Paying all that for a horrible theatre experience wasn't worth it. Movie pass got me to go again. Guess I'll just go back to waiting for it to hit Redbox and not deal with sticky floors, screaming babies, people with terrible BO, having your seat back kicked, and talking people.
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Roger that. That experience is bad enough in itself, having the "privilege" of paying $10 for a matinee version is just wrong.

Moviepass was doomed from the start.
 
Babbster said:
Gambling on a 24% return for a [very] short-term loan is entirely reasonable. It's an astronomically higher APR than gets charged for unsecured credit cards all the time.
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That is all great and all, assuming they can actually make a payment. When they file for bankruptcy on Monday the person gets nothing.

Unless they had a great plan on how to make $6 million in a week. Because they owe $3 million on Wednesday. Then the other $3 million next Sunday. Which they have been bleeding money since they started so suddenly pulling that out of their ass will be impressive.
 
Exavior said:
That is all great and all, assuming they can actually make a payment. When they file for bankruptcy on Monday the person gets nothing.

Unless they had a great plan on how to make $6 million in a week. Because they owe $3 million on Wednesday. Then the other $3 million next Sunday. Which they have been bleeding money since they started so suddenly pulling that out of their ass will be impressive.
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Again, it's a gamble. Remember too that the company isn't entirely independent; Verizon, for example, holds a stake in the company. It may be that the owners secured the loan with the promise of paying out of separate pockets if it was necessary.
 
I wonder if they are on a cloud platform. I know Azure requires prepayment, you need to have funds in your account to keep the lights on. If those funds run out your stuff gets shut off.
 
rudedog said:
I still don't understand what data they can mine, what movies I see? You can only use their CC for movies. TBH, I'm a 9.99 a month subscriber. I use the service when on the road for business (2 weeks+ a month) I sometimes see movies that I may not be interested in just to do something when not working (skyscraper to name a recent one). That right there is bad data for movie pass.

However they've started charging a surcharge of $2-$3 for just released / weekend movies. You also have to take a pictures of the ticket stub via the app within so many hours of purchase. The extra money, PITA pictures and now this. I'll be cancelling my sub.

The movie theaters should have embraced movie pass as it got me into theaters more then I normally would. They will now be loosing out on their overpriced popcorn and sodas sales from me.
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They have your name, address, age(?), how often you see movies, what type you see, do you normally see them at home or on the road. All that information is helpful / usable to somebody.
 
Babbster said:
Again, it's a gamble. Remember too that the company isn't entirely independent; Verizon, for example, holds a stake in the company. It may be that the owners secured the loan with the promise of paying out of separate pockets if it was necessary.
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That could be, however I would expect Verizon to have $5 mil laying around for week. Guess we will see where the company is in one month.
 
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