Will MoviePass Get Another Chance at Being a Viable Business?

What is going to happen with MoviePass?  While the concept was great, and one that needs to be studied, in order to figure out how to deliver that kind of service.  But in a way that is sustainable, of course.  In a bid to save the struggling theater-subscription service, Helios & Matheson Analytics announced a plan to spin off the division as a separate, publicly traded entity called MoviePass Entertainment Holdings.  A spinoff?  What do they think this is one of the Marvel Defenders? All jokes aside, is this actually a good idea?  Helios & Matheson Analytics said that their board has preliminarily approved this plan that would combine MoviePass Inc., and another film-related asset in order to create a “vertically integrated” entertainment company.

I have more questions, than answers, it seems.  How will this work, exactly?  There’s no guarantee that Helios & Matheson will be able to pull this off, and they’re also not even sure that this kind of transaction is even allowed under the law.  This definitely sounds like a MoviePass kind of move, doesn’t it?  I mean, promising something (or at least putting it out there) and then not being able to follow through with it.  Further, the company is under investigation by the New York Attorney General’s office into whether they misled investors.  The company had been sued by investors alleging it deceived shareholders.  Which definitely begs the question as to whether this would actually go through.

The proposed MoviePass Entertainment Holdings would include: the shares of common stock of MoviePass Inc. held by HMNY, which currently owns 92% of the outstanding shares; the membership interests of MoviePass Films, HMNY’s movie production company partnered with Emmett Furla Oasis Films; the membership interests of MoviePass Ventures, which was established to acquire completed films; Moviefone, which HMNY bought from Verizon’s Oath earlier this year.

Will this new structure change the model by which MoviePass entices users?  Or is this just a hail mary attempt to stay in the game? Another point to consider is why Helios & Matheson is doing this.  A big part of that might have something to do with the fact that the parent company has become synonymous with MoviePass in the public’s eye.  Which has led many shareholders to believe that the parent company might benefit from parting ways with their movie-related assets – MoviePass included – in order to distance themselves from MoviePass.

Earlier this year, MoviePass touted that it had topped 2 million subscribers for its service letting customers see one movie per day for just $9.95 per month. But the deal was too good to be true: The surge in users caused an enormous cash drain on Helios & Matheson and the company was forced to take out several loans. To stay afloat, MoviePass drastically changed its offer in August to limit customers to only three movies per month for the same price and curtailed access to wide-release movies during peak demand.  This angered customers and has caused many to cancel their subscription.

All that said, if Helios & Matheson is able to do it, they are going to do it.  Stay tuned for more on how that shakes out over the next few months.