MoviePass won’t raise prices after all.
The beleaguered subscription movie-going service that’s helped upend exhibition said on Monday it would keep prices at $9.95-per-month rather than raise it to $14.95 as planned just a week ago. But the company is making some changes to the service in an effort to stabilize the business.
Starting Aug. 15, MoviePass subscribers will transition to the new plan, allowing them to see up to three movies a month for $9.95, and up to a $5.00 discount for any additional movie tickets. The company said in a release that “because only 15 percent of MoviePass members see four or more movies a month, we expect that the new subscription model will have no impact whatsoever on over 85 percent of our subscribers.”
The new plan will include major studio first-run films, and it gets rid of the peak pricing and ticket verification features for subscribers who migrate to the new plan.
MoviePass said it will give monthly subscribers the opportunity to signup for the new plan when their current plan comes up for renewal beginning Aug. 15, 2018. Annual subscribers will not be affected by this plan until their renewal dates, but users can still cancel anytime.
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MoviePass, and parent company Helios & Matheson Analytics, have suffered setbacks in recent weeks. The service seemingly went nearly dark on the eve of the release of “Mission: Impossible — Fallout,” one of the year’s biggest films. And in the past month, shares of Helios & Matheson have plummeted 99.8 percent.
The stock was up 44.4 percent on Monday, trading around 10 cents per share.
“We are well aware that during our journey to innovate moviegoing — a form of entertainment that over time has become unaffordable and broken — we’ve encountered many challenges. However, any industry-wide disruption like MoviePass requires a tremendous amount of testing, pivoting, and learning,” MoviePass CEO Mitch Lowe said in a statement. “We discovered over several months of research that our customers value a low monthly price above nearly everything else, so we came together to create a plan that delivers what most of our loyal MoviePass fans want, and one that, we believe, will also help to stabilize our business model.”
MoviePass has been burning cash as it subsidizes its users’ costly movie tickets. A couple of weeks ago, the company appeared to run out of cash and was forced to take an emergency $5 million loan, under severe terms, just to keep the service afloat after widespread outages.
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“All along, we’ve known that we need to invest heavily to prove our business model and bring enough subscribers into the business to truly understand their usage patterns and allow us to leverage ancillary revenue opportunities,” Helios & Matheson CEO Ted Farnsworth said in a statement. “However, one year and 3 million plus members later, it has become clear that a small number — only 15 percent — of the subscriber base has been stressing the system. We believe this new business model will immediately reduce our burn so we can refocus our efforts where they belong: making a permanent and positive change in this industry by creating an amazing theater-going experience and building a company that continues to benefit our nationwide community.”
Since acquiring MoviePass last August, Helios & Matheson has poured tens of millions of dollars into the monthly subscription moviegoing service, fueling its ability to sign up 3 million-plus users in less than a year.
However, that subscriber growth has proven costly since the company pays movie theaters full price for every ticket its subscribers purchase, meaning that even occasional MoviePass users have driven the company further into the red. Plans to dredge up additional revenue by selling user data or investing in its own films have yet to generate significant revenue.
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As a result, the company reported $40 million in MoviePass losses in May and anticipated that to grow to $45 million in June — with just $18.5 million cash on hand as of May 31.
“While most of our loyal subscribers shared the passion for this new accessible movie experience and experimented fairly, the fact is that a small number have used our business model to a point where it was compromising the business’ long-term stability,” Lowe said in a statement. “As is true with any new company, we’ve evolved to accommodate what has become an unprecedented phenomenon. We are now creating a framework to provide the vast majority of subscribers with what they want most – low cost, value, variety, and broad availability – and to bring some moderation to the small number of subscribers who imposed undue cost on the system by viewing a disproportionately large number of movies.
“We believe this new plan is a way for us to move forward with stability and continue to revitalize an entrenched industry and return moviegoing to everyone’s financial reach.”
MoviePass has to compete more than ever now since the nation’s largest cinema chain AMC recently launched its own subscription service, analysts believe is competitive.
Last week, AMC announced it had signed up 175,000 users it the first month of its AMC Stubs A-List program, which allows members to see three movies a week for $19.95-a-month.