MoviePass CEO Mitch Lowe doesn’t want to talk about the tanking stock price of his parent company. He’s excited about the June 1 release of “American Animals,” a joint venture between MoviePass Ventures and The Orchard, and how his discount ticket service is still growing fast.
“We’re adding well over 90,000 [subscribers] a week,” said Lowe, minutes before the stock price of his company’s owner, Helios and Matheson Analytics [HMNY], closed at an all-time low of 46 cents per share on May 24. (By 12:45 pm ET May 25, the price had declined further to 41 cents per share.) “We rolled out some new features, and new terms and conditions, and the growth rate has just accelerated since then.”
Initially, those new terms included reducing the number of films subscribers could attend from one per day to four per month, saddling customers with an iHeartRadio “free trial” subscription that would soon double the cost of their membership if they forgot to cancel it, and preventing cardholders from seeing favorite movies more than once. That proved unpopular, so MoviePass returned to the movie-a-day deal and made the radio trial optional.
At this point, the public’s appetite for MoviePass may be whetted because they don’t believe this great deal can be around much longer. HMNY Chairman and CEO Ted Farnworth reported in an April SEC filing that it lost $150.8 million in 2017, and the company continues to spend $21.7 million/month. He and Lowe have brushed off concerns that the organization is running out of time, pointing to $300 million available though an equity line of credit.
MoviePass currently offers two subscription options: $9.95/month to see up to one movie in theaters every day, or $7.95/month to see three movies per month (a plan that comes with iHeartRadio All-Access, for which subscribers will be automatically charged for after three months).
In early 2018, Lowe told IndieWire that 28 percent of its 2 million-plus subscribers reside in either New York, Los Angeles, or San Francisco, where a single movie ticket typically costs more than $9.95. MoviePass pays theaters full price for each ticket, so it loses money on each transaction in these cities. The only MoviePass customers who make the company any money are those neglect to use the service.
However, Lowe hopes to make money on “American Animals,” which cost The Orchard and MoviePass $3 million to buy North American rights out of the Sundance Film Festival. To recoup that $3 million, and presuming another $3 million in marketing costs, the film would need to earn at least $12 million.
Courtesy of The Orchard
Even the BAFTA-winning director of “American Animals,” Bart Layton, seems uncertain about the fate of his distributor. “The cinemas are booked, the movie will go out,” he told Business Insider. “I guess if [bankruptcy] happened we would have a few less of their subscribers going to the movie. But hopefully at this stage those people are still engaged enough in the film that they want to see it badly enough that they would pay full price to see it.”
On June 15, MoviePass Ventures is scheduled to release a second film, “Gotti,” through a deal with Vertical Entertainment. As to why MoviePass pursued these films, Lowe cited the millennial appeal of “American Animals” — the real-life tale of student-thieves who flubbed a rare-book heist — as more than half of MoviePass subscribers are under 35, and predicted that modern New Yorkers would want to watch a film about one of the infamous local mafioso John Gotti (John Travolta).
“Because we do such an effective job of getting people to go see smaller films that marketing budgets may not have been able to get the message across, we enhance the value of all these,” said Lowe who added that 120,000 MoviePass members applied to win a trip to walk the red carpet and see “American Animals” in New York next week. “So by enhancing the value and then owning a piece of that, we drive incremental profits downstream,” all while supporting the independent film community and allowing directors to “see their film on a big screen rather than on an iPhone for the first time.”
Whatever happens to MoviePass, its unflagging dedication to the theatrical experience is without question. As it announced at Sundance, MoviePass plans to build its own film catalog — however, Lowe clarified that it will primarily be comprised of old movies. “The more impactful part is finding films that people saw maybe a few years ago or longer, and giving people the opportunity to see them back on the big screen,” he said. “This has been done — you see classics being played all the time, but you rarely have the ability to ensure that thousands and thousands of people will go and see it.” Catalog offerings would be screened exclusively in theaters, he said, without a streaming component.