There may be a reason why MoviePass seems too good to be true. The company has seen its user base grow exponentially since drastically lowering prices last summer, but allowing subscribers to see one movie per day for the princely sum of $9.95/month has never made economic sense to many observers.
According to Variety, an independent audit of parent company Helios & Matheson appears to have confirmed those fears. Its findings revealed “substantial doubt” that MoviePass can continue is “a going concern.”
“MoviePass currently spends more to retain a subscriber than the revenue derived from that subscriber and MoviePass other sources of revenue are currently inadequate to offset or exceed the costs of subscriber retention,” the audit reads. “This results in a negative gross profit margin. MoviePass expects its negative gross profit margin to remain significant until MoviePass can sufficiently increase its other sources of revenues to offset the losses or achieve substantial economies of scale.”