MoviePass’ parent is planning to unburden itself of the beleaguered cinema subscription service — spinning it off as a separate, publicly traded company — after racking up massive losses.
New York-based data firm Helios & Matheson Analytics Inc. said Tuesday that it would create a new entity called MoviePass Entertainment Holdings Inc., which would include its subscription business and other film-related assets.
The decision comes as the financial struggles of MoviePass continue to weigh on Helios & Matheson’s stock. The company has lost nearly all of its value in the last year and risks being delisted from the Nasdaq stock exchange if it can’t boost its price to at least $1 a share.
The stock climbed about 15% on Tuesday morning, bringing its share price to 2 cents.
Helios & Matheson “largely has become synonymous with MoviePass in the public’s eye, leading us to believe that our shareholders and the market perception of [Helios] might benefit from separating our movie-related assets from the rest of our company,” said Ted Farnsworth, the company’s chairman and chief executive.
It remains to be seen if MoviePass can survive on its own. The spun-off entity would also include the company’s production unit MoviePass Films, film acquisition operation MoviePass Ventures and movie listings service Moviefone, which it acquired this year. Among MoviePass Ventures' handful of investments was “Gotti,” the much-maligned John Travolta crime movie that bombed at the box office.
The split requires regulatory approval.
Helios & Matheson's harrowing misadventure began when it announced plans to buy MoviePass in August 2017. It paid $27 million for a majority stake in the New York-based firm, run by Chief Executive Mitch Lowe, who’d previously clashed with studios as an executive at Netflix and Redbox.
MoviePass drew 3 million subscribers after it reduced its monthly fee to $9.95 in August, 2017. For that price, users of its red debit card could see a movie in the theater as often as once a day — a savings for people who see even a couple of movies a month. MoviePass, first launched in 2011, had previously operated as more of a niche player with its price of about $30 a month. The $9.95 deal angered some major cinema owners, who feared that audiences would become used to paying ultra-low prices and that if such deals stopped being offered, people would stop going to movies.
MoviePass bet on what many viewed as a wildly flawed business model: paying theaters the full price for each ticket its customers buy, with the intent to make money by selling consumer data and possibly getting a cut of theaters' concession revenue. But theater chains refused to share concession money, and the goal of selling consumer data to major studios and distributors didn't pan out.
Facing a cash crunch and a plummeting stock price, the company took out a $5-million loan in July to keep the service operating. It also irked customers by making dramatic changes to its offerings in order to stop hemorrhaging cash. In August it restricted subscribers to three films a month, leading to predictions of its speedy demise. Helios & Matheson reported a second-quarter operating loss of $126.6 million.
The company is also dealing with legal problems. The New York attorney general’s office is investigating whether the firm misled investors, and investors have filed class-action lawsuits accusing the company of not being forthright about its financial situation. Helios & Matheson has denied misleading investors.
Amid the turmoil, some subscribers have fled MoviePass for competitors. AMC Theatres, which has been vocal in its opposition to MoviePass, this year launched its own subscription service, allowing subscribers to see as many as three movies a week for $19.95 a month. That program has attracted about 400,000 users, according to Leawood, Kan.-based AMC.
Helios & Matheson said that after spinning off MoviePass, it plans to focus on its data analytics and technology business. The company would remain the owner of Zone Technologies Inc., which makes a mapping and crime data app called RedZone Map.