Last time I mentioned Moviepass in May, the stock of its owner (NASDAQ: HMNY) was over $2. Today, it is nearing 20 cents! Lost 9/10 of its value in two months.
This latest plunge is related to a "hail mary" attempt to raise cash to fund its giveaway business model. It currently claims 3 million users and is losing $40 million ... every month!
Other news: the movie chains launched their own rival service. That's a smart move - kill off the value destroyer while it is still weak.
In the meantime, what does Moviepass say they are doing to keep alive?
One idea is "surge pricing": they are to impose surcharges for popular movies at popular times. And they have floated various other ideas to "upsell", generating more revenues from existing customers. It doesn't seem to realize that many of its customers are not the average movie-goer but the nickel-and-diming customers who smell a good deal when they see one, and will walk away if the deal isn't there.
The fundamental problem of the Moviepass business model has never changed - it loses money on all new customers, because it is paying full price for the tickets. Instead of fixing the problem on the new customers, it is trying to get as many customers in the "store" and then squeeze more money out of them while they are inside.
According to this Bloomberg article, the CEO explains that the strategy is "to sign up more subscribers who don’t go to the movies quite so often, making them more profitable." So he is betting on innumerate customers - people who don't understand that if they are paying $9.95 a month, they have to see at least one movie a month to make the subscription worth it.
Now, imagine you subscribe because you smell a good deal. The first movie you see is paid for by the monthly subscription. The next movie you see has to be paid for by another subscriber who has an idle month ("subscribers who don't go to the movies quite so often"). The third movie you see has to be paid for by another subscriber's idle month, etc. etc. If you see 10 movies a month, then Moviepass has to find 9 idle months to break even on your one subscription. And that is one month. The next month, if you see 10 movies, it has to find another 9 idle months to pay for them. (I'm using 10 movies not the maximum of 30 movies a month since I don't think there are 30 movies a month that someone can pay me to watch.)
Good luck to those who's still holding the stock.
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