MoviePass Is Coming Back -- but Why?

I'm sure you remember MoviePass. The subscription-based service would let you pop in at the local theater for one screening a day, at the extremely low price of $10 per month. The business was acquired in 2017 by a small data-focused company named Helios and Matheson Analytics, which never figured out how to make money from this unique idea. Seventeen months later, Helios and Matheson filed for bankruptcy, and MoviePass disappeared.

Well, it's back from the dead.

Co-founder Stacy Spikes has bought MoviePass -- the company that fired him -- out of bankruptcy, presumably for pennies on the dollar. One might wonder why Spikes wants to resurrect an utterly failed business model. Let's take a look at what MoviePass 2.0 hopes to accomplish in 2022.

A popcorn-toting moviegoer shows a ticket code on a smartphone to an usher.

Image source: Getty Images.

Things are different this time

The rebooted MoviePass will not offer completely unsustainable discounts on movie tickets, the way the first iteration of this company did. Spikes was reportedly a voice of reason back then, fired for his habit of raising objections to the cash-draining operating model.

For example, the all-you-can-watch plan was supposed to be a time-limited promotion, not a permanent feature. The idea generated skyrocketing user growth but also ate through the company's money, creating more than $219 million of negative free cash flow before it gave up the ghost. Helios and Matheson kept the lights on by selling more stock and taking on high-interest debt. Banks and shareholders ran out of patience with that approach, forcing it into bankruptcy.

So Spikes must have learned a few important lessons in cash management from that debacle, on top of the fiscal objections he raised along the way.

Data from the failed launch showed that MoviePass never really moved the needle for blockbuster hits. Instead, the service turned out to be an audience-boosting boon for smaller titles -- the passion projects and the art films that never land on the top of the weekly box-office charts. Leaning on that insight could help MoviePass 2.0 rebuild a client list that isn't all about cost savings, but is more focused on driving traffic to the theater for smaller titles.

Furthermore, the movie industry of 2022 is radically different from the Hollywood version that MoviePass encountered in 2018. The COVID-19 pandemic shut down theaters and movie productions entirely for several months, and movie theaters are still having serious trouble getting foot traffic through the doors. The movie experience is moving into living rooms through ultralarge TV sets and digital streaming services. Theater chain giants AMC Entertainment Holdings (NYSE: AMC), Cineworld Group (OTC: CNNW.F), and Cinemark Holdings (NYSE: CNK) were fighting MoviePass tooth and nail three years ago; today, they might be more welcoming to anyone and anything that could help them overcome the challenges of the coronavirus.

MoviePass did actually achieve something the first time around. By the time Helios and Matheson went belly-up, MoviePass had sown the seeds of revolution. Every major theater chain now offers its own subscription program for movie tickets, starting with Cinemark's Movie Club in December 2017, followed by the AMC Stubs A-List program in the summer of 2018. Cineworld's Regal dragged its feet all the way into 2019, and the Regal Unlimited service comes with more restrictions than its peers' offerings. But they all jumped aboard in the end.

I mean, they're really different

Keen on staying on the bleeding edge of new technology, Spikes wants to build the new MoviePass service around blockchain technologies. When the service launches this summer, it will let users buy, sell, and trade movie-watching credits through a blockchain-based marketplace. Higher-end service plans come with more credits per month, and Spikes wants to make the most of the cryptocurrency-style platform.

"Customers, theaters, and studios will be able to trade in everything from commemorative NFTs to digital currency and more," Spikes said in an Inc. interview. He wants a full-fledged Web3 service, far beyond the clumsy system of debit cards tied to a mobile app in the original MoviePass system. So if you end up buying more movie credits than you're using, you could sell them to other MoviePass users, or trade them in for commemorative non-fungible tokens (NFTs), among other things.

Just as MoviePass 1.0 introduced subscription-based movie tickets to the cinema sector, MoviePass 2.0 may serve as a useful training ground for how to make the most of blockchain services in the movie industry. That's a helpful idea, though it remains to be seen exactly how successful it may be in the rapidly changing movie industry of 2022.

MoviePass is actively looking for institutional investors, possibly leading up to a stock-market entry somewhere down the road. Patience is a virtue, for both investors and business leaders, and paying closer attention to that adage would have been a good idea for MoviePass in 2018. You can't invest in this business quite yet, but it's probably for the best that MoviePass first gets to flesh out its operating model and prove that it can flourish this time.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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