MoviePass: A Real Hollywood Horror Show
Dear Rundown Reader,
Today’s Rundown looks at the incredible story of MoviePass.
People love the service, but the company has major problems.
Today we examine what’s going wrong and show you how it’s affecting its holding company Helios and Matheson.
But first, a recent letter:
“I actually just commented to a co-worker that I was concerned with having a 30 year old wealth management professional manage an account for me, considering they may have never seen the market conditions on the horizon.”
It’s a fair question to ask. Maybe a concern worth sharing directly with your broker. See what they have to say. It’s your money, and they do work for you.
Your Rundown for Thursday, May 17, 2018…
Can America’s Best Consumer Deal Survive?
Great for consumers, terrible for shareholders.
That sums up MoviePass in a nutshell.
MoviePass is a service that allows people to a see new film, in the theater, everyday for a month.
The cost is $9.95 a month.
At the going rate of $15-$20 per show, you can see why this is one of America’s favorite services.
However for folks with positions in MoviePass’ holding company Helios and Matheson (NASDAQ: HMNY), things are not so great.
The Wall Street Journal reported one man, Michael D’Ariano, was so in love with the service he decided to buy a stake in HMNY.
“I’m saving $70 a month going to the movies and losing thousands investing in the company that’s letting me do that,” notes D’Ariano to the Journal.
HMNY shares have tanked 93% since the end of January. Shares closed Wednesday at $0.68, down from $3.83 a month ago.
The year-to-date chart isn’t pretty.
The biggest problem for MoviePass, and inherently HMNY, is the company’s burning through cash at an incredible rate.
According to CNN, MoviePass “burns through about $21.7 million every month operating the service.”
And Bloomberg reports HMNY will only have “$15.5 million in cash at the end of April and $27.9 million on deposit with merchant processors.”
With a 92% stake in MoviePass, HMNY executives must have panic attacks walking into the office each morning.
MoviePass still pays the full price of a subscriber’s movie ticket to theaters.
And as The Wall Street Journal notes, MoviePass’ “core business is designed to operate at a loss.”
In our opinion the solution is simple. Raise the cost of subscription 3x over.
Who wouldn’t pay $30 a month to be able to see a Hollywood flick whenever they wanted.
We don’t expect a check in the mail.
Now, turning to the markets this morning…
Market Rundown for Thurs., May 17
Yield on the 10-Year Treasury sits at 3.106% this morning, up 0.011.
S&P 500 futures are down 3.50 to 2,719.
Oil’s up $0.68 to $72.17.
Gold’s down $4.10 at $1,287.
Bitcoin costs $8,303 as we write this morning, according to CoinDesk.
We’ll talk again tomorrow.
For the Rundown,