MoviePass Stopped Working Last Night Because It Ran Out of Money
There's long been a perception amongst casual moviegoers and industry observers that the deal offered by MoviePass, the startup that lets you see one movie a day for less than $10 a month, was too good to be true. How long can the ultra-cheap subscription service last until they run out of money or until the big movie theater chains strike back? For a period on Thursday night, it looked like the end was near: MoviePass service was temporarily halted because they couldn't afford to pay for all the movie tickets people were buying.
How did they fix the problem? Helios and Matheson, the parent company behind the mega-popular but financially shaky service, hastily borrowed a ton of cash -- $6.2 million, exactly -- to attempt to turn the lights back on and hopefully get movie fans those cheap tickets to the screenings of Mamma Mia!: Here We Go Again they so desperately need. The money came from Hudson Bay Capital Management, the firm that helped secure $25 million in January after a $100 million investment fell through.
"The $5.0 million cash proceeds received from the Demand Note will be used by the Company to pay the Company's merchant and fulfillment processors," the company wrote in a filing first reported by Business Insider. "If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc. ('MoviePass'), which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018."
This short-term loan, however, could soon wreak more financial horrors for Helios and Matheson: as Bloomberg writes, the lenders can "demand repayment of more than $3 million of the loan" on August 1 -- all of five days away. "If the company is 48 hours late in its payment, Hudson Bay can require the company to repay the debt at 130 percent."
But, at the time of this writing, there are reports that users are still experiencing technical difficulties with the service. Some MoviePass users are seeing an in-app alert that reads: "We are presently experiencing some technical issues with our card-based check-in process and we are diligently working to resolve the issue. In the interim e-ticketing is working. We apologize for the inconvenience and appreciate your patience while we resolve this issue. This message will be updated once the issue is resolved."
Unsurprisingly, the interruption was noticed by users on social media and the company has taken to Twitter to attempt to diffuse the situation with some tweets.
In addition to dealing with frustrated customers, the company's stock, which has experienced wild fluctuations as the details of the subscription service have changed in recent months, has also taken a hit. At risk of being below the Nasdaq's minimum share value, which would mean it'd be delisted from the exchange, Helios and Matheson issued a reverse stock-split -- essentially, a retraction of a certain number of a company's shares in an effort to make the ones still out there more valuable -- earlier in the week that raised the price, and Helios and Matheson's stock tanked. (It's currently trading at $2.81 after opening around $7 on Friday morning.) Not exactly a strong way to enter the weekend.
That's not the only headache that MoviePass has experienced this week. Since introducing "surge pricing" earlier in July for popular films, the company has faced criticism from customers accustomed to the service's old practices. One only needs to take a look at the MoviePass Twitter feed to see the company dealing with angry users attempting to purchase tickets for Mission: Impossible - Fallout.
Are we in the midst of the MoviePass apocalypse prognosticators have been predicting for months? As with most things MoviePass, it's hard to say. Given the way the company runs, its past debacles, and the curious financials keeping it afloat -- it's up to a $98 million deficit, according to TheStreet, and has considered financing itself with cryptocurrency through an Initial Coin Offering, according to Yahoo -- it wouldn't be surprising if they again manage to weather this PR storm. At this point, the sense of unpredictability and the feeling of impending doom has become as essential to the MoviePass experience as the (sometimes) low-priced tickets.