When MoviePass launched a plan to allow moviegoers to see one movie per day for $9.95 per month, it seemed too good to be true in the eyes of many. It turns out the deal was legit—but it could be costing MoviePass millions of dollars in lost revenue.
According to a report from Business Insider, MoviePass has "negative cash flows from operating activities," which basically means it's losing money.
"MoviePass currently spends more to retain a subscriber than the revenue derived from that subscriber and MoviePass other sources of revenue are currently inadequate to offset or exceed the costs of subscriber retention," reads the report. "This results in a negative gross profit margin. MoviePass expects its negative gross profit margin to remain significant until MoviePass can sufficiently increase its other sources of revenues to offset the losses or achieve substantial economies of scale."
MoviePass originally launched in 2011 with a starting rate of $15 per month. But when the company dropped it to a flat monthly fee of $9.95, it quickly gained popularity, which led to a whopping two million subscribers. But MoviePass still pays each movie theater the full price for each ticket—which is often more than it charges for its monthly fee. Although it's since stopped letting new subscribers in on the deal—thanks to a promo deal with iHeartRadio—it plans to make the $9.95/month deal available to new subscribers again in the future.
The company has some ideas to combat its losing profits as well. Earlier this year, Deadline reported that MoviePass is trying to get discounts from AMC theaters while collecting 20 percent of concession profits as well. It's also seeking to gain more subscribers in smaller cities where the ticket prices are cheaper, and reportedly have a deal with Mark Cuban's Landmark Theaters in the works. While the future may look grim, fans of the popular service shouldn't lose all hope just yet.