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MoviePass might be ready to capitalize on just how much movie lovers have missed going to a theater this past year. After shutting down the service in 2019, the company teased that a revival would be on the way. There was a countdown on the company’s website that said, “The movie is about to start,” with no other details. Now that movie theaters are starting to reopen, MoviePass is ready to join in on the fun.
The subscription-based movie ticket service experienced financial issues due to its business model. The idea was that the company would buy tickets in bulk at full price and offer them for free to users in exchange for a flat monthly fee. MoviePass shook up the theater industry in 2017 when it announced that its subscribers could go to the movies every day for less than $10 a month. To help with revenue, the company later tried removing signature features, created price tiers, and added surge pricing to no avail. The appealing offer helped them reach two million subscribers, but the company still couldn’t shake reports of “negative cash flows” and that they were hemorrhaging money.
MoviePass was supposed to be the future of movie-watching and would inspire more people to go to the cinema instead of staying home with Netflix. Paying $9.95 a month for a movie a day seemed like the dream deal for movie lovers, but it wasn’t a profitable enough venture to keep the company afloat. Stacy Spikes, one of the service’s original co-founders, successfully bought back the company out of bankruptcy in November 20211, with plans to relaunch it. If you’re not familiar with the rise and fall of MoviePass or if you need a refresher, we’ve put together some significant moments in the company’s history ahead of its promised summer 2022 return.
MoviePass had a rough start
MoviePass tested its service for the first time in June 2011 in San Francisco, offering subscribers the opportunity to see one movie each day for a monthly fee. The service required subscribers to print out vouchers for each movie ticket at home, but subscribers complained that the system was too complicated to use. The company launched nationally in October 2012, with the service costing between $29 and $34 each month, based on the user’s city. The new system employed a mobile app attached to a MoviePass debit card, with funds made available for use at the ticket kiosk when the user selected a movie and screening time. Members were told the card would work at all major theaters, but theater chains like AMC and others opted out of using the service.
AMC agreed to a partnership with MoviePass
MoviePass pitched the idea to join forces with AMC by saying the partnership was the theater industry’s future, similar to Netflix-style subscription services. AMC agreed to a partnership with MoviePass in December 2014 after a decrease in movie ticket sales that year. AMC Theaters, which is the No. 2 chain in North America behind Regal Entertainment, agreed to allow people to attend a movie a day for a monthly fee as part of a trial run. “It frankly wouldn’t be smart to ignore the success of subscription in other areas of media,” senior vice president for corporate strategy at AMC Christina Sternberg said at the time. AMC theaters in Boston and Denver began offering MoviePass monthly subscription packages for $45 and $35 and planned to add more cities in time. “The data will determine how fast we go,” Sternberg also said. “Sometimes you first expand the test, sometimes you accelerate the deployment.”
Mitch Lowe introduces subscription tiers to MoviePass
Former Netflix and Redbox executive Mitch Lowe joined MoviePass as the new CEO in 2016. Lowe brought on changes to the service, including testing different subscription plans based on how many movies users planned to watch per month. The higher the price, the more movies users could watch. After an investment from Studio Movie Grill, MoviePass launched a promotion that allowed users to watch 30 movies a month for just $10. For a limited time, theaters owned by Movie Grill offered their customers a MoviePass subscription for $9.95, which got them a movie ticket a day. The service would usually cost $50 a month, and the MoviePass CEO anticipated the financial strain it would put on the company. “It will be expensive for us, but it’s part of our subscriber acquisition costs,” said Lowe at the time. “We bear the risk of over-usage and get the benefit of under-usage.” At the time, the service had 20,000 subscribers and almost $10 million in yearly revenue.
Helios and Matheson purchased a majority stake in MoviePass
Analytics firm Helios and Matheson purchased a majority stake in the company in 2017. That August, the company announced they would be dropping the MoviePass membership prices to just $9.95. The new subscription plan offered users a movie ticket a day in any theater and market. That meant the company began spending more on its users than they would pay to use the service. The company planned to find profit for the service by increasing its number of members and then selling targeted advertising based on its members’ interests, the way Google and Facebook do to keep their services free.
With the new price, the company saw a surge in subscribers, reaching 400,000 subscribers. The company wasn’t prepared to keep up with its new users. The demand was so high that it caused the MoviePass website to crash, and that’s when AMC announced that the “unsustainable” MoviePass and its subscribers were no longer “welcome” at its theaters. MoviePass card shipments were delayed, and customer service was overflooded. While the company relied on users to not take advantage of their membership, some subscribers were watching multiple movies a day, which created an increase in spending and a loss in revenue. By the end of 2017, MoviePass announced that it had more than one million subscribers.
Controversy follow the company into 2018
After reaching two million subscribers, the company began reducing its prices from $10, down to $8, and then to $7. The company’s financial statements then showed it was losing $20 million each month due to the low subscription costs and outsized subscriber base. MoviePass began cutting back and adding restrictions for its services. The unlimited plan for $10 per month was no longer an option for new subscribers, and the new plan limited users to just three movies each month. Subscribers were also restricted from buying multiple tickets to high-demand films, with the company saying its members were misusing the service. After losing over $40 million in May, the company began raising ticket prices for popular movies and showtimes. Subscribers began complaining about website outages in July while they attempted to buy tickets for popular movies. The MoviePass website crashed during weekends in July and August, so the company began limiting subscribers to choosing between just two films a day as it went into a “transition period.” The service later announced an end to its controversial surge pricing.
A Securities and Exchange Commission report was filed following the technology issues and revealed that MoviePass secured an emergency $6.2 million loan to its merchant and fulfillment processors. The filing showed that if the company cannot pay these merchant and fulfillment processors, they “may cease processing payments for MoviePass, which would cause a MoviePass service interruption.” The document confirmed that “such a service interruption occurred on July 26, 2018.” A day before the release of one of the biggest films that year, Tom Cruise’s Mission: Impossible – Fallout.
Many subscribers who attempted to cancel the service after the incidents had trouble doing so. They were also automatically re-enrolled in the new MoviePass service announced later that month. Complaints from users began circulating, saying the company signed them up for the new service with little notice and just a few weeks to opt-out of the new subscription.
Whenever people in charge of a company start jumping ship, it’s never a good sign. Chief product officer Mike Berkeley left MoviePass in September 2018, just six months after the industry vet was hired. A board of directors member for Helios and Matheson Analytics resigned, citing concerns about corporate management. Things only got worse when New York Attorney General Barbara Underwood began investigating MoviePass’s parent company Helios and Matheson for potential fraud to determine whether the company misled investors regarding its assets. “We believe our public disclosures have been complete, timely, and truthful, and we have not misled investors. We look forward to the opportunity to demonstrate that to the New York Attorney General,” Helios and Matheson said in a statement to CNBC at the time.
MoviePass suspended its service indefinitely
Customers’ credit card numbers were exposed
Before the service shut down, TechCrunch reported in August 2019 that a researcher at cybersecurity firm SpiderSilk found a massive encrypted database that exposed tens of thousands of MoviePass customers’ credit card information because a critical server was not password protected. Mossab Hussein, a security researcher at the cybersecurity firm, found an exposed database containing 161 million records, including sensitive user information, such as MoviePass customer card numbers and personal credit card numbers.
MoviePass’s parent company settled in court for $8 million
Law360 reported in December 2020 that former executives of the app and its parent company agreed to pay $8.25 million to end investors’ New York federal court claims that they misled the public on the moviegoing subscription service’s profitability. MoviePass subscribers also went after the company legally, filing class-action lawsuits alleging that they could not use the service as promised due to the company blacking out certain movies and locations. One lawsuit in New York claimed the company used a “deceptive and unfair bait-and-switch scheme,” deceptive advertising, and breach of contract. The case was seeking to represent all customers who subscribed between February 2013 and August 2018.
There might be a MoviePass rebirth on the horizon
It was announced in February that Mark Wahlberg’s production company is working on a docuseries on the chaotic rise and fall of MoviePass. The series will be based on Insider reporter Jason Guerrasio’s coverage of the service. Now fans of the service have had their hopes renewed of MoviePass’s resurrection after an updated official site shows a countdown with the phrase “the movie is about to start.” According to the clock, the big reveal should happen on Monday, March 22, at noon EST.
It was announced on Nov. 11 that one of the company’s cofounders Stacy Spikes purchased the rights to MoviePass in bankruptcy court and has plans to relaunch the company. Spikes gave a statement about the purchase to Insider, saying, “I can confirm that we acquired MoviePass out of bankruptcy on Wednesday. We are thrilled to have it back and are exploring the possibility of relaunching soon. Our pursuit to reclaim the brand was encouraged by the continued interest from the moviegoing community. We believe, if done properly, theatrical subscription can play an instrumental role in lifting moviegoing attendance to new heights.”The purchase didn't include the company’s data or former customers’ email addresses.
MoviePass was put up for sale in bankruptcy court last year, and according to Insider, the “minimum bid set by the trustee was $250,000” and “there were no competitive bids” at the time. In February, Spikes hosted an event to announce that a new, updated version of MoviePass, with new features, would be available in summer 2022.
