MoviePass’ owner lost $126 million last quarter, compared to less than $3 million a year ago
MoviePass’ recent struggles are no secret, but things just got even worse.
The movie subscription service’s parent company Helios & Matheson Analytics Inc. filed its quarterly earning report, revealing it ran up an operating loss of $126.6 million in the three months ending Jun. 30.
The loss is well up from the $2.74 million deficit racked up by the company the same time last year. Helios & Matheson said that without additional funding, it “will not have sufficient funds to meet its obligations” by Aug. 14, 2019.
To add more headaches, one shareholder has filed a class action lawsuit in the Southern District court of New York against Helios & Matheson, plus its CEO Ted Farnsworth and CFO Stuart Benson, for being misled about the company’s business and prospects.
“Helios was touting MoviePass’ valuation and path to profitability even though there was no reasonable basis to even imply that the MoviePass business model could lead to profitability for Helios,” reads the filing by Jeffrey Braxton, posted by Deadline.
“MoviePass’ business model was not sustainable because there was no reasonable basis to believe that MoviePass could monetize the model to a degree that could be maintained before being too buried in debt to survive.”
MoviePass has already responded to its financial problems by altering its plans, limiting customers to three movies per month under the $9.95 plan from Wednesday.
Previously, users could watch one movie per day, per month. The old $7.95 plan, which also allowed customers to watch three movies a month, is no longer offered.
The changes and interruptions to its service have prompted MoviePass subscribers to cancel, but some users reported they’ve had their plans renewed instead.
MoviePass apologised to members who had been affected, and said it “fixed the bugs,” maintaining that “none of our members have been opted-in or converted to the new plan without their express permission.”
“We are in the process of transitioning our members to the new, $9.95 plan, which launches officially on August 15,” a spokesperson said.
“Those who have not already done so will continue to have the choice of either opting in or canceling their membership over the course of the coming weeks. Monthly subscriptions will automatically expire for members that do not respond by the end of their billing cycle.”
Additional reporting by Shannon Connellan.