MoviePass wants to revolutionize the theater-going experience. With its subscription service, film fans can pay $9.95 a month and have the ability to go see one movie per day at almost any theater. With the rising cost of movie tickets, this is an incredible deal for consumers. However, many critics point out how the company will just continue to lose money.
Well, those critics are now going to have a little more ammunition against MoviePass.
In an independent financial audit by Rosenberg Rich Baker Berman & Co., the subscription service isn’t given a glowing review. The audit claims (via Variety) that Helios & Matheson (the subscription service’s parent company) “has suffered recurring losses from operations and negative cash flows from operating activities,” adding that “this raises substantial doubt about the company’s ability to continue as a going concern.”
The terms “substantial doubt” and “going concern” are definitely not what the subscription service wants people to think about the future of their company. But let’s be honest, this was bound to happen. On paper, the theater-subscription model doesn’t make sense. With charging under $10 a month, MoviePass is losing money the first time anyone uses the service.
“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,” the audit reads. “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.”
However, CEO Mitch Lowe and other executives tout the incredible amount of credit the company has, and the future sources of revenue they claim are imminent. Just a last month, it was announced that MoviePass and Landmark Theatres had reached an agreement to enter into a deeper partnership (IE – profit-sharing). However, Landmark isn’t one of the big theater chains out there, only operating a few dozen locations. For MoviePass to really become profitable, they’re going to need to woo the big companies like AMC Theaters.
Until then, it looks like MoviePass really is on borrowed time, and there’s definitely “substantial doubt” about the future. So, use those cards while you can!