MoviePass’s 3 million members are costing it a fortune.
Helios and Matheson Analytics, which owns 92% of MoviePass, posted a $126.6 million loss during the second quarter of 2018, it revealed in its quarterly earnings report Tuesday (Aug. 14). Much of that was due to rising costs of running MoviePass.
The movie-ticket subscription service, which charged members $9.95 per month to see a movie each day, generated about $74 million from selling subscriptions, and marketing and promoting movies to its members during the quarter. But the cost of that revenue, such as paying for the tickets members used and marketing materials, was more than double that, resulting in a $105 million loss from MoviePass’s businesses, before operating expenses. Those costs included the acquisition of MoviePass and the formation of subsidiaries MoviePass Ventures and MoviePass films, as well as standard operating expenses.
By Quartz’s back-of-the-envelope calculations, that comes out to an average loss of $34.92 per subscriber for the quarter.
Earlier this month, MoviePass CEO Mitch Lowe told CNNMoney that 15% of subscribers—who went to the movies four or more times a month—accounted for 40% of its costs. In that case, MoviePass would have lost about $133.85 on each of those very frequent moviegoers. That translates to those users going to roughly 17 movies per quarter, based MoviePass’s cost of revenue and the average national ticket price in the US, which was $9.38.
Starting today, MoviePass is rolling out a cap to its subscription that limits subscribers to three movie tickets per month for the same price of $9.95, as opposed to the movie per day they used to get. The company says subscribers, who totaled 3.2 million on Aug. 10, will also be able to buy more tickets through the service for $2 to $5 less than the ticket price.
MoviePass has been charging members fees to see popular movies and showtimes for the last month as well, a practice it calls “peak pricing.” It’s also been barring users from seeing big blockbusters like Mission: Impossible—Fallout and The Meg during their first few weeks in theaters, which may cut down on costs it incurs for the next quarter. Both those practices are supposed to be ending now that the ticket cap is going into effect. The company says the new subscription model will slash its cash deficit by 60%.
The company also hopes to grow its marketing and promotions business to further offset the costs of subscriptions, and ultimately, turn a profit. MoviePass generated about $935,000 in revenue from those efforts during the second quarter, down from $1.4 million in the first quarter. The company did not break out that segment during the same period a year ago.
Helios’ stock price was down about 13%, to around $0.04, at the time of publishing.