Helios & Matheson (NASDAQ:HMNY) announced this morning that its majority-owned movie ticket subscription service MoviePass added an impressive 500,000 subscribers in just the past 30 days. The company’s total subscriber count now stands at 1.5 million.
MoviePass has been flying on a hockey stick trajectory since it announced in August that it had lowered the price of its movie ticket-a-day service from approximately $40 to $9.95 a month. That’s less than the price of a single ticket in most theaters across the United States, yet the service allows subscribers to attend as many as 31 movies in a given month, with the entire cost paid by MoviePass.
The 500,000 subscriber gain represents a huge acceleration for the booming service. In the six years from its founding in 2011 to Aug. 14, 2017, when it announced its new pricing plan, MoviePass accumulated just 20,000 subscribers. By mid-September it had zoomed past 400,000 — a 20-fold increase — and by late November it had reached one million.
That implies a current revenue run-rate of at least $180 million a year, and growing fast. But the company’s expenses — which haven’t yet been disclosed in an annual filing — are presumably much higher than that. MoviePass CEO Mitch Lowe has expressed confidence that the service can make a profit from collecting and selling behavioral data about its subscribers, and he told me that he expects that costs will level off as the average subscriber's usage drifts down to attending just one movie per month. Both of those claims have been met with widespread skepticism by analysts and stock market investors.
That skepticism explains HMNY’s modest stock price of just $7.14 per share (it had peaked at $38.86 last October). Today’s announcement of 50 percent subscriber growth in 30 days has barely registered with investors, who pushed the price up by just 3 percent in mid-day trading. Its market cap of $147 million is just 0.8x times imputed annual revenues.
Still, MoviePass wouldn’t be the first online consumer service to grow exponentially without earning a profit, and its prospects are far from bleak. When I interviewed MoviePass CEO Mitch Lowe in September, he told me his target was to reach 2 million subscribers by year-end 2018. At this rate he’ll reach that total in February.
The former Netflix executive and co-founder told me that with scale will come additional revenue opportunities, including possible movie distribution and even financing and production. "When we get to 10 million subscribers,” he told me, we'll be able to generate $7 million in additional box office for an independent film. At that point it makes sense for us to get into the distribution business."
Whether MoviePass can get that far will depend largely on Lowe’s ability to manage the challenges that come his way. So far he has managed to survive an enormous consumer backlash that arose when MoviePass failed to make timely delivery of its membership cards to paying members, and he’s overseen torrid growth despite continuing customer service problems. Still, movie lovers should take advantage of the $9.95/month service while they can. MoviePass and its parent Helios could potentially run out of money before they reach their goals, or they just might have to jack up that low price to a more sustainable level.