MoviePass' parent company, Helios & Matheson, is under investigation by the New York Attorney General to find out if it mislead potential investors in the popular subscription service. After MoviePass started allowing users to see a movie a day for just $9.95 a month in August 2017, the company started hemorrhaging money and wound up posting a 2018 second quarter operating loss of nearly $127 million dollars.
Since then, things have more or less been in a free for all with the company restricting users to three movies a month, then blocking high-profile new releases, followed by the introduction of peak pricing for hot ticket films and times. The company also suffered outages, as it's literally run out of the funds necessary to keep itself operational and relied on emergency loans to stay afloat until the ship could be righted. It's also been accused of the less than savory practice of un-unsubscribing its defunct customers and is currently the defendant in a class action lawsuit launched by its own shareholders. Predictably, its stock has plummeted.
Related: A Timeline of the MoviePass Meltdown
Now, New York Attorney General Barbara Underwood has launched her own probe into the company under the suspicion that they misled the investing community at large with regard to their financial viability. CNBC reports that - under the Martin Act, which protects New York investors and the financial community from fraud - the New York AG is in the early stages of an investigation into Helios & Matheson to see if they did, in fact, engage in misleading tactics to secure capital. At this point, given what is known about their overall business model, it's hard to see how they couldn't have.
Aside from billionaires with money to burn in the hopes they'll hit on the next Facebook, it's hard to believe how anyone could look at the MoviePass business model and not scratch their heads. No amount of user data sales would have ever made up for the staggering losses incurred when the company covered ticket costs that well-exceeded income received from the monthly subscription fees. Their insistence on growing their business to include the purchase of a production house and the distribution of their own films seems even more perplexing in the face of what appears to be a totally nonviable model.
While the company is still in business and most nights customers can see films with relative ease (especially if one of your theaters offers the rare and prized e-ticketing), and even if higher subscription fees and peak pricing level out its revenue, it may already be too late. If the New York AG's investigation uncovers the kind of behavior she expects to find, the company's eventual profitability might not matter in the end.