MoviePass, a subscription service that lets users buy theater tickets with a single, monthly fee, is dealing with some new troubles after a disappointing quarter. In response, it now faces legal action from its shareholders. The platform has recently rolled out several changes to its rules to try to turn the company toward profitability. But the results of these strategies aren't apparent in the latest financial announcements. That's because they came relatively late in the quarter, which ended in June.
Until recently, MoviePass allowed users to see as many movies as they wanted for $9.95 a month. The company has covered the full cost of the tickets, which means that it was spending much more than it was putting in. But it's slowly throttled the service to staunch the monetary hemorrhaging. Changes have included only allowing users to see each movie a single time, requiring them to submit pictures of their ticket stubs, and not letting their customers see new releases like Mission Impossible: Fallout and The Meg until after they'd been out for a couple weeks. It also introduced "Peak Pricing," which would add a surcharge for shows during periods of high demand.
These measures might have slowed the flow of cash out of the company, but MoviePass is still far from profitability. According to Deadline. its parent company Helios and Matheson reported that it had in the quarter ending June 30, it had a net operating loss of almost $127 million. The troubles continued through July, when the service suffered an outage, reportedly because MoviePass had run out of money. And now, the beleaguered company has a fresh problem.
Shareholders are now suing MoviePass over "material misrepresentations and omissions" about the service's standing and viability. The class-action suit claims that "because the MoviePass business model was unsustainable ... it was inevitable that Helios would run out of cash or lose so much cash as to raise doubts as to its ability to continue as a going concern" and that the company withheld this information.
MoviePass recently announced new measures to turn its prospects around. Currently, MoviePass customers may only choose between two movies a day. The service is also making drastic changes to its subscription plan this week. Starting August 15, it will no longer require ticket verification and will eliminate Peak Pricing. But customers will be limited to three movies a month. The company will offer discounts up to $5 on further tickets depending on factors like demand and geography.
Nobody will know for a while whether the new system will make MoviePass profitable or if the service is too far gone to salvage. But Helios stock is currently trading at five cents per share, and the fresh legal trouble isn't likely to help, either.