Data Dive

Data Dive: The Uncertain Future Edition, MoviePass, Credit Cards And Seattle Taxes

Summer is here, the heat is on and what’s on the menu for the next three months is more or less a known commodity.

But the commerce ecosystem’s weather is far less a known commodity, and it’s occasionally hard to tell which way the wind is really blowing.

For example...

MoviePass: The Show Will Go On 

With the rapid scaling back of its movie ticket subscription program — combined with reports that the startup is burning through funds at such a rapid clip that it only has enough cash on hand to survive for another month or two, MoviePass has investors worried.

And Helios & Matheson Analytics — the parent firm of MoviePass — remains concerned about a cash crunch.

But Ted Farnsworth, head of Helios & Matheson Analytics, said the firm actually does have enough cash to survive and thrive.

Farnsworth, in a Variety interview, noted that the firm continues to have a $300 million equity line of credit, which is more than enough to keep the firm afloat while it hits reset.

“There’s been a feeding frenzy of negativity, but it’s not going to slow us down,” said Farnsworth in the interview. “I’m not worried at all. You’re going to see. We’re doing more acquisitions of movies and companies.”

According to legal filings, the firm claims it has $15.5 million in cash, less than it typically spends per month to fund ticket buying.

While Wall Street and investors are growing skeptical about the service that gives users free visits to the movies through a monthly subscription, Farnsworth is undeterred.

“We’ve got 17 months’ worth of cash without further raises of capital,” the executive said.

MoviePass loses money on tickets since it purchases them at full price.

AMC Theaters Chief Adam Aron said MoviePass users were going to movie theaters multiple times a month and said he was skeptical customers of the service will reduce attendance to the levels MoviePass needs to stay profitable.

Farnsworth took issue with those comments.

“They’re trying to put us out of business,” he said. “We’ve become a serious threat.”

Farnsworth also noted the company was completing a big acquisition that it will announce at the Cannes Film Festival in the coming days.

“It’s going to be substantial. People are going to go, ‘Hmm how did they pull it off?’” the CEO said.

Credit Card’s Profit Squeeze

Credit card companies, faced with an increase in costs associated with rewards and rising loan losses, have seen their profitability dip of late. According to Wall Street Journal reports, credit cards remain a lucrative form of lending, but they aren’t seeing much benefit from the Fed raising rates of late — as what small increases there have been are offset by competition from other lenders trying to steal customers with lower interest rates.

The balances on credit cards have grown at a fast pace — up 7 percent year over year in the early part of 2017. Balances of the industry surpassed $1.03 trillion in January 2018, setting a new record. But those increased rates came with increased losses, as banks were forced to push more money aside for future write-offs.

Banks also got more strict with their lending requirements, which resulted in a slowdown in credit card balance growth. The paper noted that American Express, Capital One, Citigroup, Discover Financial and Synchrony Financial had a median return on their assets of 2.1 percent in the first quarter, which is higher than the 2 percent in the year-earlier first quarter, but lower than the two years prior when it was 2.6 percent.

Compared to two and a half years ago, returns are flat or down in certain instances.

“Rising rates [are] a mixed blessing for the card issuers at this point,” said Brian Foran, an analyst at Autonomous Research.

Seattle Taxation Change of Heart

It looks like the tax situation in Seattle may be getting a bit stickier: Seattle’s city council has approved a new tax for the city’s biggest companies, including Amazon, to combat a housing crisis impacting the city’s working class.

Reports indicate that the tax comes as Seattle considers the housing crisis at least partly brought on by a local economic boom that has spiked the cost of local real estate.

The new tax passed with a 9-0 vote and is meant to affect most companies grossing at least $20 million a year. At $0.14 per employee per hour working within the city, the new tax would cost companies about $275 annually for each worker. Analysts estimate the new tax will bring in $45 to $49 million per year over five years.

The funds will be put toward the construction of affordable housing and to provide support services for the local homeless.

The tax would end after five years unless the city chooses to renew it.

Amazon was one of the leading opponents of the plan, noting that it was pushing pause on plans for a new major downtown office building, also known as the Block 18 project. As the eCommerce giant is the city’s largest employer, the move put more than 7,000 jobs in jeopardy.

However, the company said after the vote that it would resume construction on the project.

“We remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” noted Amazon’s Vice President Drew Herdener added in an interview with CNN Money.

The move will effect other big players in Seattle, like Starbucks and Nordstrom, as well as Northern California-based firms like Apple, Google and Facebook, which have a large enough presence in Seattle to be subjected to the new levy.

The tax is expected to affect about 500 companies — 3 percent of the city’s private sector — while healthcare companies and non-profits are exempt.

So, what did we learn this week? The story can always change in unexpected ways.

Have a great week.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.