Working Capital Sizzles, Wells Fargo Fizzles And MoviePass Faces An Uncertain Future

It’s never a good sign when the headlines begin widely speculating about a firm’s impending demise. That’s currently the media narrative for MoviePass, which has everyone wondering whether it’s heading for its last curtain call.

“Enjoy MoviePass While It Lasts,” the team at Vanity Fair noted, while Slate wondered, “Can MoviePass Survive The Summer?” CNN, with its typical blunt tone, asked, “Is the End Here For MoviePass?”

It’s savage out there; those were just a couple of the highlights.

It’s a rough run of luck for a firm that exactly one month ago was talking up its acquisition of Moviefone with PYMNTS and explaining its big plans for getting people back into theaters.

“Over the last month, we have been buying about 6 percent of all movie tickets nationwide,” CEO Mitch Lowe told Karen Webster a conversation, noting that because consumers are able to essentially see 30 movies in a month for the price of one, they tend to go to the movies more often — and take more chances while they’re there.

“People don’t use our service to see another Marvel movie — they will use it to take a chance on a movie like ‘Gringo’ or ‘Ladybird’ that they might not have seen,” Lowe noted.

But less than two weeks after that rather upbeat interview, things were beginning to look less than idyllic over at MoviePass. The firm’s $10 a month for one-movie-a-day plan was quietly replaced with a $10 for four-movies-a-month plan, with a subscription to iHeart Radio that no one really had asked for or seemed much to care about getting.

There was ample grousing about the change — despite the fact that 88 percent of MoviePass subscribers see fewer than four movies per month and that taking away the unlimited option would only affect about 12 percent of the company’s customer base. Still, even customers who didn’t necessarily use the 30 tickets in 30 days option were somewhat miffed to find out they no longer had access to something they didn’t use but might some day.

But the $10 for four movies offer was only for new customers; those who had signed up under the old agreement were allowed to keep their unlimited movie memberships. And the $10 price point itself was a fairly recent change from the $30 a month the firm was charging before last August. That very tempting promotional price brought MoviePass’s membership figures from 20,000 users to more than 2 million.

One might have concluded it was a promotional tool that had served its purpose — but was perhaps not ever intended to be a permanent price point.

But things began to look really hairy earlier this week, when in a filing from the Securities and Exchange Commission, MoviePass’ parent company, Helios and Matheson Analytics, noted it has about $15.5 million in cash on hand, plus another $27.9 million in accounts receivable.

The firm also noted that it burns through cash at a brisk clip — about $21.7 million a month — giving a strong impression for anyone who can do simple addition and subtraction that the service might not be around much longer.

“They appear to have enough cash to last two months,” Michael Pachter, an analyst for Wedbush Securities, told CNN. “Sounds like a terrible business model to me, and I can’t imagine that any sophisticated investors will view it differently.”

Indeed, it seems they don’t: Helios and Matheson shares have been falling for months. As of this week, they’re trading for less than a dollar after being sliced nearly in half (down by 46 percent) on Wednesday.

However, MoviePass remains optimistic about what’s next.

Helios and Matheson CEO Ted Farnsworth said its rapidly expanding user base will be important in making the service profitable in the future. In a statement to CNNMoney, he further noted the company always knew MoviePass would burn through a lot of money.

“We have access in capital markets to over $300 million,” Farnsworth said. “So, there is plenty of cash available to sustain the subscriber growth and movie-going habits of our users.”

Farnsworth, according to CNN, did not elaborate on the $300 million figure in his statement, and he was not immediately available for additional comment.

MoviePass also still has moves left when it comes to generating revenue. In his conversation with Karen Webster, Mitch Lowe noted that advertising within the mobile app remains a possibility.

“Brands and studios have been telling us they want to expend some of the big advertising budget with us, and then ask us what our inventory is,” he said. “And right now, the truth is, we don’t have any, because MoviePass doesn’t have ads in its current formulation. That will likely change, but this is a way to accelerate that revenue stream.”

Perhaps it will, although MoviePass did find itself in some hot water with users earlier this year when it was discovered the app was tracking users to see where they were going after the movies — which users did not like (MoviePass discontinued the practice in March). Monetizing its user base by targeting advertising to their data might be a bit tricky, particularly in a post-Cambridge Analytica world where consumers are concerned about data privacy.

But for now, MoviePass has a more pressing problem: how to bring in enough revenue (mystery $300 million notwithstanding) to keep the curtains up and the film reel rolling.

It may be a bit early to declare “The End.” We suspect a firm that has played around with its business model as much as MoviePass has may still have some interesting moves left to make. But, at least for this week, given all of the fits and starts and red ink, the fizzle of the week rating seems reasonable.

Sizzle

Working Capital Is Everybody’s (Pay)Pal: No anarchy in the U.K. here. PayPal offers up an additional $300 million in working capital since last June to small businesses in the U.K. In an arena where working capital is the lifeblood of firms, and especially where late payments seem to be a systemic problem, such loans may be critical.

Lyft: May get a lift by giving lifts on a subscription basis, testing and rolling out new monthly plans. The company is expanding on its All Access plan. The ridesharing firm is giving some customers the option to hop on a waitlist.  Recurring revenue is a Holy Grail of many a firm, and might be in reach for Lyft.

Developers to Develop Robust Bank Accounts: Microsoft is changing its revenue model a bit, and developers working on mobile apps will earn more. That new wrinkle comes as purchases are made across Windows 10 PC and other devices.

Fizzle

U.K. Construction Firms: Call it a Domino effect. One construction contractor, Carillion, collapses, and a ripple effect hits smaller firms. A survey of 400 smaller firms in the space shows a 30 percent increase in the number of those respondents who said they have been on the brink of collapse.

India and Loan Defaults: SWIFT sees an “unprecedented” wave of defaults here, as bad loans are creeping up on banks’ books, up nearly 5 percent year over year. Bad loans are as much as $145 billion in that country, and large corporates are as much as 17 percent of non-performing loans.

Wells Fargo: Fines, fines and more fines — so, not so fine. Workers did not get rest breaks in Calfornia, and under that state’s rule, such breaks are mandatory. Thus, the bank will have to pay $97 million to a slew of private mortgage bankers and consultants. This all stems from a 2017 suit brought against the company.