LAS VEGAS — MoviePass has had a hard few months.
Furious customers have flooded social media sites with complaints about abrupt, unexplained shifts in service and marathon waits for membership cards. Technology glitches have caused headaches. And then there is an auditor’s report that expressed “substantial doubt about its ability to continue as a going concern.”
But the men behind MoviePass, a cut-rate, subscription-based service for movie theater tickets, arrived at a film industry convention here this week with a sunny message that many theater owners — and even some MoviePass customers — have a hard time believing: Everything is handled.
“I’m not worried about the viability of MoviePass at all,” said Ted Farnsworth, chief executive of Helios and Matheson Analytics, which owns 92 percent of the service, with Verizon holding the balance. “Our customer service has dramatically improved, we’ve worked out the little bugs with the technology and we have plenty of money to get through the next year.”
But what about the disclosure by Helios in a Securities and Exchange Commission filing last week that auditors, citing mounting losses associated with MoviePass, doubted its ability to remain in business? A smiling Mr. Farnsworth, sitting in a suite at Caesars Palace, waived away that revelation as nothing more than routine, pro forma stuff.
“We have well north of $300 million available to us in financing,” he said. Helios had $189 million in debt at the end of the last year, according to the filing, and has been losing roughly $20 million a month since September.
MoviePass, which has been around since 2011, now has more than 2 million subscribers, up from 20,000 in August, when the company drastically cut prices. Suddenly you could see a movie a day in theaters, 365 days a year, for $10 a month. It’s such an eye-popping deal that 32 percent of MoviePass’s own subscribers believe the service won’t last, according to data released this week by National Research Group, a movie industry consulting firm.
Uncertainty about the future of MoviePass has been fueled by Helios’s volatile stock price and a recent decision to stop selling new movie-a-day subscriptions — for a limited time, MoviePass insists — in favor of a promotion with iHeartRadio that offers four movies a month for three months for about $30.
Mr. Farnsworth, whose previous ventures have included a pay-per-call psychic hotline, insisted that the naysayers were wrong. He pointed to that National Research Group study, which was conducted for The Hollywood Reporter, noting that it also found that 84 percent of MoviePass users said they would recommend the service and 83 percent are seeing more movies in theaters than they were before becoming subscribers.
“That’s exactly what we’ve been saying,” he said.
Mr. Farnsworth spoke in a joint interview with Mitch Lowe, chief executive of MoviePass. They came across as giddy — something that Mr. Farnsworth chalked up to the thrill of owning a “hot company,” and Mr. Lowe, munching on a bag of Fritos, jokingly (or not?) credited to “alcohol.”
“We love the idea that everybody thinks that we’re going to fail,” Mr. Lowe said. “It’s exactly what people told us at Netflix and Redbox. And then suddenly they all turned around and realized we were too big to stop.” Mr. Lowe was an executive at Netflix from 1998 to 2003 and served as president of Redbox, the DVD rental company, from 2009 to 2011.
Under the MoviePass business model, theaters get paid full price for every admission. People who sign up receive a membership card that functions like a debit card. When members want to see a movie (no more than one a day) they use a MoviePass smartphone app to check in at the theater. The app instantly transfers the price of a ticket to the membership card. Members in turn use the card to pay for entry. And it all works independently of theaters.
To a degree, the service depends on traditional subscription economics: more people pay than go. “We’re profitable on 88 percent of our customers,” Mr. Farnsworth said.
It gets more complicated, however, when you consider heavy users and the price of movie tickets. According to the National Association of Theater Owners, the organization holding its annual gathering in Las Vegas, tickets cost an average of $8.97. But theaters in cities like New York, Los Angeles and San Francisco routinely charge $16.50 for a standard ticket.
MoviePass believes it can make money by striking bulk ticket pricing partnerships with theaters; charging studios fees to promote new films to members; and perhaps even growing big enough (20 million subscribers is a goal) to demand a slice of concession revenue, although Mr. Lowe appears, for now at least, to have backed away from that particular aspiration.
“It’s really a mistake for people to think that we’re after their concessions,” he said.
Mr. Lowe and Mr. Farnsworth said they already had some deals in place with studios, although they would not say which ones. “We’re collecting significant revenue from partnerships,” Mr. Lowe said. “But they say, ‘Don’t tell anyone that we’re paying you. We don’t want to make the theater owners mad.’”
Too late. Companies like AMC Entertainment, the largest theater chain in North America, have dismissed MoviePass as a fly-by-night operation. “AMC has absolutely no intention — I repeat, no intention — of sharing any — I repeat, any — of our admissions revenue or our concessions revenue,” Adam Aron, AMC’s chief executive, told analysts late last year.
Mr. Aron remains a nonbeliever. Told by a reporter about the assertions made by Mr. Farnsworth and Mr. Lowe about financial viability and improved customer service (they have vastly expanded that department), Mr. Aron narrowed his eyes and said, “Our view on MoviePass hasn’t changed.”