Helios and Matheson Analytics Inc (NASDAQ: HMNY) is having an overwhelmingly rough day in the market today, and for good reason. Either these guys know something that the investing public doesn’t, or they have completely lost their minds! The company that’s already losing massive amounts of money has announced that it is lowering the price of its flagship loser, MoviePass. Today, we’ll talk about the announcement, what we’re seeing from the stock, and what we’ll be watching for ahead.
HMNY Announces Lower Price For MoviePass
As mentioned above, Helios and Matheson is having a horrible start to the trading session this morning after announcing that MoviePass is reducing its price. In a press release issued early this morning, the company announced that it has reduced the price of annual subscriptions to new subscribers. The new price will be just $6.95 per month, a decline of $3 per month, per subscriber.
In the release, HMNY said that MoviePass is gaining momentum with diversifying its revenue streams as a result of a series of marketing agreements with studios, distributors, and theater exhibitors. The company said that the lower monthly price is the result of the recent success in these segments. In a statement, Mitch Lowe, CEO at MoviePass, had the following to offer:
Our vision has always been to make the movie going experience easy and affordable for anyone, anywhere… With the current growth and support that we’ve seen within the last several months, our studio and exhibitor revenues and other marketing partnerships have motivated us to lower the price once again, offering movie lovers greater access to MoviePass.
The above statement was followed up by Ted Farnsworth, CEO at HMNY, here’s what he had to offer:
We believe our business will succeed by granting the public greater access to see movies how they were originally intended to be seen-in theaters… As the leading movie theater subscription company, we want to bring better value to our MoviePass fans. With this new annual plan, MoviePass is bringing cinema back to the masses.
The New Pricing Model Shows That The Struggle Is Real
When you read the press release, it looks like HMNY is doing good here, like MoviePass is becoming profitable. However, don’t let the company fool you, that’s not what’s happening, and profits are likely never coming! Recently, we’ve seen several public offerings out of HMNY with the goal of purchasing more of a stake in the failing MoviePass and continuing to support MoviePass growth and ventures. Here’s the issue… as MoviePass grows, the losses associated with the service grows. After all, with the average movie ticket near $9 in the United States and MoviePass paying full price for tickets used by subscribers, one ticket used per month generates a loss. Here’s the real reason for the lower price:
I believe that Helios and Matheson and MoviePass got together to come up with a way to float the business in what works quite a bit like a pyramid scheme. Instead of paying $9.95 per month, new users will pay $6.95 per month, but must pay for a year in advance. That means that each time a new subscriber signs up, the company is bringing in $83.40 in revenue. If that user was to go to the movie theater twice per month, it would take about 4 and a half months for that user to start generating losses. So, with a strong growth rate, up front fees will float the business… at least for a little while.
Nonetheless, this shows that the struggle is real. HMNY has reduced the cost of the service and packaged it in a pretty bow with a statement that they are doing well in other areas. The reality, well that’s very different. The reality is that this will drive more revenue right now and allow the company to worry about the later… well, later. Unfortunately, that’s a strategy that almost never works.
What We’re Seeing From The Stock
At the end of the day, you can polish a lump of crap, but it’s still a lump of crap. While Helios and Matheson tried to polish this crap well and feed it to investors, the investors weren’t hungry. Seeing through the smoke and mirrors, investors are sending the stock tumbling down. Of course, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:55), HMNY is trading at $3.02 per share after a loss of $0.11 per share or 3.39% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on HMNY. In particular, we’re interested in following the company to see if it ever proves us wrong and makes it to profit. While we don’t believe this is likely, anything can happen in the market. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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