Helios And Matheson Analytics: Something’s Gotta Give!

Helios and Matheson Analytics Inc HMNY Stock NewsWhen we think of Helios and Matheson Analytics (HMNY), the first thing that comes to mind is MoviePass, and for good reason. Back in August of last year, the company acquired a majority stake in MoviePass. While Helios and Matheson did have the RedZone Maps product before it acquired MoviePass, there’s no denying the fact that the unlimited movie theater ticket subscription service is what really put the company in the lime light.

Subscription Growth Is Great, But That Only Means More Losses… For Now

Upon the acquisition of MoviePass, Helios and Matheson Analytics greatly reduced the price of the service, bringing the price down from around $40 per month to $9.95 per month. The goal of doing so was to increase subscriptions on the service, and the company did just that.

Within the first month, Helios and Matheson announced that it had grown subscribers into the hundreds of thousands from just 40,000. From there, the announcements continued to come. In January, the company surpassed 1.5 million subscribers, and most recently, on February 8th, 2018, the company announced that the service had surpassed 2 million subscribers! Of course, Ted Farnsworth, CEO at Helios and Matheson Analytics, was overwhelmingly happy about reaching the milestone, offering the following comment:

MoviePass™ is attracting people back to the movie theaters by lowering their cost, which we believe is transformational for the industry. We believe the data MoviePass™ collects from these two million movie-goers will become an important asset to our partners and the future of the movie industry.

That Sounds Great, But Let’s Dig Deeper

The reality is that there is absolutely nothing wrong with growth in subscribers. Well, that is, as long as the subscribers to the company’s service are making the company money. Unfortunately, this is where the problem lies for Helios and Matheson Analytics. Unfortunately, as the subscribers on the service grow, the losses associated with the service are growing! Here’s the big issue:

Helios and Matheson Analytics is paying full price for Movie Tickets used by its subscribers. That’s right, and movie tickets are expensive. In fact, the average cost of a movie ticket in the United States currently sits at $8.73 per ticket. Assuming that the average MoviePass holder goes to the movie theater twice per month, each and every subscriber is creating a loss for Helios and Matheson Analytics. Let’s do the math on this:

  • Movie Tickets Cost – If the average MoviePass subscriber visits the movie theater twice per month (HMNY has not released data on how much their subscribers go to the movies, this is just a best guesstimate!) the company is purchasing 4 million movie tickets per month. At an average cost of $8.73 per ticket, the company is spending roughly $34.92 million per month on movie tickets.
  • Subscriber Revenue – Considering that, as far as we know, MoviePass has 2 million subscribers paying a rate of $9.95 per month, revenue from subscriptions only equates to about $19.9 million per month.
  • Net Loss – If these figures are on the money, MoviePass is experiencing a net loss on their subscription fees in the amount of $15.02 million per month. That’s no chump change, my friends!

In fact, the losses are so large that Helios and Matheson has had to help keep MoviePass afloat and support growth since they purchased the majority stake. In doing so, they have been buying more and more of MoviePass, currently holding around 78% of the company.

Helios And Matheson Can’t Afford To Continue At This Rate

Unfortunately, Helios and Matheson simply can’t afford to continue at this rate. In fact, the company has been diluting shares through the raising of funds since the acquisition of MoviePass. Just take a look at the company’s recent press releases:

  • November – In November, the company announced that it would be raising funds through the sale of convertible notes. During the month, the company raised $100 million.
  • December – December proved to be yet another very expensive and dilutive month. That’s because, in December, Helios and Matheson announced a public offering with the goal of raising $60 million.
  • February – Most recently, on February 13th, the company announced yet another public offering. This time, it planned on raising $105 million.

With offering after offering, it’s clear that Helios and Matheson simply can’t afford to keep running at this rate. Either the company will go bankrupt, or the Mshares will be diluted down to nothing!

Data Is The Key Value Proposition

For Helios and Matheson and its MoviePass venture, data is the key value proposition. The idea is that, through the data collected by the MoviePass service, the company will be able to create second-to-none marketing services for studios, producers, restaurants, and others that are part of the “night out to the movies” experience.

On top of that, the company has been very clear that it intends on selling data. In fact, Ted Farnsworth recently had the following comment to offer when it comes to monetizing the MoviePass platform:

Making money putting people in the theater is fine, but also think about the advertising side… We’re the only company out there that can tell companies exactly who and when people are going to the movies.

It’s much easier than people think. There are so many areas for revenue streams. Will we need to raise more capital in the future? Sure. But right now we’re focusing on growing the company and doing deals with companies already out there.

Can The Company Turn A Profit Before Going Broke?

This is a nearly impossible question to answer. The reality is that, yes, the company has the data and the expertise to make things happen. However, what it doesn’t have is time. At the current rate of growth in MoviePass subscribers (approximately 500,000 users per month based on most recent numbers reported), MoviePass losses are expanding by $3,755,000 per month (using the same calculations explained above ((Movie ticket price X 2 X user growth)-(user growth X 9.95) = net loss).

With losses likely continuing to grow, Helios and Matheson’s management team needs to work together quickly to monetize data. If not, just like Farnsworth said, more funds will need to be raised. Unfortunately, each time it happens, it will be at the expense of investors!

Final Thoughts

The reality is that if Helios and Matheson can turn MoviePass into a profitable service through a combination of subscriber fees, data sales, and marketing services, this could be a big hit. But the key word here is IF, and that’s a very big IF. So, if you’re considering getting involved here, please be sure to do so with caution!

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