In the 11 months since Ted Farnsworth's Helios and Matheson Analytics Inc. (HMNY) acquired MoviePass and slashed its monthly fee to $9.95, its user base has ballooned from 20,000 the year before to over 3 million devoted fans.
To many, the offer of being able to see a movie in theaters for a day for about the cost of one ticket in most major cities seems too good to be true, considering MoviePass has to pay theaters the full price of each ticket. Subscribers have one question - how long can it last?
According to Farnsworth - forever.
The stock market seems to disagree, both on the model and ability to earn money from it.
Shares of Helios and Matheson plummeted 7.93% Wednesday, trading at an all-time low of $0.17. That day Farnsworth told TheStreet that "the money issue on my side has never been an issue," and that the company will be cash flow positive by the end of the year, even as analysts predict that it won't turn a profit before 2020.
"I think there's a concerted effort out there from AMC (AMC) and other players trying to put us out of business, with the whole scare tactic of 'can they survive,' 'are they sustainable,' 'can they make it,' 'they're burning cash.' Of course, we're burning cash, but so does Amazon (AMZN) . And then there's Netflix (NFLX) , doing original content and losing $4 billion this year," Farnsworth said.
Farnsworth also told TheStreet how he plans to defy their expectations. Below is an edited and condensed version of the interview.
TheStreet: Subscribers love MoviePass but a lot of people doubt that it's a viable business. How do you plan to make money off of it?
Farnsworth: So as we grow and look at the $1.2 billion we plan to raise, and as we talk about in our SEC filings that's really for MoviePass Ventures, maybe MoviePass Films and also for M&A activity. The institutions on Wall Street understand that model, so for us to sustain it and go forward is not a problem. We believe when we're at a little over 5 million subscribers, you're really cashflow positive on the subscription side.
That's just on the subscription side, but it's never really been about the subscription. From day one when I bought the company, it was really about building a user base and then starting to use your leverage. Independent research came out from the National Research Group that says 41% of our people go to a theater, so our model has incredible power. With all those different little nuggets in that research report, that is when Hollywood really, I believe, stepped back and said, oh my gosh, this is the power that they have.
TheStreet: It seems like bringing MoviePass into the green is going to take a lot of work. Why did you decide to take that on?
Farnsworth: To me, the goal was always to bring Hollywood access to the average American. You know, to somebody that's in Boise that's never going to get to Hollywood or maybe they're in Jackson, Mississippi or whatever it is. But to be able to bring the celebrities in there, fly them in and do a screening, you do an opening and it's an event that they've never had before.
And MoviePass Films is going to have a huge impact on the industry. People aren't even putting that piece of the puzzle together. So we've got 'American Animals' out there, you've got 'Gotti' out there, which we own pieces of both those and other ones coming down the line here in the next week or so. But here's what's interesting right now, we're making money from AMC (AMC) , from Regal (RGC) , from Cinemark (CNK) , from all the independent theaters, so now we even got our competitors paying us for the movies that we have.
So it really is disruptive.
TheStreet: MoviePass is also facing a lot of competition, most notably from AMC's new subscription service. Can you compete?
Farnsworth: Wall Street is a big believer, especially on the institutional side. I get it about where the stock is and the shorts are huge against us. I don't even know the numbers anymore because people sit there and they believe what they read in the press, that you're unsustainable.
I believe actually AMC's [Stubs A-List subscription plan], where they have a cap on it, I think that's unsustainable. We have four years of history with MoviePass that shows our data at $19.95, $29.95, $39.95. When you're at those numbers like $19.95, your users are heavy users because $20 out of your wallet is not the same as $9.95, so you're going to make an effort to make sure you go to a movie. It's going to be between six and eight movies a month because it's in the back of their mind.
I think there's a concerted effort out there from AMC and other players trying to put us out of business, with the whole scare tactic of 'can they survive,' 'are they sustainable,' 'can they make it,' 'they're burning cash.' Of course, we're burning cash, but so does Amazon. And then there's Netflix, doing original content and losing $4 billion this year.
A spokesman for AMC did not immediately return a request seeking comment.