Movie? Pass.

At this point, MoviePass is beyond a punchline. What they’re doing on a daily basis now to stay afloat walks a previously undiscovered line between farcical and unethical. Certainly the history behind their holding company, Helios and Matheson, doesn’t help that image. But MoviePass is no longer fun, nor funny.

Of course, I’ve never thought the company was long for this world. The underlying economics not only don’t make sense, they’re completely upside down. The business is as close to the old joke of selling dollars for pennies as you will find. And now the jig seems up. Certainly it will be before the end of the year when Helios and Matheson will undoubtedly be delisted from the NASDAQ, at which point they’ll no longer be able to raise money as they have been. But it may end a lot sooner than that after this week’s latest nonsense.

But if it’s so obvious this would never work, why did they even try? I can only triangulate the game plan from various interviews and mix that with a bit of wishful thinking to come up with a rationale. It seems like a clear attempt to thread a needle. Perhaps the smallest needle ever. While blindfolded.

To some, the idea of a subscription movie ticket service is undoubtedly compelling. We increasingly live in an era of subscription services, after all. When MoviePass first launched as a startup (before it was owned by Helios), relatively few people were actually compelled. You can try to argue the timing was wrong, that it was too early, and that may be a part of it. But the bigger part was that the model at the time — $50/month — was far too expensive for an activity most people did relatively infrequently: go to the movies.

Yet the price back then was no accident. It was the price that would allow such a service to operate in a sustainable fashion if enough people signed up. Enough people didn’t sign up. And so MoviePass sold its soul to the devil.¹

That devil, undoubtedly aided by past experience in both penny stocks and subscription services, saw the aforementioned needle to thread. If they could massively drop the price of the subscription, they could entice people to sign up who would have never signed up for the original MoviePass. The price drop would effectively cause each customer to be brought on board at a loss. But it was the old “we’ll make it up in volume” play.

Except not even that would work as a straightforward proposition. A simple volume of customers when scaled here would also scale losses. So that volume needed to be leveraged in other ways: to get enough customer data to advertise against en masse. And/or to use the customer base to make the theater chains bend to their will, giving them better deals on tickets and a cut of the concession stands. To be fair, MoviePass was long transparent about their intentions here.

Unfortunately, those intentions were both naive and foolish. And their statements on the matter were disingenuous at best, and misleading at worst. They kept insisting their plan would work. They just needed to keep growing. And since they were, they just needed more time. Things were going great! We would all see in the end!

[Narrator: we would not.]

Again, the needlehead here was extremely tight because the scale needed to make this work was also the scale that would kill them. The only way this may have worked was to grow large, but at a far more sustainable clip. Which is to say, slowly. And preferably with different pricing tiers. This still would have required a ton of capital, but they may have found people willing to give them said capital, buying into the long-term subscription vision. Then maybe — just maybe, mind you — in a few years, they could have convinced the powers that be to play ball with their big user base.

Instead, MoviePass doused their cash in gasoline and then drove that flaming heap to a match factory. The insane pricing strategy led to the service growing as quickly as possible. And with each new customer came a new undertaker to help them dig their own grave.

This is where people like to compare the model to a more traditional startup. Isn’t this the way many venture-backed companies get off the ground? Well, sort of and no. There have been many startups that have famously flamed out after burning through venture money while effectively trying to sell those proverbial pennies on the dollar with the promise of making it up at scale. But again, MoviePass is no longer venture-backed; their majority owner is a publicly-traded holding company. So they were attempting to do this with public money, not venture money. More importantly, this was a comically extreme version of the playbook described above. This was Helios and Matheson looking at some wildly unprofitable venture-backed startups and saying “hold my beer.”

MoviePass has been burning something like $50 million a month and those losses have only accelerated with the aforementioned growth. They were never going to have enough time to thread their needle. They must have seen this a while ago, yet they kept up the ruse. Stock splits and ongoing promises of a large influxes of cash gave way to their truly insane reality in debt.

And so here we are. The stock price for Helios and Matheson sits at $0.22 — and that’s after the 250-to-1 reverse split last week. The market cap is around $385 thousand dollars.² I’m honestly not even sure why it’s that high. The credits have rolled. The music has faded. The curtains are closing…

¹ And, to be fair, that devil did bring in someone to run the ship that seemed to have all the right experience — Netflix, Redbox, etc.

² I initially wrote $385 million, silly me! (thanks Alexis below)