MoviePass, the fast-growing but troubled subscription service that offered movie buffs a variety of plans at discount prices to see films, said Friday that it was shutting down.
The company, which became a cultural phenomenon for its all-you-can-eat movie buffet but struggled with investors to find a functioning business model, said in a letter to subscribers that it would close down Saturday morning because efforts to recapitalize the business “have not been successful to date.”
In many ways, MoviePass was a victim of its own success.
Founded in 2011, the company didn’t take off until 2017, led by Mitch Lowe, a former executive with Netflix and Redbox, and Theodore Farnsworth, the chief executive of Helios + Matheson, the publicly traded entity that acquired MoviePass that year.
MoviePass’s model paid movie theaters full price for every admission, with expectations of making money because in traditional subscription economics, more people sign up for a service than use it. But that model blew up in 2017 when the new leaders, Mr. Lowe and Mr. Farnsworth, slashed the fee to $10 a month. That low price entitled members to see a movie every day in theaters, including new releases.
Three million people signed up for the service and began going to the movies, quickly pushing MoviePass to the brink. Largely because of MoviePass, Helios + Matheson’s net loss exploded to $150.8 million in 2017 from $7.4 million in 2016, according to security filings.
In response, MoviePass began reducing the number of movies that subscribers could see and restricting the films. But its efforts to find a business model that worked failed as its losses continued to grow and it burned through cash.
Its stock collapsed. It faced numerous lawsuits, including some from angry customers who accused it of a bait-and-switch scheme when they couldn’t see the movies they said they had been promised.
And the New York attorney general’s office started an investigation into whether Helios + Matheson had misled investors regarding its financials. This year, citing accounting errors, the company restated its financials for 2018, increasing its net losses for the first three quarters to $256.4 million from the previously reported $246.9 million.
But while moviegoers will no longer be able to use the subscription service, MoviePass said it was still considering its options.
Helios + Matheson said late Friday that it had formed a strategic review committee to explore “strategic and financial alternatives,” including a possible sale of the company in its entirety, a sale of some of its assets or a reorganization.
“We still deeply believe in the need for the MoviePass service in the marketplace, to maintain affordable access to theaters and provide movie lovers with choices of where to go to the movies,” the company wrote to subscribers. But, it said, “at this point, we are unable to predict if or when the MoviePass service will continue.”