MoviePass, a company that started a too-good to be true service in 2017, of offering consumers a movie a day at theaters for $9.99 a month, has finally closed doors. They simply ran out of money subsidizing all those customers who took full advantage. Unfortunately, the company had to pay full ticket price and was hoping that it could sell user data to make up the difference. But, no one wanted the data they were offering. Most were interested, instead, in data from Netflix users, not those who went to the theaters.

The company went public to raise money and quickly the stock went down to trading at a penny a share. Company went through several reverse stock splits to keep the stock price above $1 to prevent it from getting delisted from the Nasdaq, but to no avail. It even raised its monthly fees to $14.95 from $9.99 and limited it customers to three a month from a movie a day, a ~90% cut in its offering. Its core customers balked. It reversed course and let customers watch more but,  limited the titles they could watch. That backfired as well.

And so, the company was finally delisted but not before it suffered a massive data breach and exposed the credit card and debit card details of thousands of customers, giving a new meaning to sharing data. In the meantime, its competitor – AMC theaters offered a $19.99 for three movies a month service available in all AMC theaters and pretty much killed Movie Pass.

Future Wealth’s View

Like most investments, if it is too good to be true, it is best to stay away. A little over a year ago, we had written about MoviePass and had called that there was simply no way the company would survive. The article is here What is surprising to us is not that we were right, but it took this long for the company to go under. 

Even though investors have become more savvy since the days of the internet bubble and the financial crisis, companies like MoviePass continue to thrive and garner money from investors looking for the next Amazon to get a 100 fold return. Companies like Uber, Beyond Meat, Roku and Shopify, who are commanding astronomical valuations with business models that are nowhere close to achieving profitability are, but a few of the companies that money is pouring into.

In these times of uncertainty, it is certainly not wise to go after return beyond what the major indices are offering and they are offering plenty. Greed is not good.