MoviePass has always offered a pretty fantastic value to their customers. For a mere $9.95 a month, the company's customers can watch as many movies in theaters as they want.
However, for many users, the deal always seemed a little too good to be true. Indeed, given the fact that MoviePass pays for all movie tickets out of pocket, many felt it would only be a matter of time before the service went bankrupt.
Still, MoviePass' founders seem confident they can monetize their service in other ways. After attracting people to their platform with the unlimited movie offer, the company plans to gather data about customer movie viewing habits with the intent of selling that information to advertisers.
It seems the company may not be implementing those plans fast enough, though. According to a recent Business Insider report, a third-party auditor examined MoviePass parent company Helios & Matheson's (H&M) financial reports and reportedly claimed the company has "suffered recurring losses from operations and negative cash flows from operating activities."
...there is "substantial doubt about the Company’s ability to continue as a going concern."
The auditor in question, Rosenberg Rich Baker Berman & Co., is likely referring to the fact that MoviePass loses money every time a customer watches a movie. The auditor says there is "substantial doubt about the Company’s ability to continue as a going concern." Since H&M reportedly lost roughly $150.8 million during 2017, the auditor's concerns may be well-placed.
Indeed, H&M CEO Ted Farnsworth claims their 2017 losses were primarily a result of the company's acquisition of MoviePass, though he doesn't specify whether or not he's referring to MoviePass' ongoing losses or H&M's purchase of a majority stake in the company.
Farnsworth went on to downplay the losses. "Out of the $150 million, basically $110 million is all non-cash — derivative accounting," Farnsworth said. "The gross loss is only $10 million cash."