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MoviePass Has Something Other Than Tickets to Talk About

Nicholas Rossolillo, The Motley Fool

MoviePass parent company Helios and Matheson Analytics (NASDAQ: HMNY) recently announced a new venture: MoviePass Films. The company's flagship service has been under fire as it tries to manage its cash-burning operation and effectively monetize its 3 million subscribers -- the number last reported before another round of changes announced at the beginning of August.

Too many people couldn't pass up the $9.95-a-month price giving them access to one movie a day -- now down to three movies per month -- and all of those users have eaten up Helios and Matheson's cash pile. This new moviemaking endeavor risks accelerating that trend, but it could also be a game-changing move.

A preview of coming attractions

MoviePass Films' upcoming feature is titled 10 Minutes Gone. The synopsis, according to the fledgling studio, is that it's a mystery-thriller in which a man hit by a stray bullet during a bank heist loses 10 minutes of his memory. Action director Brian A. Miller (Vice, The Prince, and the soon-to-be-released Reprisal) will take the lead.

The real glitter from this announcement is that Bruce Willis will be playing the lead antagonist, a crime boss out to recover cash from the heist. All of this sounds exciting for Helios and Matheson shareholders. This isn't a slam dunk, though. Movie production can carry big risks and could accelerate the bad news at MoviePass.

No free lunch

This isn't MoviePass Films' first endeavor. Back in May, Helios and Matheson announced it was acquiring the rights to Emmett Furla Oasis Films' library and work-in-progress titles. The joint venture MoviePass Films was subsequently started, and it has since released the movie Gotti with John Travolta and the sorority thriller The Row.

The problem is that producing films isn't cheap, nor is it guaranteed money in the bank. Gotti cost an estimated $10 million to make, not including marketing costs, but had dismal box-office receipts of only $4.34 million, according to Box Office Mojo. MoviePass Films is targeting 12 to 15 theatrical releases over the next year, which could be a costly foray if it doesn't land a few hits.

A group of young people sitting in a movie theater audience.

Image source: Getty Images.

How it could work

MoviePass subscribers pay $9.95 a month and in turn MoviePass pays the full price of their ticket when they go to the movies. (Members are currently capped at three movies per month with a discount offered for additional movies.) A movie ticket rose to an average price of just under $9 last year, so if a MoviePass members goes to the movies more than once a month, it's likely a money-losing proposition for MoviePass.

Its film venture could be a way to recoup losses. There are two ways this could happen.

First, MoviePass will charge MoviePass Films marketing fees for promotion of its productions. If the movie is a failure, that doesn't do either subsidiary any good, as accountants will just be moving cash around but still realizing an ultimate loss for parent Helios and Matheson. If the movie is a success, though, the marketing costs get covered by receipts from the box office, creating a win-win for MoviePass and MoviePass Films.

The second way this could work: MoviePass says 49% of its users say they go see movies they otherwise would not have because of the service. Seventy percent say they are more likely to see a film even if it receives poor reviews. That's good news for lower-budget flicks, the kind that MoviePass Films is planning thus far. While MoviePass loses money on its monthly-movie-ticket plan, it could make some money back if it can successfully herd traffic to its sister company's movies through box-office sales at theaters. Pretty sneaky.

That still isn't a guarantee, especially when considering small movie producers are battling against smash hits made by Walt Disney Co's Marvel, Lucasfilm, and Pixar at the box office, and Netflix is trying to keep people parked on the couch at home. It has been different so far in 2018, though, with box office sales on pace to hit an all-time high and topping $7.6 billion through the beginning of August. MoviePass claims as much as 6% of those total receipts are from its 3 million members.

Thus, while too many members would sink MoviePass on its own, teaming up with a partner movie producer could change things. A marketing and production team-up with special access to millions of users could end up being a boon for Helios and Matheson. Now it's up to Bruce Willis to save the day on the silver screen. Again.

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Nicholas Rossolillo and his clients own shares of Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.