MoviePass at $6.95 a month may be too good to be true

An already ridiculously good deal for moviegoers is getting even cheaper, and one has to wonder how this won't all end up badly for MoviePass and majority stakeholder Helios and Matheson (NASDAQ:HMNY). MoviePass -- the multiplex smorgasbord that lets members see a movie per day for $9.95 a month -- is introducing a pre-paid annual option at a steep discount.

The limited-time offer gives film buffs the ability to pay $89.95 for an entire year of MoviePass access. The pre-paid plan breaks down to $6.95 a month with a $6.55 processing fee, or a monthly average of $7.50. The average price for a standard screening movie ticket these days is $8.97, so the new pass more than pays for itself even for people seeing a single movie a month. We're talking an average of less than a quarter per movie for someone dedicated enough to catch a flick every day.

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The latest MoviePass offer would be the steal of the century if it were sustainable, but that doesn't seem likely. Major movie theater chains hate MoviePass. It may drum up ticket sales, but it wrecks the value proposition of a night out at the movies. MoviePass has to pay face value for its tickets through most exhibitors, so it's theoretically losing money with the very first movie someone sees.

MoviePass argues that it will find other ways to make money. Helios and Matheson is a data analytics specialist, and it feels that it can use its prowess to target ads for its growing membership base and to sell usage data to movie studios and marketers. There doesn't seem to be any feasible way that it could make enough money through those revenue streams to offset the limited data points it will collect on its customers and the hefty ticket prices it will have to pay to acquire them.

The new annual pass seems like a desperate move to raise money now for multiplex tickets that it will have to pay later. This is a model that can survive in the short term as long as the subscriber base is growing -- and we've seen MoviePass subscribers grow from 20,000 to top 600,000 since its mid-August move to lower its rate to $9.95 a month -- but sustainability of that pace is the deal-breaker.

Wall Street seemed to dismiss Helios and Matheson as a nearly 54% stakeholder in MoviePass after a wild run from mid-September through mid-October, but it's showing new signs of life. The stock has moved markedly higher for five consecutive trading days. Speculators are back, and this new annual pass will prove as magnetic as the model itself is unsustainable. More days of wild trading are likely on the way, and it may not be a happy Hollywood ending by the time we're done.