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MoviePass was down last night because it ran out of money

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The end is nigh — again

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A Night At The Roxy With MoviePass Photo by Craig Barritt/Getty Images for MoviePass

The writing has been on MoviePass’ wall for a long while now, but precipitous stock drops and constant financial bad news hasn’t stopped the company from ticking along — until last night, when service was disrupted because the company ran out of money, and its parent company borrowed an emergency $5 million from the hedge fund Hudson Bay.

In corporate speak: “The $5.0 million cash proceeds received from the Demand Note will be used by the Company to pay the Company’s merchant and fulfillment processors,” Helios and Matheson noted in a SEC filing, Business Insider reported. “If the Company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, Inc. (“MoviePass”), which would cause a MoviePass service interruption. Such a service interruption occurred on July 26, 2018.”

Later, the company released a formal statement, which attempted to reframe the cash issue as a back-end technology problem. “First, we sincerely apologize for the inconvenience caused from the temporary outage in the app over the past day,” they wrote. “We have handled the issues on the back-end, and our app is now up-and-running with stability at 100%.” A further taste:

As we continue to evolve the service, certain movies may not always be available in every theater on our platform. This is no different than other in-home streaming options that often don’t carry the latest shows or movies that may be available on other services. For example, you can’t ever find Game of Thrones on Netflix, nor is Season 4 of Schitt’s Creek available there yet. Here at MoviePass, we have strived to make every movie in theaters available to you as part of your subscription, and Peak Pricing has allowed – and will continue to allow – us to do so.

Helios and Matheson Analytics has owned MoviePass since last August, six years after the company’s founding in 2011. Shortly after Helios and Matheson’s acquisition, MoviePass lowered its prices to $9.95 per month, with the service allowing customers one movie ticket per day. That move gained them millions of new subscribers, but it’s been slowly bankrupting the company.

In April, MoviePass announced that it was walking back its one-movie-per-day plan, instead offering four tickets per month, and adding new restrictions so customers couldn’t re-watch movies. The company has kept changing its service since then, introducing surge pricing and other methods to make money. MoviePass brought back unlimited tickets two weeks after it said it was discontinuing them, but the company has continued to struggle as it blows through around $21 million per month, on average.

MoviePass has had outages like last night’s before; the last widespread one happened earlier in July 2018. In May, the news that Helios and Matheson only had $15.5 million in the bank caused MoviePass’ stock to plummet more than 90 percent. On Tuesday, an attempt to boost that stock backfired, dropping its share price 50 percent. The company’s visible financial struggles, combined with new competition from established theater chains introducing their own subscription services — which are both more restrictive and more stable — makes it seem like the too-good-to-be-true service is finally too good to be true.

Update July 27th, 5:31PM ET: Added a statement from MoviePass.