The company raised $5 million last week (and promised to pay the lender back $6 million) in an extremely short term loan that can be called in at anytime by the hedge fund that lend MoviePass the cash. "Additionally, the new plan addresses past misuses which imposed undue costs on the system, including ticket scalping, unauthorized card usage and other activities, which in the past necessitated the use of certain remedial measures that have sometimes been inconvenient for our subscribers".
Lowe noted that 85 percent of MoviePass subscribers will notice "no impact whatsoever" from the change because they see fewer than four films each month. MoviePass subscribers who see more than three films a month will get a discount of $2 to $5 a ticket, if they purchase through the MoviePass app. Lowe said in an interview with the Wall Street Journal that the move will reduce the company's cash burn rate by more than 60 percent and make it "more manageable" to become profitable.
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The company will keep the monthly subscription price at $9.95.
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"Any industry-wide disruption like MoviePass requires a tremendous amount of testing, pivoting, and learning", CEO Mitch Lowe said in a statement, adding that the new pricing will "help to stabilize our business model". As word that the company was operating at a $45 million deficit and counting went public in June, the service began imposing surge pricing making subscribers pay an additional surcharge to see popular films at peak times.
The change replaces a previously announced plan to raise prices to $14.95 a month. Parent company Helios and Matheson Analytics had to beef up its shares by executing a 1-250 reverse split, and sellers still dumped the stock. This change will take effect August 15.
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Even with the sharp cut in member benefits, there is no guarantee that MoviePass will be able to survive.