MoviePass currently has a business model of burning money. Turns out they burned a bit too much. On Thursday night, the service experienced an “outage” because the company ran out of cash.
On Thursday, July 26th, MoviePass customers all over the country weren’t able to use their cards to purchase tickets at the movie theater. MoviePass works by giving its customers a MasterCard to buy tickets, for full price, from the theater, so this is a pretty crucial part of their system. If it fails, then subscribers are stuck, physically at the theater, forced to pay full price for the ticket themselves. On Twitter, MoviePass claimed this was a “technical issue” with its “card-based check-in process.”
In reality, the “technical issue” is that MoviePass was out of money.
We are still experiencing technical issues with our card-based check-in process and we are diligently working to resolve the issue. In the interim e-ticketing is working. We apologize for the inconvenience and appreciate your patience while we resolve this issue.
— MoviePass (@MoviePass) July 27, 2018
According to an SEC filing, MoviePass’s parent company Helios & Matheson Analytics disclosed that it had to borrow $5 million in order to turn the service back on. More specifically, the merchant and fulfillment processor (the company that handles the behind-the-scenes work of processing all those credit card payments) shut down MoviePass’s cards because, at least for a while, MoviePass was unable to “make required payments.”
To put that in perspective, this less like your bank account being empty until your next paycheck, and more like borrowing money from your mom because the power company cut off your electricity. Knowing full well that you’ll have the same problem next month.
This isn’t the first time that MoviePass has experienced a major outage, either. Just a few weeks ago–the day that Marvel’s latest film, Ant-Man and the Wasp came out, in fact–customers experienced a similar outage. It’s unclear if that outage was also caused by a lack of funds (possibly not, since only some users seemed affected), but having at least two major outages in a single month doesn’t bode well for the company.
It’s unclear just how long MoviePass’s merchant and fulfillment processors haven’t been getting paid, but it is clear that MoviePass didn’t have the money to pay its bills. In recent months, MoviePass has been getting increasingly desperate to find ways to generate revenue, its stock has dipped so far it had to perform a reverse stock split and still dropped a further 50%, and it’s turning to a $300 million line of credit to survive.
As we’ve said before, burning money to build a large userbase isn’t exactly unique. However, it doesn’t usually affect customers quite this hard. If you’re an existing MoviePass customer, we recommend getting as much out of the service as you can as soon as possible. If you’re not already a customer, well, there’s always AMC’s A-List.