Moviepass Has Gone Low

Moviepass has now gone low and I am not talking about just the stock. Moviepass is now – probably way too late – following a classic disruption strategy of entering a market on the low end.

In past posts, I wrote about how Moviepass was attempting to come in on the low end of the market as a disruptive new service, but stupidly they were offering full price premium fair at a disruptive low price. That strategy bombed badly. Buying $15 tickets and selling them for $5 is not just a bad strategy, it turned out to be plain stupid. All the while Ted and Mitch were promising that over time people would start to watch fewer movies and the ancillary revenue would make up the difference. None of that was well tested by this supposed data-centric company, even when both CEO’s claimed they had data to prove their case. They didn’t, they were both lying, and admitted tacitly later that they did not realize how popular the service would be, and had only expected 100 thousand customers to take the deal, not the millions who did. I guess that is what happens when you basically give away free money.

Now Moviepass is definitely coming in on the low end of the market. They are offering a service that is definitely not a premium movie going experience. In fact, for many, you almost can’t even find a movie to go see. The service is cheap relatively speaking, at $9.95 a month it still pays off in most markets if you can see a single film a month. It’s not always easy to do, but generally, you can find at least one off beat film a month to see. It’s not exactly an exciting value proposition, but you can get some small value from the service if you put in the effort.

This new strategy could help Moviepass survive. Gone are the days of Moviepass generously buying tickets for the masses to the big blockbuster films. But if Moviepass can hang on to enough subscribers to help small indie films goose their numbers, a small low-end niche service may be born. This strategy of connecting Moviebuffs to smaller run lesser known films could have been the initial disruptive service Mitch envisioned but simply executed horribly. Coming in on the low end might have attracted filmgoers who are interested in supporting smaller indie films and had an interest in seeing more indies at a better price. Eventually, this could have progressed to include more and more films, and working with creative companies to partner and promote films to the Moviepass subscriber base could have created a win-win partnership with indies who struggle to find audiences and money to create new films.

Moviepass could have slowly taken more and more of this market without drawing the ire of the establishment. Instead, Moviepass stuck their neck and middle finger out, and summarily got slapped down by the establishment.

It’s probably too late for Moviepass to execute this new low-end disruptive strategy. They have done so much damage to the brand, it will be almost impossible for them to build trust with a new type of audience willing to accept Moviepass as a niche service. Theaters have essentially given up on Moviepass, as Moviepass is no longer a significant contributor to ticket sales. Large studios could care less about Moviepass, they never believed in it anyway.

The only shot Moviepass really has now is to find a way to really excite indie filmmakers and try and find a way to hold on to enough subs so they can create meaningful partnerships that help deliver bigger audiences to smaller films. If they can pull that off, there’s a slim chance Moviepass could hold on.

Moviepass Films is a bet that Moviepass can make this happen. It’s a risky bet, as picking films that work is a portfolio like game, finding breakout films that help fund the turds has proven to be a difficult and low margin business throughout the years. There’s no good reason to believe Mitch and Ted will have great success here, and so far they are batting a big fat zero on their portfolio choices. Gotti being the extreme example, but let’s be real, none of the films so far have done anything interesting in the box office, and the current slate looks bad or very risky for returning investment.

It’s a looong road from where Moviepass has been to where they might be going. But maybe a small glimmer,  a faint light of hope is on the horizon.

Amazon Has Jumped the Shark – Advertising, Over Monetization and Company Politics Are Trashing Amazon’s “Customer Obsession”

Amazon built its empire by focusing on customers first. All Amazon employees are indoctrinated in Amazon’s core 14 Principles – Amazon takes this stuff very seriously, they demand that potential new hires regurgitate these principles when interviewing for positions at the company, and they robotically and religiously try and proselytize these principles in everything they do. It’s a culture they think they believe in, and follow.

The problem is, Amazon has gotten too big, too political, and too fractured to truly embrace their principles, and like any big bureaucratic organization, competing groups, with competing interests are controlling and slowly destroying the Amazon customer experience. All in the name of “doing what is right for the customer ”

I have seen this movie before – actually I lived this reality while working at Microsoft managing their largest consumer website MSN.com. MSN was destroyed by multiple different competing fiefdoms inside Microsoft all claiming that they were customer focused, and strategic imperatives for the future of the company. All wanted a premium placement on the MSN homepage, all could demonstrate their deep commitment to consumers, and all who had very specific business and revenue goals assigned to them that they did not want to miss.

This manifested in an insane competition from groups all over the company trying to secure the best real estate on the MSN homepage they possibly could. Unfortunately, the result was a Frankenstein like site that did little for any internal group, and was a horrible and busy mess for consumers.

You only need to look at Amazon’s mobile app homepage, or read their most recent earnings to see that the company is now heading down the dangerous path of balancing the power of their huge audience on their entry page while also trying to feed the mouths of their internal constituents. Amazon is focusing less and less on customers, and more and more on promoting the multiple tentacles of its Goliath.

To be sure, Amazon has sophisticated data intensive methods for testing and measuring the performance of every pixel of their entry points. They have studied, tweaked, and debated every dot on the page, yet from my experience at Microsoft, none of that matters. Why? Because the politics of strategic initiatives, the demands for ever more revenue, and increased click efficiency take over, and the needs of the customers slowly, although justified by data, take a back seat.

What was once a well organized site with easy navigation to product categories or departments has been obliterated by a hodgepodge of Amazon’s pet products, advertising, and strategic initiatives. On my page today it is another hard push on the Fire TV Stick – I already own three of these things, I like the product. But I don’t want or need any more of them. It’s ridiculous that Amazon is using 90% of the page pixels promoting the stick to me. Enough already! Amazon. Geesh.

The ONLY other thing “above the fold” is an advertisement for “Portal” from Facebook. Another product I have absolutely zero interest in. For me it is just another lame banner ad that makes Amazon less useful to me. Clearly Amazon is doing well selling advertising, Estimates show Amazon could rake in $10 Billion from advertising soon.

This IMO is a disaster for Amazon. Selling $10 Billion in advertising and being customer obsessed is an oxymoron. Advertisers don’t pay that kind of money to “help” customers. I am not advocating that advertising or advertisers are bad or inherently negative. But I do know from experience, advertisers are not in the business of helping end users efficiently get things done. Advertisers are desperately trying to buy consumers attention, they are trying to divert consumers away from whatever they were doing in order to get them to pay attention to their brand or product. Sure they want to do this in a relevant and efficient as possible way. But they are more than happy to divert your attention from whatever it was you were trying to get done and hijack your flow and attention over to their message. Snagging your attention and getting you distracted to click is what they do!

This runs counter to what made Amazon great. Amazon was a productivity booster, a massively efficient and effective way to get shopping done. Amazon until more recently was never about serendipity, or shopping just for fun, it was about getting what you needed at a great price with great selection. It did not bombard you with ads for products you didn’t care about, and it’s navigation was seamless and easy to find what you were looking for, without weeding through massive pixel space of things you never cared about.

This is all made worse by Amazon’s relentless push of their hardware products. Fires, Dash Buttons, Mystery Giveaways, and crazy stuff like “scents from your favorite actors”. You can’t make this stuff up. It’s insane, and it is NOT customer focused.

No, the customer had been pushed to the back burner at Amazon. The focus now is clearly on Amazon, and how they can sell every pixel of the site to the highest bidder, be it a 3rd party advertiser or an internal product group trying to score points with the latest “company strategic initiative”. Amazon is broken, and they don’t yet know it.

Yep, I have seen this movie before…

And Now for the Spinoff Maneuver

Fartsworth has decided to spinoff!   Is this good for HMNY shareholders?  Is it good for MoviePass?  Is it good for Teddy?  Only time will tell.  Here’s my take.

First, for Shareholders, the spinoff could be good news.  HMNY is now one of the most loathed companies on all of Wall St., with a despised CEO, a business model the media loves to hate, and a ticker that means nothing to anyone, what is left worth saving in HMNY?

For investors, the best chance that HMNY and or the new MoviePass ticker returns some capital to beleaguered shareholders is if 2 things happen.

1) MoviePass finds a solvent way to move forward

2) HMNY actually delivers a decent dividend to shareholders of the new MoviePass INC.

In the PR release Fartsworth tried to include some BS about Zones, and that they had this plan of spinning out companies all along, that is all just total nonsense.   None of that stuff matters, there is nothing left when HMNY spins off Moviepass, everyone knows that.

What really happened here is Fartsworth could not deliver on the money he promised to Lowe and to Moviepass and as a result, they are looking for an amicable divorce.   The story went sort of like this.  Mitch thought he had found a white night in Fartsworth who could fund MoviePass through its planned expansion to get to 5 Million users.   Both Lowe and Fartsworth badly underestimated the cash burn it would take to get there, and both also badly underestimated how fast the service would catch on with such an unbelievable deal.  So as subscriber numbers went into hypergrowth, and cash burn went to mach 10, everyone, inluding Lowe and Fartsworth started to freak out.   Wall Street spooked, knowing that the only way to get enough cash for the experiment was to sell ever more shares.  Fartsworth was either too stupid, or too crooked, or just plain too unlucky to prove to Lowe that he could deliver the goods and make the marriage work.

Lowe was using Fartsworth for money – Not trying to be sexist, but Fartsworth was the sugar daddy, and Lowe was the golddigger.   When the money (or even the promise of money) dried up, Lowe lost interest in his new found friend.   And now the divorce proceedings are on.   Fartsworth could never get that last 8% of Moviepass to own it all, and knowing that all the old guard at HMNY now despises him, and that the folks at MoviePass now basically were done with him, he had to make a move to try and save whatever he could for himself.   Fartsworth also knowing that HMNY was now in the crosshairs of the New York AG, and that the SEC and NASDAQ had had just about enough of his Reverse Split, ATM share dumping shenanigans Fartsworth had to find his next move.

The spinoff could be the answer to Fartsworth’s prayers.   First, it clears MoviePass from all the shareholder lawsuits, AG inquiries, and other nasty baggage from Wall Street.  HMNY can simply spinoff Moviepass, and let HMNY live or die, or whatever – it really doesn’t matter all that much.  Maybe they can find some other bullshit company like Zones to get people excited with, who knows.

MoviePass will almost certainly remove Teddy from ANY operating role at the company, the guy is a total liability, and even he may realize this by now.  Almost certainly Lowe will be the CEO, and Ted will get a sacrificial BOD seat promotion.   Promoting idiotic CEO’s to BOD seats is a well-honored tradition in the corporate world.  Everybody wins, the CEO saves face, the company gets new leadership, and nobody has to admit they were idiotic.  He will be demoted/ promoted to one voting member of several.  He already has his seat, and you can bet that all or most of the other BOD members will treat Ted with all the respect he deserves :-).   For Fartsworth, he can save some face, he can chalk up the spinoff as a great strategic move.  He can stay on as CEO of HMNY until it totally withers to oblivion or they concoct their next Fartsworth scam company.   It is even possible that Ted could step down from HMNY shortly after the spinoff, take a BOD seat on both companies, collect money and call it all good.  Who knows what will happen to handsome Ted.  Jail would be good, but that looks increasingly unlikely now.

Spinoffs are a funny thing.  They can go really great, or really terrible in lots of different ways.   When I was at Microsoft we spun off Expedia, it was great for the people who went with the spinoff, it was not particularly great for shareholders of Microsoft or the employees who were left behind.   Expedia is now a $17 Billion dollar company – long shareholders of EXPD were richly rewarded.

However, There was no dividend for MSFT shareholders, and I can tell you if there were, it would have been a VERY nice thing to have.   Microsoft first spun off Expedia for a measly $75 million in an IPO in 1999.  It then sold the remaining portion of Expedia to IAC in 2001 for $1.8 Billion.   Not a bad return, but shareholders of Microsft hardly noticed any difference, and employees that were left behind were certainly not happy to have missed the opportunity to be part of a successful IPO and big market winner.  That said, IPO shareholders of the original IPO in Expedia did TERRIFIC!  Who wouldn’t love to see the HMNY spinoff of Moviepass see similar results to Expedia?!!

Expedia was in a similar spot to MoviePass when it was originally spun out of Microsoft.   It was losing money, it needed more capital to survive.  It was an innovative idea, in a very new and disruptive marketplace.  Many can barely remember the days of Travel Agents in strip malls, millennials can’t even comprehend travel prior to Expedia, Hotels.com and the like.   However, back in 1999 there were as many people inside Microsoft that thought Expedia would never make it, as there were believers.  That is in fact why they spun it out.  The leaders of the Expedia business inside Microsoft were furious they could not get enough funding and traction from inside Microsoft itself to go after their business plan.   The felt they had a much better chance of finding funding, and investing and focusing on the business outside of the clutches of Microsft and they wanted to be free!

Well – over the long term, the Expedia Management was 100% correct.  The company has been massively successful and has come a very long way from losing millions on tiny revenue numbers inside of Microsoft.   If you had purchased Expedia at the initial IPO, you would be the very happy owner of both Expedia and IAC stock, both of which have skyrocketed over the past several years.   If you had simply held MSFT – you also would have done just fine.  So there were no real big losers in this deal.

So to answer the question, will this ultimately be good for HMNY shareholders.  I think the answer is more likely yes than no.  Getting Fartsworth away from an operating role, and as far away from a CEO seat is a big win for the MoviePass business (and for humanity!)  The likelihood that Mitch Lowe can now take over what’s left of MoviePass and turn it into a good solid company looks much more favorable now.   Will HMNY shareholders get their “fair share” of the new MP INC?   MAYBE!  I mean, it’s Fartsworth we are talking about here so things could get screwed up before the spinoff in any number of ways.   But there are a lot of other VERY interested parties here.  Minority interests do have a say in these things, and with an AG watching, and the SEC and NASDAQ not really wanting to see more bullshit from Fartsworth, I don’t think he can screw HMNY shareholders out of at least some semblance of their fair share of the spinout company MP INC.

So my take, this is likely positive for everyone involved.  Even Fartsworth.  He doesn’t deserve it because he is a liar and he is stupid.  But the rest of the gang does deserve it.   MP customers, investors and employees all deserve a break, and I think the spinoff is the break that helps them all.  IF – and it is still a big IF, Moviepass can find a way to hold on to a couple million subs, and shore up the value prop from here, they could survive and someday thrive.  But there is nothing sure about any of this.  It is risky as hell, and certainly not a risk worth more than 1% of your total portfolio.

 

 

 

 

HMNY Total Garbage Stock- But May Be Cheap

HMNY is a total garbage stock – badly mismanaged with a botched strategy, horrible execution, and totally lame marketing and PR. They have a criminal like CEO who is both stupid and dishonest. They are regularly out foxed and out executed by competitors, and they make it seem impossible to find new productive partnerships.

Add to that that they execute so slowly for a startup you would think they were a 100 year old company.

And finally they have been shedding customers on purpose at a rapid rate. That part is only partly bad. The company was so f’d up they had to fire 1/3 of their customers to stay alive!

Add it all up and this stock is just total garbage and that is why the market pounded the stock to oblivion. I have never seen a bigger shit show for any stock- ever. Pets.com was better than these idiots. Sears was likely better- even into bankruptcy.

All that said – the salvage value of this heaping pile of shit is likely more than the measly $32-34 Million Market Cap range the stock is trading for today.

Rumors of acquisition have been floating. That makes sense. There is value here. Last reported the company had $65M left from its scammathon ATM offering, that now by the grace of god is over. It also slipped out that there are still 2.1 Million suckers still left paying for the almost impossible to use service.

Oh to be fair- I am still a member- and if I use it once a month it has value.

If you value the subs at $30 each (and that’s pretty cheap) that is $60 Million. Let’s say the cash is down to $30 Million left. They probably have at least $10 Million in accounts receivable. That’s $100 Million with zero goodwill and zero value for the tech, patents and TM’s.

A $100 Million buyout is peanuts for any real company. Hell you could just take the cash, milk the subs and give them even shittier service and skim more cash until they all finally quit. It would be worth more than $100 Million.

So yes- this total pile of horse pucky is undervalued as an acquisition target no doubt.

The issue is that this stinker is still run by an idiotic CEO who is a loser, a guy who wants to play in Hollywood with your money. His best asset was that he was able to befriend Mitch Lowe with promises of money to deliver his vision, which of course he could never deliver on. Subsequently, he ruined Mitch’s reputation and drove the entire ship straight into a toxic iceberg.

Will the stock go up from here? Depends on how addicted Ted is to his own crack. He is a big enough sociopath to screw up an acquisition with a poison pill. He does not want to leave his pretend Hollywood job to go back to peddling another loser penny stock. So expect him to continue being a total drag on the stock and a huge impediment to any possible deal. Nobody will want Ted to stick around post an acquisition, even Stupid Ted is smart enough to know that.

So it is no sure thing that any acquisition will happen, but with the price so cheap, and the RS possibly at risk, it could force Terrible Ted’s hand.

Is it worth loading up here? Probably not. Am I selling. No- I am waiting out the 5 years I promised in the past.

Is the Worst Over for HMNY?

There was a very strong market reaction to Ted Farnsworth announcing he had secured $65 Million in “Financing” for Moviepass today. Farnsworth also boasted that Bankruptcy was “off the table”. He continued to state that he is looking for acquisitions and to find new ancillary revenue opportunities.

All this happening at an event called The Grille.

Can we believe Ted this time. Unfortunately, probably not. Ted has proven too many times that he gets confused about what “securing finances” really means. Because the company won’t comment on who, how or why anyone would give them additional financing, it seems very unlikely that there is any new real support. It is possible the company stuck another toxic deal for shareholders with Hudson Bay, and combined with some further dilution from their long running ATM offer they may have $65 Million in the bank. But if the history even rhymes with what we are going to find out about this new round of financing, get ready to find out the worst deal you can imagine for common stockholders. It’s simply the way Ted does business.

If somehow Tee did pull a hat trick and secured a reasonable debt deal, that would be a great thing for the company. I doubt that happened however, as Ted said the company still has no debt. Or maybe they do now? Who knows – this is Ted we are talking about here.

At any rate. The big jump from today is probably NOT going to last, and almost certainly won’t survive another big reverse split. If there is no other news than Ted haplessly announcing more toxic deals with sharks like Hudson, you can forget any long term rally.

If there is new real sound financing. Why would Ted and company not issue an official statement? Why would there be no SEC filing? It makes no sense. Yet nothing at HMNY ever makes sense.

I guess one silver lining. If he does have $65 in the bank now, that is nearly 3X the market capitalization of the company.

Unfortunately, even with all that, Ted will likely find a way to piss that money away faster than you can say reverse split!

I hope I am wrong, history says I am right. I hold my slightly less worthless shares, praying the company will find a way, and get rid of Fraudsworth.