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.

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.

The Value of Moviepass – Something to Ponder

Moviepass even with all of its hassles continues to be a great deal. That much is obvious when considering that for $9.95 a subscriber can save money by going to the theater just one time, and if they use the subscription to the max, they can get somewhere around $30 to $50 in value depending on when and where the pass is used.

I thought it might be fun to compare Moviepass to other ways consumers might blow their cash to entertain themselves. So here’s a short list of of entertainment options compared to the value of Moviepass…

We could go bowling… as Gaffigan says. But bowling these days is generally around $20 or more per bowler. For that you could buy 2 months of Moviepass and go out to the movies up to 6 times.

If bowling is not your thing – how about golf? Apparently the average green fee is around $34 for a public course. But you have to have clubs and the fancy pants and shoes to really get out there. For that you get 3 months of MP or 9 Movies. And you would have some money leftover to buy a popcorn and a drink!

Golf a little slow? How about a day skiing? According to “Snow Online” the average cost of a lift ticket in the US is now up to $94. And if you think movie concessions are expensive, try ski lodge concessions! And don’t forget the 2 hour drive, the expensive equipment rental or purchase. It’s enough to make you want to just go see a movie! And for that price, you could see at least 27 movies or have 9 months worth of Moviepass! With plenty left over to take a friend or two or three!

Maybe you prefer to do something less active? How about a concert? Well we all know that is going to set you back some real money. For good seats at a good show we are talking about $120. Or a full year of Moviepass, or 36 movies! Now that’s a lot of entertainment hours by comparison:-)

Well, how about a Broadway show! Turns out that is going to hit your wallet hard as well. According to statisa that will be $127 big ones!

Do you like Speed? How about a day at the races? NASCAR perhaps? Average ticket there $96.14. Plus parking, plus a LOT of hassle getting in and out. Let’s just call that about a year of Moviepass again. And that is being kind on the hassle charges.

How about an NFL game? Forget about it! No matter where your favorite team plays – it’s more than a full year of Moviepass!

We can talk about other entertainment options that are cheaper than Moviepass. Going on a walk is free! Sex can and should be free! You can share a Netflix account for less. Or you can buy a digital TV antenna off Amazon for about $30 bucks and get your locals for free!

Let’s face it, the cost of Moviepass is super low, and it is a fantastic value compared to just about any other entertainment option.

So as we sit and ponder if Moviepass subscriber numbers will flame out or continue to grow under the new 3 movies a month value proposition. It’s worth considering, do consumers have a lot of better options for the money?

Even the Mormons are Bashing Moviepass!

I live in an area where there are a lot of Mormons, they are generally pretty nice people.  They tend to sort of keep to themselves.   As neighbors, I have found they won’t really talk to you very much.  Unless of course, they are coming around on one of their mission walks, in that case, they come right up to your door, they start asking all kinds of pesky personal questions about God and religion, and they become a little bit annoying.   Otherwise, they make pretty good neighbors, they keep their lawns up, they don’t play a lot of loud music or have loud parties 🙂  Their kids tend to be well behaved, and they don’t steal any of your shit.

So it was with some surprise when I found the Moviepass bash article of the day to be from non-other than Mormonville USA – the BYU owned and operated “The Daily Universe”!     I thought to myself “God dangit now those carrot snappers are going after my Moviepass!  And with this headline.  “MoviePass struggles as industry evolves”  That is about as cold-blooded as nice Mormon folk can get!

Then I thought to myself – they named their paper “The Daily Universe”  Really – Universe?   Seems a little over the top.   But hey – it’s their little cult and they have freedom of speech to say what they want!  This is ‘Merica damn it!

The piece whines like a bishop excommunicated going through all the normal stuff,  the changes, the app hiccups, the troubled stock – etc.

The author takes a quote from a BYU professor making elegant statements like “I think the idea of subscription was novel and innovative,” BYU professor of marketing and entrepreneurship Gary Rhoads said. “I think MoviePass is going to go under most likely, but now other companies are going to learn from their mistakes and be profitable.”

Dang – I thought to myself.  Who is this guy Gary Rhoads? – he must be on top of his game here with Moviepass.  So I did a little Googling on the guy, and one thing I found out, Gary is a momo who knows how to jam!   Check Gary out as he rips a mean beat to Steppenwolf’s “Born to be Wild”

Now that is a Mormon marketing genius who knows how to light it UP!!

Hey – I am sure Doc Gary is a super smart guy, and he has a nice resume to prove it!   The only thing Gary doesn’t have on his rap sheet is any real-world companies he has created, managed or even worked at.  The old axiom of — Those that can’t do – teach – somehow seems fitting here.  Or is it, those who can’t do- consult…   Wait Gary does both.  2 strikes – he’s out 🙂

OK – then there is this doozy of a quote in the piece.

“When a company stock price drops and stays below $1 for 30 consecutive business days, it’s at risk of being delisted,” said Paul Smart, president of private investment company Smart Capital, Inc.

“In this case, NASDAQ will probably notify HMNY, which is the majority stockholder of MoviePass, and give them 180 days to get their stock price back above $1. MoviePass is going to have to act fast.”

Yeh – we get that, and we also know that this is almost 100% bullshit.  The process for delisting is massively long, and there is almost no risk of any delisting happening anytime soon.   Que the RS rumors again here!!

I thought it would be fun to find out more about Paul Smart from Smart Capital Inc.  But that was not possible with the Google machine.  According to Google, there is no Paul Smart from Smart Capital out there.  Maybe it is just a dude from the Ward that the writer knows.   Who knows, maybe it was a friend of a sister-wife or something.   I kid – I know the Mormons don’t have multiple wives anymore.

And that leaves me with my joke of the day.

Q: How do you keep a Mormon from drinking all your beer?

A: Invite another Mormon!