MoviePass for Your Health

Getting Off the Couch and Using that MoviePass Card is Actually Good for Your Health

One of the things that Mitch Lowe, CEO of MoviePass,  has tried to talk about in the company’s last few TV interviews was the idea that MoviePass is helping people come out of what he called the “cocooning phase”.   The Cocooning trend gets a lot of attention from the media as a big trend in consumer behavior.

A combination of better home theaters, more high-quality HD content offerings, lots of tech options including social media, all on top of people’s general anxiety of going out into the public has made cocooning a big trend for that past several years.

The downside of cocooning, and staying home to binge on the 8 latest episodes of “Barry“, (which I love BTW) or whatever your latest addiction might be, is that it is actually bad for your brain.   Netflix binging is know to cause depression, and from all indications, the sour mood of the nation reflects the downward spiral of too much isolation and too much social media.  Experts continue to beat the dead horse on the perils of overdoing it with screens and addiction, but for the most part, people seem to be stuck in a rut that up until MoviePass, seemed unbreakable.

The data on binging shows that Neurochemically it fills our brains and bodies with high levels of adrenaline and cortisol, which if it stays in our system, can increase our stress levels over time.   So while we may think that Netflix binging is a great way to tune out and relax, it actually means that our brains are always “on,” and aren’t relaxing the way they need to be.

Of course, Netflix itself has become addicted to this bad binging habit and tries to encourage it relentlessly.   Deborah DSouza from Investopedia did an excellent piece on this.   Netflix came out with a press release trying to normalize and change the narrative on binging, renaming it “racing”.  A binge racer is a viewer who aims to finish a season within 24 hours of its release, according to the press release from Netflix. The number of binge racers on the platform has increased more than 20 times between 2013 and 2016.

DSouza makes the comical point.  “Knowing that this piece of trivia paints a very bleak picture of people’s lives, the PR release added: “…before you assume that racers are just basement-dwelling couch potatoes, know that for these super fans, the speed of watching is an achievement to be proud of and brag about. TV is their passion and Binge Racing is their sport.

It’s like Mark Zuckerberg recommending we start seeing less of our friends in person.”

In deep contrast to the negativity of binging it alone on Netflix, studies show that going to the movies alone is actually good for you!  It seems that the social interaction of enjoying a film with other people who are laughing, crying, and gasping with you as you watch a film actually builds a positive level of social interaction and bonding.   Further, by going it alone, you overcome fears of doing things alone and grow from the experience.

MoviePass has the unique opportunity to take the benefits of it’s popular and fast-growing movie subscription service and make it a truly social experience that could help improve the mental health of millions of Americans. Atom Films, which bills itself as “a revolutionary social movie ticketing app and website” has been making strong progress in making movie-going more of a social experience.  Atom makes it easy to coordinate a movie going outing with others, agree on a time and movie, and then book the reservation.   This would be an excellent addition to the MoviePass experience, and I remain hopeful the two companies could come together in the future to deliver the combination of an affordable movie subscription with frictionless social features.

In the interim, I think that MoviePass, and Mitch Lowe could double down on the message that MoviePass is a bright light out of the dark cocoon of depression brought on by too many hours of binging.  It’s like your mother used to say to you when you were feeling down.  Get out and do something!

Maybe the cheering mother of the future will say “get out and use that MoviePass!”

 

 

 

Subscriptions Are Big Business & Worth BIG Money

Want some further evidence that subscription businesses are capable of nabbing big Money from major players. This week Microsoft bought a somewhat obscure subscription business for $7.5 Billion in stock called GitHub, which is a developer platform for businesses and individual software developers.

It’s a different market, and Microsoft has strategic reasons to be interested in GitHub, but 7.5 Billion was an astounding price to be paid.

GitHub had a Reported Revenue Run Rate of $200 Million Dollars. It had previously raised $250 Million in VC funding. It reached 3 Million users in 2013. The company was not profitable – it lost somewhere near a $100 Million a year in 2016. It had about 800 employees.

It is a great story for the early investors of GitHub, and it will give the VCs who invested a very nice payday.

Now – let’s compare some of those numbers with HMNY and some interesting similarities.

MoviePass has a revenue run rate of at least $300 Million dollars and is growing rapidly. Moviepass does lose money as well, but on a percentage loss against revenue, it is not wildly off from GitHub.

In terms of paying subscribers both companies appear to be in the 3 Million range. Both companies charge a monthly subscription fee. GitHub charges $9 a month for their basic plan. $21 for businesses.

There are some comparisons that are clearly favorable to GitHub, they have sticky business customers, they have had profitable years in the past.

But I see advantages to MoviePass as well. MoviePass is growing way faster, it has a much bigger addressable consumer market. And Moviepass has far fewer employees than GitHub. Moviepass currently has fewer than 100 employees vs. GitHub’s 800 employees. Those pesky employees are expensive!

There are of course many other differences between the two companies. Importantly GitHub had the respect and admiration of Silicon Valley. Where Moviepass has yet to win over that crowd. GitHub also had the buzz of being a cloud company. And GitHub had won in a market that both Microsoft and Google had failed in previously and desperately wanted to be winners in.

Of course the biggest difference between the two companies is one is currently valued under $30 Million dollars, and the other was just bought for $7.5B!!!

Do I think Moviepass is worth $7.5B$. Nope. But nor would I have ever dreamed anyone would pay that for GitHub either.

Suffice to say – I see BIG Upside for Moviepass!

Chapter and Lesson #5

 

One of the things I am best at is riding coattails.  Behind every successful man is me, smiling and taking partial credit.  

Tom Haverfod (Parks & Rec)   

As it turned out, my job in Product Support set me up to grab my next pretty cool job at Microsoft.  The Windows Team at Microsoft was looking to hire somebody into Product Management who had some experience with our Support organization.   At that time Microsoft was spending a TON of money supporting retail and small business customers who were calling in to get phone support on all kinds of different issues they were having with their PC’s.  Sometimes it was a Windows problem, sometimes it was the PC Manufacturer, and sometimes it was a problem with a software or hardware program the customers had added to the PC.

Whatever the problem, a big percentage of people would call Microsoft first for help, and this was taking a big bite out of the profits of Windows.  The Product Management team was interested in finding new and less expensive ways to deal with all of these calls.   So they opened up a new position to hire somebody who could help figure out what should be done to drive down those high customer costs.    

Interestingly, the hiring manager for this role was Suzan Fine – Who is now Suzan DelBene, who has gone on to be a U.S. Congresswoman for Washington State’s first Congressional district.    I loved working for and with Suzan. Suzan had a great way about her, she had an infectious smile, positive attitude and get it done personality.  She was wicked smart, and I think at times overlooked at Microsoft for bigger roles that she likely deserved to have.    

Soon after Suzan hired me, I started working for Lora Shiner who was a group manager on Suzan’s team.  Lora was one of my favorite people I ever had the pleasure of working with and for.  She was an incredibly talented marketing mind and had a common-sense approach combined with a fearless attitude where she could stand up to any Microsoft Executive on any issue.

I remember one meeting we had with Bill Gates where Lora was one of the key presenters.  I can’t recall the issue we were discussing at the time.  But for whatever reason Bill was in a particularly foul mood that day.  He took a shot at Lora and said something to the effect that “you must be the dumbest person I have ever met”.   To which Lora replied with a big smile.  “Bill, while I understand you don’t like my idea, I can assure you that I am not the dumbest person you have ever met, not by a long shot”  That comment shut Bill up for a few seconds, he paused, the room gasped and everyone started to laugh, Bill took the comment with good intent and humor and got quickly  back onto a productive track.    

Lora was outstanding because of her confidence, her intellect and her very honest and direct style of communication.   She would mentor, support and get out of the way.  She expected the best from people, and when they didn’t deliver she had this magical ability to help them realize they had let her and the organization down.    Lora could fire a person and have them love her all the way through the process until they were out the door.  Sadly, Lora died of cancer at age 47 just before 9/11 attacks.   I was devastated to not be able to make it to her funeral as I got stuck on the East Coast after the attacks of 9/11 and could not get back in time to make her services.   She was a great friend, a mentor, and a great boss.  I still miss her to this day. 

I was very fortunate to have quite a few fantastic bosses at Microsoft.   Lora Shiner was my favorite boss.  Others included  Yusuf Mehdi a long time senior marketing executive for Microsoft.  Bob Kelly the leader of Server and Tools Marketing and now at Ignition Partners, Jeff Price another longtime leader in Windows and Windows Server Marketing now at VP at Oracle, Danielle Tiedt who was the lead marketer for Bing and went on to be the CMO at YouTube,  all great bosses, each was different and each helped me grow and become more successful in my career at Microsoft.

I had my share of bad bosses too, I will talk about some of them later in the book (without naming names).  Most of the bad bosses were bad because they lacked confidence in themselves, they were insecure in their abilities, and they lacked the ability to truly lead and inspire others.   In my experience, bad bosses tend to blame the people around them for their problems.  They have  a tendency to throw up a lot of roadblocks for the people who work for them and around them.   They tend to take away the energy of people in their groups, rather than create energy.   A great boss creates energy and knocks down roadblocks, they want their lowest level employee to have great success, and they never fear the success of their underlings, they embrace it and support it.

I remember I had one boss, who I will not name, I called him the “wife beater”.   This boss would come into my office totally by surprise and just start berating me over some minute detail he was upset about.  He would swear at me, personally insult me, tell me that I was worthless.  It was disgusting, I was still early in my career and in my twenties, and I was afraid to really stand up to him directly.   After his tirades, he would always come back to my office and apologize for losing it.  He would tell me how badly he felt, and that I didn’t deserve to be treated like that.  He would offer to take me out to lunch, which was the last thing in the world I wanted to do.  It was awful, it made going to work a terrible experience.  Luckily there was a reorganization just about every 8-12 months in those days at Microsoft, so I knew I would not be with him long, and sure enough, the nightmare of working for that guy lasted less than a year.  

The point of this is you need a great boss and there is no shame in riding coattails when they are available.

Learning Lesson #5 Picking a Great Boss is MORE important than Picking a Great Job.   This may be obvious to some people, but it took me some time to figure it out.   Having a great boss who can and will support you is so much more important than the job or the content of whatever job you might be considering.   You could have dream job, but if you have a horrible boss, it will ruin anything good about the job.   Bad bosses kill careers, they kill your spirit, and they can make every day a living hell.   Bad jobs, with a great boss, can actually be somewhat fun and satisfying.  Great bosses are extremely rare.  If you have a boss that is supporting you, helping you grow, eliminating problems and allowing you to do good work, you are in a winning situation.   Even if you don’t love the content of the everyday work you are doing, if you have a great boss stick with her or him as long as feasible.   Specific jobs and the work content comes and goes, bad bosses can be forever!  Or at least they can torpedo your career forever.   If you have to make a choice between Great Boss + Bad Job vs. Bad Boss + Great Job.  Pick Great Boss every time.  

Chapter and Lesson #4

 

“It is not the employer who pays the wages. Employers only handle the money… It is the customer who pays the wages.”- 

Henry Ford, Ford Motor Company 

  

When I landed the 2nd time at Microsoft, it was first as a contractor.  I had made up my mind that I wanted to work for the company fulltime, and I was going to do everything I could to land what they called a “blue badge” job with the company.   This terminology originates from the different types of employees who had different color badges depending on their employment status with the company.   Blue badges were for fulltime employees.   Microsoft has always had different color badges for temps, contractors, service jobs etc.    Blue was the gold standard, it meant that you were a full-time employee of Microsoft, with benefits, stock and all the nice, and some not so nice, things that go with it.    It took me about a year of hard work, keeping my nose to the grindstone and ears on the phone headset, and kissing a fair amount of ass to finally land my first full-time job.      

I came up from the bottom, so I had a chance to see the pros and cons of the perma-temps at Microsoft, and the ever-growing legions of contractors the company employs.  Microsoft employs temps and contractors for a few different reasons.  Mostly they want the flexibility in their workforce, it is more efficient for them than hiring fulltime people and having to deal with adjusting that workforce up and down.   For many of the contracted employees, this works pretty well, you can get a pretty decent paying job working as a contractor for Microsoft, and you can have a lot more flexible schedule.   As a contractor you typically can just focus on doing your work, you also don’t have to go to all the bullshit meetings Microsoft has all the time.   

A note about meetings and Microsoft. Microsoft is infamous for holding way too many meetings for just about everything, they have team meetings, group meetings, manager meetings, divisional all hands, pre-meetings, post meetings, meetings to plan more meetings and on and on.  It is an insane “meeting” culture, I don’t know if this has changed since I left.   I can only say that generally if you can’t stand meetings, don’t go to work at Microsoft.  You will have far too many of them and more than 50% of them are total and complete waste of time.   I regularly sat through meetings where there were 100’s sometimes 1000’s of people.  Almost all of them were totally useless and could have been done via a quick email or send a video around.   

For me, it turned out that the little bit of experience I had gained in Aerospace doing sales was useful for landing my first “blue badge” fulltime Microsoft job.  The group I was working for at Microsoft was looking for somebody who had some sales experience, but also some experience working in the Product Support Services group – which was the group I was doing the contracting job in.   That combination of experience landed me in a group that was ramping up a new team to sell a new “paid support” product from Microsoft that they were going to call “Premier Support” at that time.   The “premier” part meant that Microsoft was going to charge significant money to the customer to support their products. 

As more and more big corporations were installing more of Microsoft’s products, quite a few companies were starting to run important parts of their business on Microsoft, and they wanted Microsoft to have more “skin in the game” when selling their software to them.   Believe it or not, back in those days, Microsoft was considered more of a consumer software company, and big enterprise customers did not trust that Microsoft was truly committed to supporting big companies IBM for example was.

Microsoft had previously tried to avoid going deep into servicing customers.   It was expensive to service enterprise customers to the level they expected, and it was not considered a core competency of Microsoft.   IBM, HP, and a few others were considered more credible players in the service business in those days.

Microsoft was a disrupter offering a lower price more flexible PC solution, while others were offering expensive mainframe solutions with very high priced service contracts.   IBM had people inside of all these big fortune 500 companies, and anytime something went wrong they would take the bullet for the CIO who might be in trouble.   It made CIO’s very nervous to have a big deployment of Microsoft software and not have somebody at Microsoft who they could choke when things went wrong.    These dynamics made for the advent of the TAM – or Technical Account Manager at Microsoft.  The TAM was a named technical support expert assigned specifically to a company, or even to a specific department of a larger company.  If for example, a big bank had some sort of serious problem happening with any Microsoft product, they could call on their assigned TAM to make sure their problem was solved, even if that meant the problem required an engineering fix from one of Microsoft’s core development teams.  And a company could ONLY get access to a TAM if they had paid for a Premier Support contract.   It was a brilliant way for Microsoft to charge money to support their products, and customers actually jumped at the chance to get some individualized attention from the fast-growing software company based in the obscure NW corner of the United States.  

For me, this meant a new job was born!   My job was to sell these Premier Support contracts to some of Microsoft’s largest and most important customers.   I was happy and lucky to have a Fulltime spot with the company, many of the young people in the division I was being hired into were already “retiring” as they had enough money in stock options to cash in!  They could “call in rich” as they would say.   I figured if these lucky bastards could be retiring before they were 30 years old, I would be able to knock out enough stock options to be done before I was 30 as well! 

Microsoft was fortunate to have a lot of talent in their support group, they did a good job of working with customers and finding solutions to whatever problems they had.   Microsoft acted like an underdog in those earlier days, it tried to continually go above and beyond to make sure customers were getting good service and were happy and satisfied.   It was a fun group to be part of, and in that work, I learned a lot about what customers wanted from our products and services.  I would hear it first hand from the IT Pros who were doing the actual deployments of Microsoft Software in their environments.   These were the people whose jobs were on the line to make our software work at their companies, you learn a TON from these folks. 

Learning Lesson #4  When starting out in a big company, get a job where you are working directly with customers.   The experience you gain working directly with customers is invaluable for your entire career.  You will get more respect from future bosses, co-workers, customers, and partners if you live in the trenches with customers for a decent period of time.  It may not be glamorous or even all that fun at times, but the experience is the best thing you can do for your career.  I recommend getting the experience as early in your career as possible and stick with it as long as you are progressing in a direction you like.   There are TONS of jobs at big companies where you never actually talk directly to customers at all.  Avoid these jobs early in career.  Jobs that don’t directly touch customers are normally easily replaceable, outsourced, automated and early to be eliminated when times get tough, and they won’t give you the credibility needed to accelerate your career.   Companies are nothing without paying customers, every CEO and senior executive knows that.   Senior Executives have more trust and rely more on people in their organizations who have had a strong direct connection with customers.   And most Senior Executives get their positions because of their focus on customers throughout their careers.  

HMNY Reverse Stock Split Panic

Several people have reached out to me asking if I think there will be a reverse stock split coming to HMNY – Moviepass.  Interestingly, nobody has asked me if they think it is a good or bad idea to do it.   I guess that is because most people simply assume a reverse stock split is a bad thing.

Now that the stock price for HMNY has sunk down under the $.40 range, some are fearful that HMNY risks being de-listed from the NASDAQ.  First of all, I think it is important to say right here, we are very far away from any chance of delisting.  Very very far away.  This is something that bashers on stocktwits talk about to scare people.  But the facts are that HMNY and MoviePass are not even close to this being a real issue.  There is a long process involved in delisting a security from the NASDAQ.   Here’s a quick background on that.

If a company fails to meet a minimum closing bid price of at least $1 for 30 consecutive trading days can trigger delisting. When this happens NASDAQ issues a deficiency notice to the company.

 If HMNY receives a deficiency notice it has four business days to file an 8-K form with the SEC or to issue a press release to announce the notice. At this point, HMNY has to provide the deficiency notice’s receipt date,  and an action plan to remedy the problem.  This has not yet happened.

If HMNY does receive a deficiency notice they have 180 calendar days to return to compliance.  After that HMNY has to achieve a closing price of $1 or more for 10 consecutive trading days during this period.  Because HMNY is not a tiny penny stock and it is widely held, it also is likely HMNY will receive a second “cure period” of 180 calendar days if needed to fix the problem.  They would have to jump through some hoops with NASDAQ, but extensions are not particularly difficult to receive for a company with the size and interest of a MoviePass.  

So – we are at least a full year away from ANY serious risk of delisting.  It just is not going to happen anytime this year, or even early next year.   And, luckily for investors here, we will know pretty well if MoviePass is going to make it or not well before that point.  So next time you hear a basher say HMNY is going to be delisted.  Just say – Please Really?   That’s just dumb.

OK – Now, back to the dreaded RS – or Reverse split.   This is just another scare tactic that shorts and bashers throw around on message boards.  And it is again almost all total nonsense.   The theory is that HMNY will have to do an RS, because the share price has fallen so low that the company will be forced to do a reverse split conversion of their stock in order to avoid delisting, and or, to be able to continue with more dilution (adding more new shares) to raise funds.

I think for folks that are newer to investing, it makes sense to clarify exactly what a reverse split is.   Here is how Zacks defines a Reverse Stock Split.

“Reverse stock splits boost a company’s share price. A higher share price is usually good, but the increase that comes from a reverse split is mostly an accounting trick. The company isn’t any more valuable than it was before the reverse split. Whatever value it has is just distributed over fewer shares of stock, thus increasing the price. A reverse split can sometimes save a stock sinking in value from a delisting.”

The important thing for novice investors to realize is, stock splits, be it reverse stock splits the decrease the number of shares,  or regular stock splits that increase the number of shares, has no impact at all on the value of the company you are holding, nor does a split in either direction have any impact on the percentage amount of the company you own.

A simple example goes like this.  Let’s say you owned 1,000 shares of XYZ Company stock at $.10 a share representing $100 of value – and that 1000 shares of stock represented 1% of XYZ Company.   IF XYZ Compay did a 100 to 1 reverse split, you would now have 10 shares of XYZ stock.  (1000 /100 = 10).  And the stock would be worth the exact same $100 value you had before. Also, that 10 shares would now represent the exact same 1% of XYZ Company it represented before the reverse stock split.   Further, the total value or Market Capitalization of XYZ company would be exactly the same as it was before the stock split ever happened.   The value of the company would simply be spread out across a fewer number of shares.  Remember Market Capitalization is calculated by the number of outstanding shares X the stock price.   

So why do people fear an RS at all if it does not change the actual value of their investment or the actual value of the company they are invested in?  One argument is that an RS is a sign of a company that is shrinking or going out of business or nearing bankruptcy.   Well if you read my blog, you know that I don’t think that HMNY or MoviePass is anywhere near going Bankrupt.  That argument just doesn’t hold water for me – they have no debt!  I also think it is a stretch to think that MoviePass is shrinking, the company is growing in the 3000-5000% range.  It is a growth company plain and simple.   You can hate the business model, and you can illogically fear bankruptcy.  But you can’t argue with the growth of HMNY.

Bears and bashers of HMNY will tell you that Ted Farnsworth will do an RS and just start diluting more shares again driving the price down, and the cycle will go again and again.   This argument actually has a little more merit and possibility.   If we arrive at the end of this calendar year at 5 Million Subscribers, and we don’t have a clear line of sight to breakeven, backed by management, HMNY would risk more dilution than has already been discussed by management.   If this happens, it will be bearish for the stock.   My firm view is that when MoviePass hits 5 Million Subscribers the revenue model works for the company and that we will not have to face an ugly pivot down the road.

If we do experience an RS is it a death knell?   The data says it no.

You might find it interesting that the data on stock prices post reverse splits indicates that RS’s are at worst irrellevant, and at best helpful.   There is a ton of scholarly studies on this topic.   I found this Barron’s article the most balanced.  The upshot from Barron’s was that a company that is going fail, will fail regardless of an RS, and the converse is also true.  If a company is going to succeed, it will do so post an RS just as well.

CNBC reveals a study that says Reverse Splits tend to actually end up being good for stocks.  This study was, however, was limited to only S&P 500 stocks, so there is an obvious sample bias here by not including penny stocks.

I think the data is clear enough.  The dreaded RS is definitely not a Death Knell, in some cases, it makes sense to do it, and it is likely a neutral move to make in the worst case.

Hopefully, this will help folks calm down a little bit and not panic over a potential RS.   I doubt it will happen to HMNY, and if it does, it is not the end of the world!!