Christopher Robin – Crazy Rich Asians and Cash Burn Control

At the risk of being a Moviepass hog, I went and saw another movie tonight.   It was primarily for research purposes, so I felt OK with the decision.

First the good part.

The choice for Moviepass customers across the country today at most non-partner theaters was between Christopher Robin and Crazy Rich Asians.   I was frankly not very interested in either, but since I loved Winnie the Pooh when I was a kid I thought why not take a chance on that.   And with that decision, I was delighted with Moviepass one more time.

Christopher Robin was dare I say it, an awesome surprise.  I loved it!  I had forgotten what a great story it was, and how totally fantastic all the different characters were.  I relived a part of my childhood and sadly relived some of my horrible times in corporate America.   The acting, the special effects, the sound, the perfect fuzzy rendition of Pooh, Tigger, Eeyore and the gang.  It was just super fun.   

Now, was it $15 dollars of fun.  No – it wasn’t.   Was it $3 dollars and 33 cents of fun?  Yes, it totally was!   Would I have ever gone to see the Movie without my Moviepass?  No way in hell.  Never, would not even think of going to see a Disney G rated movie on a Wednesday night for 15 bucks. 

My research takeaway – Moviepass can offer a surprisingly delightful experience pushing users to see movies that might not otherwise consider.  Moviepass can get people (like me) to the theaters to see movies they would never watch ever,  like Christopher Robbin.  That’s pretty big!  I am a believer in the Moviepass – Movie Insurance concept.  Even with the new deal, at $3.33 value a use – it’s not a big deal to see a movie just for the hell of it. 

Now the Bad Part

I am retired and do what I want whenever I want – unless my wife is telling me what do to…  Then I do whatever she says…  but I digress.  My point is I have plenty of free time to screw around dealing with all the hassles of using the Moviepass experience.   I can go to the theater and check in way before the movie time, I get my ticket, run a couple errands, go to dinner, and then go see the show.   My flexible schedule is not a reality for most people.    When I was working full time, I would not have had the time or patience to deal with a  movie purchasing experience like that.

I think a lot of people will be really annoyed with how flakey the service is right now.  The idea that you might or might not be able to see a movie, that you only kind of care about.  Combined with the issue of – if you don’t get your ticket early from the box office, the same day of the show, you might not be able to go at all, or be stuck paying full price.   It’s just not a very compelling value proposition.   I think for this new plan to work – people they will need to have at least 4 or 5 good choices available every day.   Limiting to two movie choices as was done today, along with the issue of not knowing what will be available from day to day, and not being able to plan for what you might go see on your special date night, I think is going to be a non-starter for a lot of people.   I am hoping we haven’t seen the new and improved selection from the new offering, otherwise, I think the sub numbers will suffer – badly.

I am afraid if the service stays flakey like this, it will continue to suffer from adverse selection.  I don’t think casual moviegoers will like what is being offered right now.   It doesn’t pass the critical elevator test.  Meaning you have to be able to clearly explain the value prop on an elevator ride.  Maybe the problem is that Moviepass is located in the Empire State Building, that ride might be long enough to explain Moviepass with all the caveats.

Here’s my hypothetical attempt to explain Moviepass to a friend.  “Yeh buddy- It’s a good price to see three movies at $3.33 per movie if you get around to seeing 3 each month.   It works at most Movie Theaters, but not all and -no iPic.  No Imax and no 3D, but they say they are working on an extra fee so you can see those.  They only have some of the movies sometimes, and lately, it has only been one or two movies available on any day.  <<my real friends have now already stopped listening>>  If you see a movie you really want to see in the morning you might want to run down to the theater, check in, get your ticket, to make sure the movie doesn’t disappear out of the app.  Oh, and if it is you and your significant other, you will both have to do that.  Or you will have to take his/her phone and MP card with you when you go check in.  <<now my friend is questioning our friendship and my sanity for recommending this thing at all>>  Oh, and one other drawback, you will have no idea what movie you will be able to see on any given day, and you can’t exactly plan to go to any specific movie on a specific day, because, well you never really know what will be available at what theater.”  <<The friend is now ready to push me out of the moving elevator>>

So anyway, I think there will need some pretty big tweaking of the service from what we are seeing here for the word of mouth marketing engine to kick back in.   Simple fix for MP would be to get organized and be really clear what movies will be available on what days at what theaters.   Of course, E-ticket partner theaters are not a problem – and maybe that is what Moviepass is trying to do here.  Force more theaters to play ball with them.  I can tell you without a doubt, traffic to my theater is obviously way down.  The Moviepass crowd is GONE.  Small theater chains must want to see those customers come back.  At my local theater, we have gone from a full parking lot, long lines at the concession stand, back to, front row parking, and a ghost town theater.  It’s like the place has gone back to pre-moviepass days.  Sad and empty.

I think Moviepass is going to work out a lot more deals with theaters, and studios, the selection, and predictability will slowly improve.  In the meantime, I think cash burn looks like it is well under control, I just hope that chokehold on cash doesn’t kill the subscription goose!    ohh Moviepass – never a dull moment – always on the edge!

 

 

 

 

 

Moviepass Stories Have Become the Internet’s Clickbait Machine – It’s Britney BITCH!

I worked for one of the largest websites in the world for many years. MSN.com – we had over 100 Million customers visit monthly. One thing we got very good at, and I hate admitting it, was using clickbait titles and pics to lure customers into our article pages.

The process is extremely easy. Pick topics that are hot in search, create tantalizing sensational headlines, and watch the traffic spike up. Hell, I am doing it with this blog right now!!… it’s hard to quit old habits!

The best headlines are sensational and negative. Nobody wants to read about good news. The best photos are sexy, or scary.  That is why TV News always leads with car wrecks, fires, shootings, and scandals. Nobody wants to hear about great teachers, or doctors saving cancer patients, or a social worker helping somebody get back on their feet. That’s not NEWS that’s boring!

People are weird social animals that can’t look away from god-awful things. They run to see a fire, they crave a good 48 Hours or 20/20 informative murder porn episode. It’s human nature. We are run by fear and flight. And we desperately want to know of the latest tragic thing that happened immediately, and we wonder in fear if it will hurt us next.

On MSN, a great headline is something like “Britney Spears life in shambles after tough divorce, and running out of money”. That would be a clickbait banger! Clicks galore with that one.

One thing you need to know about the online-only business press. These sites are desperate for traffic – they all operate on a razors edge financially, and the competition is brutal. They play the clickbait game as hard as they can.

They also love free and cheap content. This is why you see stories like the “users complain they can’t cancel Moviepass” pop up all over the pace in succession in one day. In that example, Mashable was the first to do the story. Mashable and Buzzfeed are the two original clickbait machine businesses.

Literally, it is their business model. They look for and write headlines that they see in trending topics in search logs from Google, they then try and find some scandal and look for ways sensationalize it.

They won’t do any real research on the topic, rarely will they bother to verify the validity of the story at all. In fact, reporting the rumor is considered good enough – it’s actually great if you are trying to drive traffic because it will get people to argue about it on social media!  That is also great for clicks!.   The primary metric management uses for success is “did people click the headline” from Facebook, Twitter, Instagram or whatever big traffic source they are trying to suck from.

If you work at one of these places your job is to write as many “clickbait” headlines and stories you can in a day. And you are measured by the audience you pull in.  It’s a nasty business- and it requires playing on human emotions, and knowing how to work the click.

These sites act like sheep- if Mashable looks like they got a story that is “clicking” the other sites like Vox, Buzzfeed, Business Insider, The Street, Market Watch etc. will do a “story on the story” so they can get some of those clicks. It’s competitive every day. And they don’t want to lose out. And the cheapest story to go with is the story somebody else has already written. They don’t bother to fact check anything, they simply say. “Reported by Mashable” users can’t cancel Moviepass. Speed is everything, the stories are dead in just a few hours.  Here’s what the media pile on looks like 24 hours later!  135,000 results!  BOOM just like that.  And poor old Mashable who “broke the story” – they are lost in the crowd.  It’s a brutal game.

It’s also a true Journalism nightmare. But these people are not journalists. As I have written about here before, we had deals with a lot of these sites at MSN to syndicate their “content”. So I have actually visited most of their offices. It is fascinating to see it. The scene is a bunch Journalism or English majors interning or just out of college, they make next to nothing and work in near-sweatshop conditions, pumping out stories as fast as they can. Quantity and click-ability rules over quality. It’s scary to think about how inexperienced these people are and really how little most of them know about the topics they write. But it’s a business. And it is what it is.

So it caught my attention today when Moviepass mentioned this little bullet in their Momentum Press Release. (Which. BTW- was great to see! And has some great nuggets in it)

MoviePass is one of the most widely read business stories of 2018.

It reminded me again, the online financial media is almost totally useless.

Read every headline and story with a huge grain of salt. The chances of accuracy are very low.

Good news, unless it is a HUGE upside earnings type story, generally is not covered. Nobody will click on a headline that says. “Company executing well, new customer service team is improving”. That is BORING!!  And definitely NOT clickable.  If one of my interns came to me with that headline, I would slap them across the face with my mousepad!! Give me something people will click on you stupid rookie! We are trying to run a business here!

As Teddy said today in the Fox Business interview, Moviepass is one of the hottest brands of the year. Everyone is talking about it. With that heat, comes the fire of clickbait. Expect Moviepass to be the Britney Spears of the financial press for at least a few more months. Longer if it takes off. Shorter If Britney dies. But if death comes, that will certainly be the click of the day!

Fox Business Interview and New Model

Link to Interview on Fox Business

  • Utilization Rate .08
  • 3M Subs Holding
  • Down to $12M cash burn now
  • Changes “will make us profitable”
  • Ted Denounces dilution
  • Say they have 6 month worth of cash
  • 1 Million already switched to new plan
  • Mitch – “New plan gets us to cash flow positive, and when the market starts to realize that the need for capital is declining rapidly I think people..Investors”.  Cavuto interrupts “what’s in it for the customers?”   Damn it Cavuto – let the man answer the question!

New Model – at .8 Utilization and $11ticket price  (highest I have ever modeled) show GM positive.

I am not sure why they can’t just show a profitable month for August now.  Maybe they will?

HMNY Earnings… Miss…or .. Miss-Understanding?

My quick take on the little 10Q earnings fit this evening.

But before we get to that, I saw MI 1005 – or whatever it is called – starring that aging Scientologist – whatever his name is – with my MoviePass card today.

It was sort of fun, but by about 2/3rds of the way through it I found myself hoping it would end soon.  How many chases, explosions, karate fights, rubber mask double cross scenes can you really take in one movie?  I had to go to the bathroom once during the show and was happy to take the break and let the movie keep running. When I got back to my seat I whispered to my wife, “what did I miss?”  She said chasing and fighting with that annoyed look.  That was fine by me, there were still 35 minutes more stunts, jumps, fights etc to go…

Even the special effects were at times annoying.  I happen to own a BMW 1200GS, like many of the bikes featured in the movie – the same bike the cops chase Cruise on.  Ethan Hunt’s bike is an R nine T – same engine I have on my bike.  The movie makes these BMW bikes sound like they are winding up like a Suzuki GSXR 750 with racing pipes on it.    It is like taking a Mercedes SL Class and making it sound like a 86 Honda Civic hepped up by some high school kid.  It’s ridiculous!

Also a little crazy was the after-hours spazz out over the Q10 released today.

Seriously what were people expecting?

This is a company that has been EXTREMELY transparent about their cash burn, and has been hanging on by a literal thread taking on loan shark like bridge loans to stay alive over weekends while their main product was melting down.   Did people really think the numbers were going to be good?

And were they really that much worse than expected?   In some areas NO, in some areas maybe a little concern:

Gross Profit was -$105 Million.   Yep they burned a shit ton of cash.  We knew that!!!  It was not new!!  Does nobody remember this?

Directly from the 8K on June 21st the company said.

“From May 1, 2018 through June 15, 2018, we acquired approximately 545,000 new paying subscribers. Due to our greater than anticipated subscriber growth in May 2018, our cash deficit for the month of May 2018 was approximately $40.0 million and we anticipate our cash deficit for the month of June 2018 will be at least $45.0 million due to significant subscriber growth and strong box office results of recently released films. As the MoviePass subscriber base increases rapidly, and as we increase our investments in movies through MoviePass Ventures and MoviePass Films, and make other acquisitions, our monthly cash deficit will continue to increase in the coming months.”

So May and June alone were already announced as -$40 & -$45 Million.  That is -$85M we already knew about for those May and June.

That logically means that April was -$20M —  For those who don’t get the math.  (April -20 + May -40 + June -45 = QTR -105M) . Were people hoping that April was somehow a way better month?  That seems totally illogical to me.  The GP is pretty much exactly where we thought it was going to be.  And all of this crazy Cash Burn was before the big changes really started coming in. Surge Pricing didn’t start until July 5th – or thereabouts.

SG&A actually came in lower than I have modeled at $20.5 Million.  That is pretty lean for a company of this size.  I had $36 Million guesstimate in there.

The $72.4 Million in Subscriber Revenue seemed like a pretty good number to me, particularly when the company is sitting on $65.3 Million of Defferred Revenue.   (This stuff gets a little complicated.  But Deffered Revenue sits as a liability until it is recognized over the life of the subscriber as Revenue.  This is what makes yearly subscriptions nice, it allows for smooth revenue delivery over the period of the contract.) .  Last QTR the company did $47.1M in, so it had a big jump in sub revenue in the QTR.

The biggest disappointment in revenue – and I don’t know how this number could come in a bad as it did was the Marketing and Promotional Services number.  It was actually LOWER than last QTR!  It came in at a lousy $935K vs $1.44M last QTR.  That one needs some explaining from management.  This is the area where the profits were supposed to come from.  This was the reason behind buying Moviefone.  This is supposed to be the area where they are monetizing their data, and studios were going to pay money for it!   To me, this smells like really bad execution.  And if I had once big worry about this ER, this would be it.  Studios don’t seem to be willing to spend money with MoviePass yet, and the theater deals are coming too slowly as well.  The industry seems to be giving them the finger.    That will have to change, if it doesn’t, that makes the story much more difficult.

That brings us to the next worry wall from earnings.   New panic has set in over the dilution – wait – really – Ted is going to dilute the stock?   Wowser – that fear was new…  OK – sure.  Not really no.

But I think folks have had a very legitimate worry that Ted is having a little too much fun playing Hollywood Movie Mogul, and he is funding his good times with stockholder’s money.   Ted and Mitch have said that they would be buying films multiple times in both interviews and in SEC filings.  They belive exclusive content can differentiate the MoviePass experience and bring added revenue to the company- from Box Office receipts to downlevel revenue streams from content DVD, streaming etc.  That is what MP Films & Ventures was all about.

The problem is, stockholders don’t want to hear about spending more money on risky investments in films while the company is hemorrhaging cash.  That is understandable.   Here I actually thought the news was pretty good.  In the QTR the company spent ONLY $2.052Million “Net Investments in Films”.   That is a LOT less than I think people thought they had spent on Gotti and whatever that other forgettable heist movie they funded.   I will write later on how I think they are getting parts of these movies on the cheap by guaranteeing audience delivery.   But at least up through this QTR, the fear of Ted going totally crazy on Movie Spending to impress his new Hollywood pals seems to be largely under control.

Is there other stuff to worry about with this ER, probably.  But nothing that stands out as totally unfixable or way out of line from what we already knew.

The biggest head scratcher for me is why are the Studios not spending more money with them?   This thing does not work well without that piece.  They need to find a way to work with Hollywood much better.  Mitch has mentioned this in his last set of interviews and said it on Cheddar that they have found a better approach to working with Studios.  Let’s hope so!

As for cash burn, dilution, and Ted going nuts buying movies.  All of that looks like it is about to turn much more positive starting tomorrow with the big 8/15 change over day.

People are freaked out about the new share count of 636M.  That is a lot of shares, and it is an insane amount of shares pre-split.  Some 159B.  If you gambled before the split, and I was one of those suckers – you likely never going to see that money back.  But there is some interesting math you can play with where you could get a portion back.  But in all likelihood, we will never get a dime a share back. And even that would be good at this point.

At .03 a share – we are back to the company being valued at basically nothing. $19M Market cap against 636M Shares Outstanding.

Again – this was not new news.  5B shares had already been approved.  And we all knew that ATM was the only source of funding.  Didn’t we?

Consider a scenario where the stock goes down to .02 cents and Ted goes all the way and floats the full 5B shares he has available.  Maybe he can raise $75 more dollars doing that.   That would give the company a $100M Market Cap.

So basically what all this means is that the company has to live off what it catches within the next few months.   It literally has to break even fast.  If it doesn’t, well- I suppose crazy Ted could try another RS.  And see if he can play the game one more time.   If he does that.  It is another easy short.  And at that point might as well hang it up.

I remain optimistic.  And I don’t frankly give two shits what the bears are saying about the stock.   I think the new change over can work to get to breakeven, and I think the stock is priced to go out of business.

That said – it is gambling, and if you can’t afford to lose it, don’t put it here!!!

 

 

 

 

Tomorrow is IT! 8/15 Change Over Day!

Tomorrow will mark the beginning of the end of the Moviepass slaughter. The hogs will be eliminated. The Wall Street crowd will see impressive stickiness to the service, sub numbers will be surprisingly resilient.

It will be a long battle still, but the good guys are going to win. The service will be freed from the socialists who were bringing it down. Cash Burn will dwindle toward zero. HMNY will no longer be hostages to the thieves of Wall Street.

The tables will turn quickly. When you don’t need money, everyone wants to loan you money. The dilution will slow to a trickle. The shorts will cover. The greed of Wall Street will kick into high gear snapping up shares on the cheap.

The snarky nasty media will change their tune as fast as they did the time before. Sins of the MP past will be forgotten.

Theaters starving to get that good Moviepass hit will come to partner. Films looking to buy an audience will come knocking. The platform will grow. Exclusive content and experiences will excite the masses. A new entertainment company will be born.

Mark tomorrow on your calendar.

8/15 Change Over Day!

It shall be remembered by all!