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MoviePass’s finances show it’s a deal that really is too good to be true

Not unexpected to see a startup burn through cash.

For $9.95 per month, MoviePass will allow you to see one 2D movie per week (or up to four per month) in participating movie theaters (this is different from the company’s previous plan, which allowed yo to see one movie per day for the same cost). Since this is less than the price of a usual movie ticket, it’s a pretty sweet deal.

The thing that many have wondered is how MoviePass is making money because after all, the company is paying theaters full price for movie tickets. Now, some new insight provided by a Business Insider report shows that an external auditor has “substantial doubt about the Company’s ability to continue as a going concern” based on MoviePass’s 10-K filing.

The auditor, Rosenberg Rich Baker Berman & Co., had specific concerns about the negative cash flows that MoviePass reported. Due to the level of losses, the auditors are questing the viability of the company over the next year.

Ever since the MoviePass dropped its subscription price last year, the company has attracted over 2 million subscribers. The issue here isn’t the fact that they’re attracting subscribers but the fact that with the current business model, each customer costs them money every time they go see a movie. This is the reason why they reported a $150.8 million loss.

While the company reported losses, it isn’t uncommon for a startup to go through cash while it’s trying to get everything up and running. Though, the concern here is that MoviePass needs to develop a business model that is profitable, but for now, the company is relying on outside investment for funding, as many startups usually do.

Source
Business Insider
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Hamza Khalid

The Jolt Journal is your source for daily tech news, breaking, reviews, and insights.

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