July 31, 2018 / 6:14 PM / a year ago

Parent of MoviePass raises prices, cuts service; shares sink

MoviePass, a U.S. movie ticket subscription app, is seen on a mobile phone in this photo illustration in New York, U.S., May 15, 2018. REUTERS/Mike Segar/Illustration

NEW YORK (Reuters) - The parent company of embattled movie theater subscription service MoviePass announced on Tuesday that it will seek to limit losses by hiking its monthly fees by 50 percent within the next 30 days while limiting opportunities for subscribers to see most films during their first two weeks in theaters.

Shares of MoviePass parent Helios and Matheson Analytics Inc HMNY.O were down 36 percent at midday in see-saw trade that saw shares surge briefly by over 150 percent on the announcement. Shares of AMC Entertainment Holdings (AMC.N), the biggest U.S. movie theater chain which offers a rival ticket service, jumped 7.5 percent in midday trading.

“We believe that the measures we began rolling out last week will immediately reduce cash burn by 60 percent and will continue to generate lower funding needs in the future,” Chief Executive Officer Ted Farnsworth said in a statement.

The company’s shares have plunged 96 percent over the last week after it was unable to make required payments to its merchant and fulfillment processors. Service interruptions left its 3 million customers unable to access movie tickets.

The company, which says it accounts for roughly 6 percent of U.S. box office receipts, is one of just a few disruptive technology companies that chose to go public during its growth phase. [L1N1SA1SY] This has heightened investor attention and made its share price more volatile.

Farnsworth in his statement noted that the company has “challenged an entrenched industry while maintaining the financially transparent records of a publicly traded company.”

Michael Pachter, an analyst at Wedbush Securities, said the price hike and service cuts could hurt MoviePass as a competitor in the marketplace. He noted that the price increase from $9.95 to $14.95 puts the price point just $5 lower than the $19.95 subscription service offered by AMC.

At the same time, the AMC service, called A-List, includes IMAX and 3D films and allows subscribers to view up to three films a week, he added.

“Raising the price and making people wait may get (MoviePass) to break even, but the question is how many of them will stick around when you can spend five dollars more and go to an IMAX showing on opening night,” Pachter said. “My guess is they will lose a lot of customers. And maybe survive.”

Reporting by David Randall; Editing by Jennifer Ablan and David Gregorio

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