MoviePass Bankruptcy: What Does Chapter 7 Mean For The Movie Subscription Service?

MoviePass, along with its parent company Helios and Matheson Analytics (HMNY), filed for Chapter 7 bankruptcy late Tuesday. The company had shut down its movie subscription service back in September 2019, citing “setbacks and challenges.”

At the time, Movie Pass posted on its website, “ Over the past several months, MoviePass worked hard to relaunch its groundbreaking subscription service and recapitalize the company. While we were able to relaunch the service for some of our subscribers with an improved technology platform, our efforts to recapitalize the company have not been successful to date.

“As a result, it pains us to inform you that effective at 8 a.m. E.T. on September 14, 2019, we must interrupt service for all current MoviePass subscribers. MoviePass will be providing subscribers with appropriate refunds for their period of service already paid for.”

Through the Chapter 7 liquidation, the company will sell off its assets with all funds going to owed creditors, which includes as much as $1.2 million to its more than 12,000 subscribers, which were listed as unsecured creditors, USA Today reported.

While it was unclear if the subscribers of MoviePass would be paid back what was possibly owed, CEO Parthasarathy Krishnan and CFO Robert Damon issued their resignation at the same time of the Chapter 7 filing as well as all remaining members of the board of directors, Business Insider said.

According to the news outlet, Helios and Matheson had pumped millions of dollars into MoviePass since August 2017 when the subscription service was acquired, but competition from over movie services kept the company from seeing success.

MoviePass was also reportedly saddled with paying movie theaters full ticket prices on the majority of movies that its subscribers attended, which with a lower $10 a month fee saw a wave of new subscribers, but the costs to support them were not sustainable for the company.

MoviePass was delisted from NASDAQ in February 2019, after its stock fell below $1. Shares of Helios and Matheson Analytics stock were down as much as 82.98% as of 11:26 a.m. EST on Wednesday.