InvestorPlace’s Laura Hoy recently discussed why Helios and Matheson Analytics (NASDAQ:HMNY), the 81.2% majority owner of MoviePass, is about to go to zero. HMNY stock has suffered catastrophically over the last year.

“Sure, there’s a chance that things can work out for MoviePass and HMNY, but that chance is getting extremely slim. HMNY stock looks like it’s headed to rock bottom and I’m not sure there’s any potential for a turnaround at this point,” Hoy wrote June 21. “Although the company offers the best movie subscription pass out there, it looks like its business is simply not sustainable.”

While there might not be any hope left for HMNY stock — it’s trading at 19 cents as I write this, a far cry from the $366 million market cap it possessed last fall when it hit $33 — I definitely see an opportunity for the movie theater business as a whole to benefit from the demise of MoviePass and its parent.

Here’s why.

Bums in Seats 

You’ve likely heard the expression.

In the case of the movie theater business, the number of people that go to movies is directly related to the quality of movies provided by the film studios. Good content equals bigger box office while lousy content means fewer bums in the seats.

It’s a pretty simple equation.

Once the theater gets you to come out, it plies you full of candy, soda, and popcorn, making big bucks from the concession stands. At least that’s the way it used to be.

Now, theaters have all kinds of games, alcoholic beverages, higher-quality food; the list goes on. But if they don’t get you in the door, all of that goes begging.

Sure, theater chains even have their own online movie sites where you can rent or buy movies, but it’s the in-theater revenue that drives the business.

MoviePass Has It Wrong and HMNY Stock Will Pay

I have a friend who runs a newspaper company that shall remain nameless. It had amongst its various holdings a daily paper given out to subway commuters for free.

It never made money because most people who read it were merely killing time while on their way downtown; once at their destination, it would be chucked in the garbage cheapening the value of the advertising.

The point being is that you’ve got to target your MoviePass at the right audience if you want to make money. As it stands now, MoviePass charges its subscribers $9.95, which enables them to see one movie a day.

Believe me, if you saw a movie 3-4 times a week, there is no way that you’d be spending large at the concession stands because you’d go broke.

So, let’s say you spend $10 at the concession stand once every two weeks. That’s $260 a year for the movie theater. Assuming you go to three movies a week for 52 weeks, the movie theater gets another $1,429 [an average ticket price of $9.16 times three movies/week times 52 weeks] for an annual total of $1689.

A Pretty Good Haul

A pretty good haul I’ll grant you but consider AMC Entertainment (NYSE:AMC) and its latest quarterly numbers.

AMC made $9.78 on the average ticket in Q1 2018 , a 5.2% increase despite a 5.8% decrease in attendance. Meanwhile, food and beverage revenue per patron increased by 3.3% to $5.04 despite lower attendance during the quarter.

For every $1 in revenue at the box office, the movie theater’s profit is 51 cents; the profit at the concession stand is 84 cents per dollar of revenue.

To make $400 million in profits at the box office, AMC has to sell $784 million worth of tickets. To make the same $400 million at the concession stand it only has to generate $476 million in sales to come out at the same dollar amount of profits.

The Better Way

AMC’s subscription service, Stubs A-List costs $19.95 a month and comes with three tickets per week.

So, an AMC customer who sees three movies a week just like the MoviePass customer illustration above pays double the monthly fee.

However, AMC is assured that its Stubs A-List subscribers go to its theatres only; equally important, it’s likely these movie enthusiasts will spend more on concessions as they’ve already demonstrated they’re willing to spend a little more to catch a break.

Long term, I don’t see an industry-wide MoviePass taking hold unless the provider can demonstrate to each of the theater chains that subscriber spending at the concession stand is on par with their existing customers.

Somehow, AMC has got to get $14.82 per patron going to its movies. Anything less than that is a step backward.

Bottom Line on HMNY Stock

You would have thought an analytics company like Helios and Matheson would have understood that buying into MoviePass.

I guess not, which is why HMNY stock itself is a pass.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.