What happened

Dissing its biggest supplier is looking like a good business strategy for Helios and Matheson Analytics (HMNY) today -- or at least, for Helios and Matheson stock. Over the weekend, Helios subsidiary MoviePass notified its subscribers of an update to its terms of use -- then dropped a bombshell.

Henceforth, MoviePass will not permit subscribers to use their MoviePass debit cards to see films at 10 theaters operated by AMC Entertainment (AMC -3.25%), specifically:

AMC Century City 15, Los Angeles, Calif.
AMC Mercado 20, Santa Clara, Calif.
AMC Disney Springs 24, Lake Buena Vista, Fla.
AMC Loews Boston Common 19, Boston, Mass.
AMC River East 21, Chicago, Ill.
AMC Mission Valley 20, San Diego, Calif.
AMC Tysons Corner 16, McLean, Va.
AMC Veterans 24, Tampa, Fla.
AMC Loews Alderwood Mall 16, Lynwood, Wash.

Investors are applauding the move and bidding up Helios and Matheson stock on the first trading day after the announcement. Shares of the MoviePass parent are up 13.2% as of 1:30 p.m. EST Monday.

MoviePass ad from homepage

"America's largest theater network" just got 10 theaters smaller. Image source: MoviePass.

So what

Neither Helios nor MoviePass issued any press releases explaining the reasons for their move against AMC. Still, AMC has been a vocal critic of MoviePass and its debit card entitling viewers to see "all you can eat" movies for $9.95 a month. Given that the average AMC theater charges $11.88 for a ticket to see just one movie, AMC worries that MoviePass is training viewers to think that AMC is charging too much -- "upsetting the value proposition," in movie theater parlance.

AMC would really rather see MoviePass fail, and be able to return to servicing fewer viewers perhaps -- but at higher prices. MoviePass, for its part, may be trying to show AMC what it's missing out on by isolating a set of 10 AMC theaters and showcasing how much less revenue they bring in without MoviePass than other AMC locations might bring in with it.

Now what

Thus begins the showdown. How it plays out is anybody's guess. In the best possible scenario for MoviePass, AMC will realize the error of its ways and agree to new terms that MoviePass is reportedly seeking -- a $3 reduction in prices for tickets bought with MoviePass, and a 20% cut of concessions sales for MoviePass.

In the worst possible scenario, AMC might decide to ban MoviePass from all of its theaters entirely, torpedoing MoviePass' own "value proposition" by making its product less useful to subscribers. In that case, Helios and Matheson stock, which shot up when MoviePass threw down the gauntlet, could fall just as fast if AMC picks it up.