What happened

Shares of movie theater operator AMC Entertainment Holdings (NYSE:AMC) fell 15.2% in January, according to data from S&P Global Market Intelligence. The reality of last year's box office weakness hit AMC like a ton of bricks, and then the company decided to wage war against a potential ally.

So what

As Hollywood closed the books on calendar year 2017, there wasn't much good news on tap for the theater chains. Box office sales stayed above $11 billion for the full year, but only because of rising ticket prices. In terms of raw admissions numbers, it was the weakest year since 1992 -- back when multi-screen theaters were a fairly newfangled idea.

Since AMC's high fixed costs will amplify both good news and bad as it trickles down the income statement, share prices started plunging as soon as analysts did the math on ticket prices and total admissions. And if you thought the MoviePass service from Helios & Matheson (OTC:HMNY) might save AMC's bacon, well, AMC's management disagrees and prefers to cast the subscription service as the black sheep of the movie industry instead. As January dragged on, MoviePass suddenly stopped supporting 10 specific AMC locations until further notice.

Two youngsters sleeping in an otherwise empty movie theater, ignoring the projector light overhead.

Image source: Getty Images.

Now what

Helios & Matheson hope to show AMC that its theaters get more business with MoviePass than without it, and I happen to think this is the correct math. After all, MoviePass pays up for its seemingly free movie tickets, hoping to make up the difference between low subscription prices and expensive screenings by negotiating special theater deals and reselling customer data to advertisers.

I guess we'll see in a few weeks whether AMC can be persuaded. Otherwise, more of its theaters might end up kicked out of the MoviePass program. The service still isn't big enough to really move the needle for AMC and friends, but that day might come sooner than AMC CEO Adam Aron might like.

In the meantime, AMC's shares are plunging on a secular level, and I don't expect them to stop anytime soon. Hollywood is in dire straits as consumers flock to home theater solutions with digital video streams instead, and I don't see how AMC might hope to turn that trend around. Higher ticker prices sure isn't the right way out. Partnering up with forward-thinking operators like the MoviePass people just might be crazy enough to work, if AMC ever decides to give it an honest try.

For the record, Helios & Matheson's share prices surged 48% higher last month.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.