This week is a bittersweet first anniversary for Helios and Matheson Analytics (NASDAQ:HMNY) and its decision to shake up MoviePass last summer. MoviePass generated plenty of buzz after Helios and Matheson took a majority stake in the multiplex-subscription service and dropped its price down to $9.95 a month.

The value proposition was too good to be true, and MoviePass went from 15,000 members a year ago this week to roughly 3.2 million members last week. It's all likely downhill from here, as the scaled-back service is stirring up more dissatisfaction and cancellations than positive buzz. Helios and Matheson stock is this year's worst-performing stock that hasn't gone to zero. Fellow Fool Jamal Carnette did a great job of nailing the three reasons why MoviePass is failing last week. Let's break things down to go over what MoviePass did to put itself in this predicament.

MoviePass and iHeartRadio team up for a springtime festival.

Image source: MoviePass.

1. MoviePass overestimated its initial surge in popularity

MoviePass was swamped with signup requests after slashing the price of its plan that until recently was allowing daily screenings of standard movies at most theaters for just $9.95 a month. Some members had to wait several weeks and in some cases a couple of months to get their MoviePass debit cards in the mail. 

Delays in processing the new applicants isn't a fatal flaw. Hot nightclubs love to keep people waiting on the wrong side of the velvet rope to make its product that much more appealing. However, MoviePass just wasn't ready for the tech, customer support, and financing necessary to service the masses that arrived on its doorstep overnight.

2. It never lined up the money to get to 5 million

Helios and Matheson set an ambitious goal of hitting 5 million members by the end of this year, a goalpost that seemed less and less likely as growth decelerated and unpopular MoviePass changes weighed on attraction and retention. The plan was to have 5 million of the country's most active moviegoers on its rolls, giving it the leverage to demand multiplex operators to provide ticket discounts and a cut of the concession stand sales. 

Hitting 5 million members would've been doable if it had enough financing lined up to subsidize the steep losses inherent with its loss leader business model. It would've kept the original plan in place, one that didn't restrict repeat viewings, introduce surge pricing, or the current mess of a model where only a couple of movies are available a day at just a some of the available showtimes. Last summer's MoviePass model was built for subscriber growth over capital preservation, as the equation flipped around it was the end of MoviePass as a growth company. 

3. MoviePass underestimated AMC

Helios and Matheson has locked horns with AMC Entertainment's (NYSE:AMC) for the past year. AMC has been bashing MoviePass and its discounted multiplex subscription service, so it was a surprise this summer when AMC Stubs A-List rolled out as the ultimate MoviePass killer

AMC's plan may cost twice as much, but it's sustainable because it's being run by the one company that can control its costs and offset them accordingly. AMC Stubs A-List also offers many of the features that MoviePass users would clamor for including access to premium screenings, advance reservations, and the ability to see the same movie more than once. 

It wouldn't be a surprise if many of the 260,000 subscribers that AMC Stubs A-List has signed up are MoviePass refugees, and that should continue to be the case in the future as MoviePass keeps fading absent a last-minute financing bailout.

MoviePass had a hot hand, but it didn't have enough chips to stay in the game. Multiplex operators are now back again, calling the shots. 

Rick Munarriz owns shares of Helios and Matheson Analytics. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.