It should come as no surprise that the most unsustainable business model in all of Tinseltown is toast. MoviePass parent Helios and Matheson Analytics is shutting down the multiplex subscription service on Saturday, failing in its efforts to recapitalize the business. Investing in small-cap stocks is risky, but anyone who has bought into the MoviePass parent over the past two years has seen practically all of that investment evaporated. You don't want to buy the wrong small caps.

The company's independent board members will explore strategic alternatives, including asset sales, but it's likely to be curtains for MoviePass as we once knew it. Just in case you thought the once disruptive model had a chance, let's go over the reasons MoviePass failed. 

A MoviePass card being held up against falling popcorn in a movie theater.

Image source: MoviePass.

1. The math never made sense

MoviePass gained steam when it slashed its price down to $9.95 a month two summers ago. The platform that offered unlimited daily screenings for a low monthly price saw its membership base catapult from 15,000 to 3.2 million when it peaked a year later. Fast growth like that turns heads, but things aren't always as they seem. It had to pay retail for most of the tickets it was letting its subscribers put on their MoviePass-branded debit cards. Thrifty moviegoers know that checking out a matinee or going for a midweek pricing special is a great way to lower the price of a movie ticket, but there's a different mindset when you're riding on someone else's dime. Leading multiplex operator AMC Entertainment (NYSE:AMC) revealed in an earnings call last year that it was receiving an average of $12.02 per ticket from MoviePass buyers, well above its average ticket price of $9.78. The membership base was taking MoviePass to the cleaners, and the card-swiping film buffs probably didn't care. 

You don't need to be profitable right away to win. Tech giants offer hardware at or in some cases below cost if they can hook you on to a high-margin services platform. Some of the market's hottest stocks are not in the black right now. Unfortunately for MoviePass it didn't have enough cash to see if secondary revenue streams were there for the monetizing. By the springtime of last year it started to tweak its model with limits and spotty movie availability. The party was over. 

2. The disrupted became disruptors

Multiplex operators weren't happy with MoviePass. The service was putting fannies in their seats at its prime, but it was also devaluing the moviegoing experience. Active users were paying no more than a buck or two per flick -- and even though MoviePass was paying the difference to make AMC, Cineworld's (LSE:CINE) Regal Entertainment, and smaller chains whole the value proposition of a night at the movies was going out the window. 

AMC decided to change the narrative last summer, launching AMC Stubs A-List. The subscription service cost twice as much as MoviePass and limited members to three movies a week, but it also offered up the premium exhibitor formats that MoviePass prohibited. AMC Stubs A-List also let folks reserve movie times and seats days if not weeks in advance. More importantly, AMC's platform was reliable. You know it would be there. Cineworld's recently launched Regal Unlimited is also giving its own fresh spin on the model that MoviePass championed, but like AMC it's also sustainable.

AMC and Cineworld have the levers that MoviePass never had. They are scoring high-margin concessions. They can afford to give up a piece of their share of the ticket sales. No platform is perfect, but the exhibitors found a way to build a better mousetrap just as the original trap was losing its cheese. 

3. Helios and Matheson failed to cash in on Peak MoviePass

Success came too soon for MoviePass, and it wasn't able to cope with the losses when its popularity topped 3 million members just last summer. Helios and Matheson hasn't put out fresh numbers in some time, but it would be surprising if the base wasn't in the hundreds of thousands if not tens of thousands when it went belly up this weekend. 

If it would've had more money maybe it could've grown its base to the point where the industry would have to pay attention. Multiplex operators would offer up a piece of the concessions. It could take over theater chains. MoviePass never had the headroom it needed to jump. As ridesharing companies lose billions this year -- and no one is batting an eye -- there was little margin for error for an easy to copy subscription service the moment that it started to grow less user friendly.