Former MoviePass CEO Mitch Lowe and CEO Ted Farnsworth of parent company Helios & Matheson Analytics (HMNY) were once the smiling future of the subscription-based movie ticket service. These days, they find themselves in deep trouble with the SEC over securities fraud and other charges that could land them behind bars for 20 years.
When they took over MoviePass in 2017, they shoved co-founder Stacy Spikes out the door as they slashed prices from $50 to $9.95 a month. It was supposed to be an unlimited movie subscription that promised no blackout times, a bold statement that made most moviegoers scratch their heads wondering how it was even possible.
Generating a phenomenal amount of interest, more subscribers started pouring in, and that’s when they found their subscriptions infested with subpar service. After the monthly membership jumped to nearly 3 million subscribers, a new phase of the operation began that ushered in a highly limited viewing experience, causing customers to leave in droves, and in 2019, the company was forced to close.
What exactly did they do?
Investigations by the SEC have charged that Lowe and Farnsworth made false statements to investors, leading them to believe that the business model was viable at the $9.95 subscription fee. The two CEOs further generated false documentation about data analytics capabilities that didn’t exist, as well as additional income they were trying to say they could produce. A third person has been named in the case, too, as Khalid Itum received over $300,000 in bonus money that was knowingly invoiced falsely as services.
In a really dirty move, Lowe and Farnsworth ordered MoviePass employees to incorporate tactics that would deny loyal subscribers of actually getting to enjoy their unlimited movie-watching experience. With all these charges hanging over their heads, they could face up to 20 years in prison if they are given the max. However, they both have lawyers involved, and it will most likely become a legal rodeo before all is said and done.
What happens now?
In the meantime, Stacy Spikes is back behind the helm at MoviePass, and he’s picking up the pieces of the company he co-founded in the first place. With three tiers of membership, subscribers can enjoy $10, $20, and $30 fees in a market where Spikes has partnered with 25 percent of the nearly 5,000 venues across the country. Now, MoviePass can get back on track and treat its customers the way they should have been treated when they first put their trust in the company years ago.
Published: Nov 5, 2022 01:43 am