MoviePass’ plans for a relaunch may get some free publicity now that the U.S. Securities and Exchange Commission sued two of the company’s former top executives. According to a report by Deadline, the SEC filed lawsuits against Theodore Farnsworth and J. Mitchell Lowe for one count each of securities fraud and three counts of wire fraud.
Investigators believe Farnsworth and Lowe tried to artificially inflate their own stock in an effort to attract new investors. Farnsworth and Lowe were executives at MoviePass when it was owned by parent company Helios + Matheson (HMNY). The indictment claims that they “allegedly engaged in a scheme to defraud investors through materially false and misleading representations relating to HMNY and MoviePass’s business and operations to artificially inflate the price of HMNY’s stock and attract new investors.” These allegations relate to the defunct subscription service for monthly movie tickets, not the impending revival of the service.
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The indictment specifically comes down on Farnsworth and Lowe for MoviePass’ old $9.95 per month subscription tier, which was billed as “unlimited,” allowing subscribers to see as many movies as they wanted in theaters. The SEC believes that the duo “falsely claimed that” this service “was tested, sustainable, and would be profitable or break even on subscription fees alone. Farnsworth and Lowe allegedly knew that the $9.95 ‘unlimited’ plan was a temporary marketing gimmick to grow new subscribers.”
Knowingly or not, that is more or less what happened. MoviePass tried to institute fixed-price ticket buying for movie theaters in the U.S., which had reportedly worked in other countries before. However, the company quickly ran into backlash from theater companies in the U.S. and could not keep up with its own business. Throughout 2018 and 2019, it constantly changed its terms and raised its prices, with some tiers peaking at $40 or even $50 per month.
Farnsworth and Lowe’s version of MoviePass shut down in September of 2019, and a few months later HMNY filed for bankruptcy. A bankruptcy court judge approved MoviePass’ original founder Stacy Spikes to purchase the company back at a lower price, and throughout 2022 he has been teasing a relaunch of the service with new, sustainable terms.
Spike’s relaunch offers three subscription tiers – $10, $20 or $30 per month, with some variation in different markets.
Subscribers will be able to get up to five movie tickets per month at these prices. In August, the revamped MoviePass launched its beta test, which allows customers in certain markets to sign up for a waitlist to try the service out. The waitlist is live now and is available in Chicago, Dallas and Kansas City.
