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Ted Farnsworth, the former CEO of MoviePass and guy who had the bright idea to charge $9.95 a month for unlimited movie screenings, has admitted to defrauding investors in the subscription company. According to the Department of Justice, Farnsworth pleaded guilty one count of securities fraud and one count of conspiracy to commit securities fraud and face up to 25 years in prison.
If you don’t know the history of MoviePass, Farnsworth isn’t the founder of the company, which was started by Urbanworld Film Festival founder Stacy Spikes as a relatively modest subscription service designed to get people to go to the cinema a little more often. Farnsworth was the head of the analytical firm Helios and Matheson, which bought a majority stake in MoviePass in 2017 and eventually pushed the company to offer filmgoers the ability to watch one movie per day for just $9.95 per month.
Farnsworth’s plan successfully attracted many subscribers –more than three million people signed up for service. And that’s where the problem starts. While Farnsworth hit the press lane to claim the boom in business and claim that the company would make a profit by selling customer data, behind the scenes, MoviePass was cash hemorrhaging. It wouldn’t take long before MoviePass started backtracking on its promise of unlimited movies, since it started doing so. instituted blackouts on popular films, experience interruptions in their servicesand changing prices and plans with little notice.
It was pretty obvious that MoviePass was doomed the moment the unlimited plan was introduced, but Farnsworth told investors that the price was sustainable and would be profitable only on subscription fees. Turns out not, since the DOJ found MoviePass lost money from the plan. As for Farnsworth’s customer data game, it was also smoke and mirrors. The Justice Department said its analytics firm “does not possess these capabilities to monetize MoviePass subscriber data.” In the end, MoviePass never had a revenue stream beyond its subscriptions — and that cost the company so much money that Farnsworth ordered employees to throttle users to prevent them from using the plan they had paid
After Farnsworth drove MoviePass into bankruptcyapparently ran the playbook again with another company called Vinco Ventures. According to the DOJ, Farnsworth and his co-conspirators bilked money from investors by lying about the state of the business, all while funneling money directly into their own pockets.
Farnsworth’s sentencing will take place later this year. Meanwhile, MoviePass is back under the ownership of its founder Stacy Spikes, and it is reported profit (but users of the service he complains regularly about glitches and problems).
