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The Courts Crime

Former MoviePass CEO Mitch Lowe Pleads Guilty to Securities Fraud Conspiracy (variety.com) 40

Former MoviePass CEO Mitch Lowe pleaded guilty to securities fraud, admitting he misled investors about the viability of the company's $9.95-a-month movie subscription service, and faces up to five years in prison. His co-defendant, former Helios and Matheson CEO Ted Farnsworth, faces similar charges and is scheduled for trial in March 2025; Farnsworth has been in federal custody since August 2023 due to bond violations involving misuse of company funds. Variety reports: Farnsworth and Lowe were the architects of MoviePass' doomed all-you-can-watch offering, which resulted in hundreds of millions of dollars in investor losses in 2017 and 2018. Investigators found that Lowe tried to stem the losses by throttling the service, forcing high-volume users to reset their passwords and verify their tickets. The two men were charged in November 2022 on counts of wire fraud and securities fraud. According to Lowe's plea agreement, the government estimates the total losses from the scheme at $303 million -- though Lowe contends it is less than that. Lowe remains free on bond, and is due back in court in Miami on March 21 for a status conference. Lowe published a memoir in 2022 in which he reflected on the downfall of MoviePass, entitled "Watch and Learn: How I Turned Hollywood Upside Down with Netflix, Redbox, and Moviepass."
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Former MoviePass CEO Mitch Lowe Pleads Guilty to Securities Fraud Conspiracy

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  • by DesertNomad ( 885798 ) on Monday September 16, 2024 @09:07PM (#64791833)

    Lowe published a memoir in 2022 in which he reflected on the downfall of MoviePass, entitled "Watch and Learn: How I Turned Hollywood Upside Down with Netflix, Redbox, and Moviepass."

    • I suppose it depends on how you interpret the phrase "upside down." I mean, he certainly turned MoviePass and Redbox "upside down" if that means they went bankrupt! Maybe Netflix is next...

    • by necro81 ( 917438 )

      he reflected on the downfall of MoviePass, entitled "Watch and Learn: How I Turned Hollywood Upside Down with Netflix, Redbox, and Moviepass."

      Upside down is the best orientation for emptying a piggie bank.

    • Former MoviePass CEO Mitch Lowe pleaded guilty to securities fraud

      There's no such thing as bad publicity, I guess?

  • ... of having to watch dreadful movies over and over again.*

    * and paying $9.95/month for the privilage

  • by Tony Isaac ( 1301187 ) on Monday September 16, 2024 @09:44PM (#64791877) Homepage

    How did anyone think MoviePass would be able to charge just $10 per month, less than the cost of a single movie ticket, for unlimited movies? Did they think the company would "make up for it in volume"? Maybe they thought the company would become so powerful that theaters would be forced to accept its terms? I didn't get it then, or now.

    • Consider the possibility that they might have had a different business model than simply "customer buys pass, company makes money". Google is free, FM radio is free, Robinhood is free. There's a reason why these companies stay in business.
      • Clearly, MoviePass never figured out how to...stay in business.

        • by kenh ( 9056 )

          Moviepass "claimed" that they had buyers for the customer data that all those moviepass users generated, but they never did.

          A local cinema has a subscription service that was $200/year and good for one movie a day - they've run this program for two years, and it's still going strong (I have no idea how they do that).

          Another local cinema chain offers a movie a day for $20/month, but the catch is you have to pay their "transaction fee" ($2 + tax) for each movie you want to see.

          Both of these deals are on-going

    • Maybe they thought the company would become so powerful that theaters would be forced to accept its terms?

      Maybe I am misremembering but isnt that what they sortof explicitly stated at the time? They were going to run at a loss to lure in subscribers to the concept with the idea of once people are used to the concept they could raise the price and force negotiations with the theater chains based on the huge built in subscriber base?

      • Yeah, and we see how well that worked for them.

        • Fuck no it didn't work, this is a cocaine-adjacent-idea for sure.

          • Fuck no it didn't work, this is a cocaine-adjacent-idea for sure.

            If it was cocaine-adjacent it would have made money. Cocaine and finance are tight, bro. This strikes me more as a *PUFF*PUFF* pass. As the breath is released, "What if we like, charge people a few bucks a month to go to as many movies as they want. That'd be cool, man."

    • movie theaters make most of their money on the concession stand selling $1 for popcorn for $8 , $1 drink for 6 , etc Unlimited was never gonna work but something like $25 a month with max 8 movies might had worked.
      • Yes, agree. However, theaters pay most of the ticket price to the studios in licensing fees. They have to pay that money whether the moviegoer pays that price or not. Trusting that already inflated popcorn prices would cover an even bigger loss, was never going to work.

        • by kenh ( 9056 )

          Movies get a percentage of ticket price - what is ticket price when a monthly pass is used?

      • Unlimited was never gonna work but something like $25 a month with max 8 movies might had worked.

        Unlimited works just fine and is a concept that many theaters in other parts of the world offer already. I have a Pathe Unlimited pass. It is the cost of 2 bottom tier movies per month, or 1 Dolby Cinema 3D movie + a coke. It works because as you said the money is made off the concession stand. Also people don't have unlimited time, and cinemas don't offer unlimited movies.

        I haven't been to the cinema this month and I won't be going either because there's simply nothing good on now. My girlfriend literally

    • by Can'tNot ( 5553824 ) on Monday September 16, 2024 @11:01PM (#64791965)
      He promised investors that they could make money off of the collected data, but evidently that monetization never materialized. I'm a little unclear on whether the app just didn't collect data, or if the company didn't have the partnerships that they needed to make money off of the data, but regardless: he apparently made some promises about this aspect of the project which were just outright false.
    • by DrXym ( 126579 )

      The same could be said for any streaming service but I guess the margins weren't there for theaters to operate on a same model. I assume MoviePass pitched the idea that subscribers would buy a bunch of concessions to make up for the subsidized viewing but actually they were freeloaders who purchased nothing and cannibalized sales for popular movies.

      • It probably didnâ(TM)t help that movie theaters have much tighter constraints in terms of how many seats they actually have to sell, especially at times people actually want to fill them. Itâ(TM)s not like bandwidth is free at streaming-service volumes; but(especially with things like caches at ISPs) itâ(TM)s not like itâ(TM)s a full house where people are being turned away at the door.
        Also probably doesnâ(TM)t hurt that âstreamingâ(TM) is more readily amenable to off-p
      • Theaters already make basically no money on ticket sales because they pay it all to the studios in licensing fees. They already have to make all their profits by selling concessions. Eating into that margin is a losing proposition.

        • by DrXym ( 126579 )

          I'm sure they claim that, but I bet when it comes down to it they still make some money on the ticket price and then nickel and dime customers into paying for prebooking, "fees", better seats, garbage concession food.

          But MoviePass was hardly going to work if it didn't cover, at a bare minimum the theater's costs to the studio. I have no idea what they were compensating the theater with when someone watched a movie but I doubt it was more than a couple of bucks.

      • by kenh ( 9056 )

        Moviepass failed because they were neither the movie studio nor the movie theater - moviepass had to literally pay full ticket price to the theater, which they justified as a stop-gap measure until they got big enough to negotiate lower ticket prices. They also claimed they had deals to sell subscriber data to third-parties, which they did not.

    • by thegarbz ( 1787294 ) on Tuesday September 17, 2024 @05:59AM (#64792327)

      How did anyone think MoviePass would be able to charge just $10 per month, less than the cost of a single movie ticket, for unlimited movies?

      Leaving aside the fact he wanted to sell data, the cost of the movie ticket is irrelevant for the Cinema. The partnership with a Cinema chain can't be view in terms of recommended retail price you pay for your seat. As far as the cinema is concerned as long as someone with an unlimited deal isn't blocking a seat for an otherwise paying customer, there's potential for extra sales to be made - and the concession stand is where a *LOT* of high profit margins come in.

      We have Pathe Unlimited subscriptions here. They are only marginally more expensive than a cinema ticket. Sometimes we go several times a month. Sometimes we don't go at all. Sometimes - and this is where the money is - we go to movies we wouldn't have otherwise gone to, buying popcorn and coke / beer on the way in that the cinema otherwise would not have made a sale on, all the while the cinema still needs to run that projector, still needs to have staff at the concession stand etc. etc.

      • Theaters don't get to just have people sit in seats for free. They pay most of their ticket revenues in licensing fees to the studios. They literally pay the studio a fee for every person who sits in a seat, whether they paid a ticket price or not. That fee eats up most of the price of a ticket. Concessions are really the only place theaters make money. Letting people sit in seats for "free" results in a loss for the theater.

        • That license fee is no where near what you think it is and you have massively simplified it. Concessions are where theaters make money, but the ticket sales are used to cover the high fixed costs of staff, building, and equipment. The variable costs here are no where near as significant as you think they are - because a large chunk of it isn't actually variable. Most of what is paid to license a film for playback is based on group venue size, only a small portion is total ticket sales. This is also why cine

          • This article shares some good insights into theater costs for showing a movie. https://www.musicgateway.com/b... [musicgateway.com]

            Overall, it seems that about 60% of the ticket price goes to the studio. This varies, of course. But offering seats "for free", does not mean that the studio doesn't expect a royalty for that seat.

    • How did anyone think MoviePass would be able to charge just $10 per month, less than the cost of a single movie ticket, for unlimited movies? Did they think the company would "make up for it in volume"? Maybe they thought the company would become so powerful that theaters would be forced to accept its terms? I didn't get it then, or now.

      My first thought when I heard of the whole thing was that they were hoping people would sign up, then forget they had it. It's the only possibility outside of data collection for ads. There's no other money making scenario here. It's the greatest hope of all the forever payment shemes. Hope and pray the people forget they have the subscription and never use it, yet still continue to pay. That's why so many of them love autopayments. It saves them from even coming across your radar once a month when you send

    • by suutar ( 1860506 )

      The only way I can imagine it sounding feasible is if we add the assumption that a given user will only actually go see a movie once every two months. While a case could be made that most people would fit into that category, most of those would not bother to buy a membership, so...

  • Yeah, he's a jackass wannabe typical unicorn startup douche. But what kind of person would say "Hmm, movie tickets cost this, it's unlimited, and the monthly fee is this," and then invest. If you're THAT bad at math, you should not be in control of any amount of money.
    • I think the formula was more like ($fees - $tickets) + $userData + $adRevenue = $profit

      But still, the whole thing has always been slimy.
      • if anyone thinks ad revenue and totally redundant geolocation data would not only subsidize free movie tickets but ALSO make profit, they should be euthanized for terminal fucktardism.

  • One of those very rare scams that actually benefited consumers. But if you screw over investors, they have the money to come after you. Honestly it was an amazing deal and I used the hell out of it at the time (clearly part of the business model problem).
  • But then again, I didn't think Amazon was going to work either. This is clearly another case of Satanism at work, but this time I just kinda feel sorry for them.

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