MoviePass
From Invertopedia, the encyclopedia of how things fail
MoviePass was a movie-ticket subscription that in August 2017 cut its price to $9.95 a month for up to one movie a day[4]. It typically paid theaters the full price of each ticket[1], and by the summer of 2018 it had nearly 3 million subscribers and, by its CEO's estimate, was losing $21 million a month[1]. The service shut down on September 14, 2019[1][5], its parent filed for Chapter 7 in January 2020[3], and both former chief executives later pleaded guilty in a federal securities fraud case[7][8].
Contents
The bet
Get the audience first and make money later. CEO Mitch Lowe told NPR in July 2018, "Amazon lost money for 20 years. Netflix still loses money. And so this is the way you build a big company."[1]
The plan was to break even through partnerships with studios to promote their films and by making money from the data MoviePass collected about its subscribers[1]. The Justice Department later said the executives' claims of "big data" and "artificial intelligence" tools to do that were false[7].
What happened
| 2011 | MoviePass is founded. A subscription costs about $40 a month.[1] |
|---|---|
| 2016 | Mitch Lowe takes over as CEO. MoviePass has about 20,000 subscribers.[1] |
| Aug 15, 2017 | Helios and Matheson Analytics is announced as the new majority owner and the price drops to $9.95 a month for up to one movie a day. Demand crashes the website and app.[2][4] |
| May 2018 | MoviePass loses roughly $40 million in the month.[5] |
| Summer 2018 | Nearly 3 million subscribers and about 5 percent of US movie tickets. Lowe puts losses at about $21 million a month.[1] |
| Late Jul 2018 | MoviePass runs out of cash. The service goes down until a $5 million emergency loan comes through.[1][5] |
| Aug 2018 | The plan is cut to three movies a month for $9.95, setting off a wave of cancellations.[3] |
| Sep 14, 2019 | The service shuts down.[1][5] |
| Jan 28, 2020 | Helios and Matheson files for Chapter 7 in the Southern District of New York.[3] |
| 2021 – 2025 | The FTC settles with MoviePass, Helios and both executives in 2021. Lowe pleads guilty to conspiracy to commit securities fraud on September 16, 2024; Farnsworth pleads guilty to securities fraud and conspiracy on January 7, 2025.[7][9][10] |
The kill shot
Each ticket MoviePass bought could cost more than a subscriber paid for the whole month, so every new customer and every extra visit made the losses bigger. The executives kept telling investors the plan worked.
MoviePass bought tickets from theaters at whatever price they charged[4], which in many places was more than the $9.95 monthly fee[1]. Its most loyal users were its most expensive. Instead of changing the price, the company worked to stop people using what they had paid for. The FTC alleged it invalidated subscribers' passwords while falsely claiming "suspicious activity or potential fraud," made users photograph ticket stubs to keep their accounts, and set "trip wires" that blocked groups of heavy users once they hit cost thresholds[9]. It alleged that Lowe ordered the password disruptions and chose how many people to target[9].
In the criminal case, the Justice Department says Farnsworth and Lowe knew the $9.95 plan was "a temporary marketing gimmick" to grow subscribers and push up Helios's stock price, while telling investors it was tested, sustainable and would be profitable or break even on subscription fees alone[7].
Red flags ignored
- Priced below cost per use. MoviePass typically paid full price for tickets that often cost more than the monthly fee.[1]
- Revenue from a plan, not a product. The data business meant to cover the losses did not exist, according to the Justice Department.[7]
- Rules that changed every few weeks. Surge pricing, ticket verification, then a three-movie cap.[1]
- An emergency loan to stay open. In July 2018 the service went dark until a $5 million loan came through.[1][5]
- Customer data left open. The FTC alleged MoviePass stored financial information and email addresses in plain text and left a subscriber database unencrypted and exposed.[9]
The cost
Helios and Matheson reported a 2018 net loss of $329.3 million on revenue of $232.3 million[3]. When it filed for Chapter 7, it listed assets of $1 million to $10 million against $60.9 million of creditor claims[3]. The FTC settlement included no money for consumers; both companies had filed for bankruptcy[9]. The order bars the companies and their principals from misrepresenting their business and data security practices[10].
In the criminal case, Farnsworth faces up to 20 years on the securities fraud count and five on conspiracy, and Lowe up to five years[7]. As of October 2026 the Justice Department still lists the case as pending, with victim statements invited ahead of sentencing and a status conference set for December 11, 2026[7].
The inversion
Check which customers lose you the most money, and don't make them the target market. If your price only works when people use less than you promised, the price is wrong.
What survived
The idea and the name. AMC, Regal and Cinemark all set up their own monthly ticket subscriptions after MoviePass[5]. Co-founder Stacy Spikes bought the company back in November 2021, after Helios went bankrupt, and announced a beta relaunch for Labor Day 2022 with tiered prices and a waitlist[6].
References
- ^ “MoviePass Has Officially Shut Down, And We Don't Know If There Will Be A Sequel”. NPR (Jenny Gathright), September 14, 2019. Founding in 2011 at about $40 a month, Lowe's 2016 takeover and 20,000 subscribers, full-price ticket payments, nearly 3 million subscribers and 5% of tickets, $21 million a month losses, Lowe's quote and break-even plan, the July 2018 outage and $5 million loan, surge pricing, verification and the three-movie limit, and the September 14 shutdown.
- ^ “MoviePass”. Wikipedia. Helios and Matheson's majority stake in August 2017 (cross-check).
- ^ “MoviePass Parent Company Files for Bankruptcy”. Variety, January 29, 2020. The Chapter 7 petition of January 28, 2020, listed assets and claims, Farnsworth's 2017 acquisition, the 2018 net loss and revenue, and the August 2018 three-movie plan.
- ^ “What Is MoviePass? The Pros and Cons of $10-a-Month Unlimited Films”. Variety (Seth Kelley), August 15, 2017. The $9.95 plan for up to one movie a day, the new owner, the site crash, and MoviePass buying tickets at whatever price theaters charge.
- ^ “MoviePass Finally Shuts Down for Good”. Fortune (Aric Jenkins), September 13, 2019. Shutdown on September 14, roughly $40 million lost in May 2018, the $5 million loan in July 2018, and AMC, Regal and Cinemark subscriptions that followed.
- ^ “MoviePass to Return on Labor Day With Tiered Prices, Waitlist”. Variety, August 22, 2022. Stacy Spikes buying the company back in November 2021 and the Labor Day 2022 beta relaunch.
- ^ “United States v. Theodore Farnsworth and J. Michell Lowe”. U.S. Department of Justice, Criminal Division victim notification page (read October 2026). Lowe's guilty plea of September 16, 2024, Farnsworth's of January 7, 2025, the conduct described (the "temporary marketing gimmick", false big-data and AI claims, blocking subscribers), maximum penalties, and the pending status with a December 11, 2026 status conference.
- ^ “Former CEO of MoviePass' parent company faces up to 25 years in prison”. CNN (Jordan Valinsky) via ABC17 News, January 8, 2025. Farnsworth's guilty plea and Lowe's earlier plea.
- ^ “Operators of MoviePass Subscription Service Agree to Settle FTC Allegations that They Limited Usage, Failed to Secure User Data”. Federal Trade Commission, June 7, 2021. The password disruption, ticket verification and trip-wire allegations, Lowe's alleged role, the plain-text and exposed data allegations, and no monetary relief with both companies in bankruptcy.
- ^ “FTC Finalizes Settlement with Operators of MoviePass Related to Allegations They Blocked Subscribers from Using Movie Service as Advertised”. Federal Trade Commission, October 5, 2021. Final approval of the order by a 4-1 vote and its terms.