Struggling theater subscription service MoviePass reportedly resorted to extreme tactics to prevent users from taking advantage of core features, according to a new report from Business Insider. In particular, the report highlights a strategy the company used to keep users from bankrupting it, by changing account passwords to prevent ticket purchases that might cost it money it didn’t have.
Business Insider’s report looks at how Ted Farnsworth, CEO of MoviePass parent company Helios & Matheson Analytics, and MoviePass CEO Mitch Lowe, transformed the company from a little-known subscription service to a nationwide sensation. It also delves deep into the questionable business strategies and tactics the duo used to keep the company afloat, all while it hemorrhaged money by fronting subscribers the full cost of a movie ticket. MoviePass was not immediately available for comment.
MoviePass has had an extremely rough couple of years, due in part to its buzzy $10-a-month fee it introduced back in the summer of 2017. The change, which allowed subscribers to see a movie a day every day of the month for less than the price of an average ticket in most American cities, resulted in an explosion in popularity and exposure for MoviePass.
The report, however, outlines how the price drop was mainly a marketing tactic to generate headlines, and that it led to a surge in sign-ups the company could barely keep up with. For example, MoviePass never anticipated the number of physical cards it needed, and its vendor ended up running out, leading to delays in on-boarding new users.
The goal was to get critical mass of new subscribers to boost profits, with the hope that a majority of users wouldn’t see more than one movie a month, much in the same way a gym offsets high overhead by relying on members who hardly ever show up. The problem is that people enjoy going to the movies in a way that they don’t particularly like going to the gym, and as a result, MoviePass was losing money with every visit. MoviePass founder Stacy Spikes argued the price was going to bankrupt the company, and he was eventually shown the door, Business Insider reports.
Because of the demand, the company ran into trouble. In April 2018, it cut back on its unlimited plan, allowing users to see only four films a month. Then it changed its user plans again, allowing users to only see films from a certain selection. Then it forced users to opt out of the new plans. In January, it unveiled yet another set of subscription plans. In March, it brought back the unlimited plan (with conditions). And finally in July, it announced that it would shut down for “several weeks” to retool its model.
Business Insider’s report outlined how the company took on a more adversarial stance toward power users that were costing it too much money. One employee noted, “Before Mitch came on it was, ‘How do we slow down those users?’ With Mitch [Lowe] it was just, ‘F— those guys.’”
The company tried other tactics to actively make its service hard to use, like when it limited the ability for users to see high-profile films like Avengers: Infinity War and Mission Impossible: Fallout. Employees say Lowe demanded they change the passwords of “a small percentage of power users” ahead of those releases to prevent them from ordering tickets through the app, telling people that it was a “technical issue.”
The company also implemented a “trip wire,” which would cut off users once the company reached a certain monetary threshold each day. Users were told “there are no more screenings at this theater today,” when in reality MoviePass was disabling its services to prevent it from burning through too much cash.
Business Insider says the company’s subscriber base has dropped from “over 3 million to around 225,000,” and since the company shut down its operations in July, “Farnsworth and Lowe are nowhere to be found, as most of the staff have yet to learn the cause of the company’s halt.”