Ted Farnsworth, the former CEO of MoviePass and guy who had the bright idea to charge $9.95 per month for unlimited film screenings, has admitted to defrauding investors in the subscription company. According to the Department of Justice, Farnsworth pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud and will face up to 25 years in prison.
If you’re unfamiliar with the MoviePass story, Farnsworth is not the founder of the company, which was started by Urbanworld Film Festival founder Stacy Spikes as a relatively modest subscription service designed to entice people to go to the cinema a little more often. Farnsworth was the head of analytics firm Helios and Matheson, which bought a majority stake in MoviePass in 2017 and eventually pushed the company to offer filmgoers the ability to see one film per day for just $9.95 per month.
Farnsworth’s plan successfully pulled in lots of subscribers—more than three million people signed up for the service. And that’s where the trouble started. While Farnsworth hit the press trail to tout the boom in business and claim that the company would turn a profit by selling customer data, behind the scenes, MoviePass was hemorrhaging cash. It wouldn’t take long before MoviePass started backtracking on its promise of unlimited filmgoing, as it started to institute blackouts on popular films, experiencing outages in its services, and changing prices and plans with little warning.
It was pretty obvious that MoviePass was doomed to fail the moment the unlimited plan was introduced, but Farnsworth claimed to investors that the price was sustainable and would be profitable on subscription fees alone. Turns out no, as the DOJ found MoviePass lost money from the plan. As for Farnsworth’s customer data play, that was smoke and mirrors, too. The Justice Department said that his analytics company “did not possess these capabilities to monetize MoviePass’ subscriber data.” In the end, MoviePass never had a stream of revenue beyond its subscriptions—and that was costing the company so much money that Farnsworth instructed employees to throttle users to prevent them from using the plan they paid for.
After Farnsworth drove MoviePass into bankruptcy, he apparently ran the playbook again with another company called Vinco Ventures. Per the DOJ, Farnsworth and his co-conspirators pulled in cash from investors by lying about the standing of the business, all while diverting cash directly to 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’s reportedly profitable (though users of the service regularly complain about glitches and issues).
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