Another chapter of the MoviePass saga has come to a close, as ex-CEO Ted Farnsworth has pled guilty in federal court to defrauding investors in the subscription service.
MoviePass attracted a lot of attention beginning in 2017, as the plan at first promised subscribers unlimited access to movies at their local theaters. However, with an original subscription fee of $9.99, the company’s business model proved unsustainable. Despite reaching a peak of 3 million subscribers in 2018, MoviePass soon crumbled, filing for bankruptcy in 2020.
According to the Justice Department, Farnsworth and co-CEO Mitch Lowe were indicted because they “falsely claimed that MoviePass’s $9.95 ‘unlimited’ plan… was tested, sustainable, and would be profitable or break even on subscription fees alone. Farnsworth and Lowe allegedly knew that the $9.95 ‘unlimited’ plan was a temporary marketing gimmick to grow new subscribers and, in turn, artificially inflate HMNY’s stock price and attract new investors.”
In addition, the Justice Department claims that:
“Farnsworth and Lowe also allegedly made false and misleading representations about the positive impact that multiple revenue streams (other than subscription fees) were having on MoviePass’s profitability and self-sufficiency. These statements were misleading because, as the indictment alleges, Farnsworth and Lowe knew MoviePass did not have non-subscription revenue streams that would make MoviePass self-sufficient or otherwise offset the losses MoviePass experienced as a result of the unprofitable $9.95 ‘unlimited’ plan.”
Farnsworth’s attorney, Sam Rabin, told Variety that “It was important for Mr. Farnsworth to accept responsibility for his conduct and he took the first step by entering a guilty plea this day.”
The 62-year-old executive also pled guilty to an additional conspiracy charge at a separate company, and has been in federal custody since August 2023. The saga of MoviePass’s rise and fall was explored in the recent documentary MoviePass, MovieCrash, now streaming on Max. The company is now operating under new management and a new business model.