Disastrously failed theaterThe corpse of ticketing startup MoviePass has been rotting for years, but its former executives have only reached a settlement with the Federal Trade Commission for allegedly using fraudulent and deceptive tactics to abuse its users.
MoviePass, for those who don’t remember, was a subscription service initially offering movie tickets once a day in exchange for a monthly fee of $ 9.95. The whole business was largely dependent on investors subsidizing the enrollment of so many users that MoviePass could muscle large theater chains like AMC in signing deals – a moonshot strategy that never came to fruition, grappling the company with millions of users consuming far more tickets than MoviePass received in subscription revenue. By the time the house of cards collapsed, MoviePass had exploded hundreds of millions of dollars in losses.
The startup has used a variety of increasingly depraved strategies as lifelines, including impose confusing restrictions on how many films could be seen and when, reset passwords to hinder user access to accounts, a ticket “verification” system to discourage use, “trigger threads” to block users who have obtained too many tickets, and re-registration of users who had already terminated their subscriptions. He regularly lack of money to buy tickets, exasperating subscribers who often did not know it before they were already at the cinema.
The Consumer Protection Division of the FTC written in a complaint published Monday that MoviePass and its CEO Mitchell Lowe, along with now-defunct parent company Helios & Matheson and CEO Theodore Farnsworth, went to great lengths to deny subscribers access to services they paid for , violating several federal laws. The FTC also alleged that MoviePass failed to take the necessary steps to protect consumer data, such as storing names and financial information in a clear text database that was left behind. exposed to the public internet without password.
The regulations, also announced by the FTC Monday, may seem disappointing. The FTC wrote that it essentially prohibits company operators from distorting their business efforts in the future and requires any companies controlled by MoviePass, Helios & Matheson or Lowe to agree to implement comprehensive security programs:
Under the proposed order, MoviePass operators are prohibited from misrepresenting the services they provide and must implement a comprehensive security program that requires them and all companies controlled by MoviePass, Helios or Lowe to identify external security risks and internal processes and take measures to remedy them. In addition, MoviePass operators must obtain biennial evaluations of its information security program from a third party, which the FTC has the authority to approve, in order to review the effectiveness of the program. Finally, MoviePass operators are required to notify the FTC of any future data breaches, and a senior executive must annually certify that MoviePass operators comply with the data security requirements of the regulation.
The FTC has identified three tactics company executives have deployed to deceive users: false allegations of “suspicious activity or potential fraud” used to justify resetting passwords, the ticket verification system that regularly “blocked thousands of subscribers” due to technical issues and the
“Trigger Wires” designed to prevent MoviePass from overpaying for too many tickets. He also said the company’s marketing practices were deceptive and that Lowe and Farnsworth were aware of all of this mischief.
“MoviePass and its executives went to great lengths to deny consumers access to the service they paid for while failing to secure their personal information,” wrote acting director of the Consumer Protection Bureau, Daniel Kaufman. , in the ad. “The FTC will continue to work to protect consumers from deception and to make sure businesses keep their promises.”
The FTC noted in the announcement that the proposed settlement “does not include monetary relief for consumers” – and not that anyone expected. MoviePass closed and ceased all operations in September 2019 after exhausting its financial reserves and failing to find new investors and shortly after declaring bankruptcy, when the parent company filed an application for Chapter 7 Bankruptcy in January 2020.
Last year, MoviePass settled a class action trial brought in by investors at a discount price of $ 8.25 million. The company has also achieved a separate regulation with four district attorney’s offices in California last week for similar allegations of “numerous illegal and unfair practices”, Lowe and Farnsworth agreeing to pay $ 400,000 in civil penalties and restitution. Yet that may not mean the end of the legal problems of its leaders. Last year, MoviePass acknowledged that in addition to the FTC and California investigations, it was also under study by the New York Attorney General and the Securities and Exchange Commission.
At least one of MoviePass’ former executives has successfully started a new business. Co-founder Stacy Spikes, who was fired by Hélios & Matheson after acquiring MoviePass in 2017, has since launched PreShow Interactive, a company that allows gamers watch advertisements in exchange for in-game currency. It was originally intended for hand out cinema tickets as rewards instead.
In March 2021, the specter of a relaunch of MoviePass briefly arose after a zombie site (“moviepass.ventures”) has been uploaded, with barely a countdown to March 22 and the text “the movie is about to begin”. While it was initially unclear who actually registered website, operators later revealed be a hoax intended to trick journalists into covering it.