“It was hard. All of this was part of a bigger story," says Stacy Spikes, co-founder and former CEO of MoviePass.
HBO's "MoviePass, MovieCrash" documentary chronicles the company's meteoric rise and fall, illuminating little-known information regarding how and why a once hugely popular and lucrative business fell apart in less than a year. The moviegoing subscription service, which Spikes launched alongside fellow entrepreneur Hamet Watt, allowed people to attend as many movies as they wanted per month for just under $10.
Though MoviePass saw considerable success at the outset, it struggled initially to sustain enough capital to be profitable. This led one of Spikes' top investors to bring Mitch Lowe on board as CEO, while data analytics company Helios and Matheson New York (HMNY) purchased a majority share of MoviePass. CEO of HMNY, Ted Farnsworth, subsequently joined forces with Lowe in a seeming effort to generate capital.
Through interviews with various journalists, former MoviePass board members and employees, and once-ardent fans of the subscription service, "MoviePass, MovieCrash" details how a reversal in power and intentionality in the company led to unfair ethical and financial losses, creating the conditions for the company's ultimate demise.
Here are the central takeaways from "MoviePass, MovieCrash."
01 Spikes and Watt's vision was co-opted by two white men
Spikes and Watt, who are both Black, teamed up in 2011 to launch MoviePass, which was born out of Spikes' UrbanWorld Film Festival. Spikes created the festival in 1997 with the intention of amplifying films created by people of color by providing them a platform to showcase their work. The origin of MoviePass was derived from Spikes' idea to make UrbanWorld a subscription service.
Spikes and Watt sought to disrupt the movie industry and organized a plan to make what they envisioned would be the largest moviegoing subscription business ever conceived; however, they were somewhat stymied by racial stereotypes in the business world, which partially led to the onboarding of Lowe and Farnsworth. “There are certain stereotypes that society has of what a successful entrepreneur looks like, and we didn’t look like that," said Spikes. “If you have a white male with more grey hair that could inspire other males with white hair to be more comfortable investing — it’s a factor that we considered through the entire entrepreneurial journey,” Watt said.
Not long after Lowe and Farnsworth joined the MoviePass team, the board structure shifted, and Spikes and Watt were given fewer seats before being ousted from the board entirely. Spikes and the new executives consistently butted heads over finances — while MoviePass' stock had increased exponentially, the company was still functioning on its non-profitable, cheap monthly subscription model.
“We’re learning how to build the plane in mid-flight and changing it from a crop duster to a 747,” Spikes recalls telling the CEOs in the documentary. “We were not prepared to keep running at that pace.”
Lowe eventually elected to fire Spikes, which was met with sadness by a number of MoviePass employees. “It broke my heart to see two Black founders create a company like we did, and then all of sudden there was an all-white board,” Spikes said.
02 Ted Farnsworth's elaborate spending wreaks havoc on MoviePass
"MoviePass, MovieCrash" delves into Farnsworth's penchant for luxury and parties, which belied the staffers' meager existence at the office. From elaborate stints at the Coachella music festival (which cost MoviePass more than $1 million), to company culture focused on partying, Farnsworth and Lowe were out of touch with the people who were actually running MoviePass. The company, which was grossly understaffed, saw a stark discrepancy in its spending habits and what its employees actually reaped from all that burning cash. As one former staffer says in the documentary, "They had spent over a million dollars, meanwhile there weren’t extension cords to plug our computers into. I still had to go over to the bank to borrow pens or whatever. It was insane."
Farnsworth's quasi-obsession with having MoviePass be steeped in the world of A-list entertainment saw him test out some costly schemes, such as taking a stake in John Travolta's film "Gotti," which garnered a 0% on Rotten Tomatoes, and trying to launch a MoviePass plane company.
03 Spikes and Watt lose $80 million in ownership shares
Lowe and Farnsworth's egregious spending habits and mismanagement of the company led to the dissolution of millions that were owed to MoviePass' original founders. Though Spikes and Watt had high ownership value in MoviePass, they were prohibited from accessing and selling their shares because of a yearlong IPO lockup. Instead, they had to hope that MoviePass' new executives would steer the company into more lucrative waters while also growing its value. "You’re not behind the wheel. You’re not even close to the wheel," Watt said.
In 2017, Lowe and Farnsworth filed a public 10-K report, seeing as MoviePass' parent company, HMNY, was traded publicly. The filing revealed that in 2017 alone, MoviePass had lost more than $150 million. In contrast with the roughly $200,000 per month that was lost while Stacy was CEO, Lowe and Farnsworth were hemorrhaging cash, losing $30 million each month. MoviePass' investors grew nervous, and its stock began to plummet. In 2019, both HMNY and MoviePass filed for bankruptcy less than a year after Lowe and Farnsworth had assumed control.
“I think the hardest part — if we had failed, and I use the collective 'we' of the MoviePass team — we tried a product, it didn’t succeed in the market, and we just failed. I think I could’ve lived with that," Spikes said. "But what was hard about what happened was that we had succeeded. We had built a brand over years, the brand had enormous value in the marketplace, we were disrupting the movie industry, we were changing everything, and it worked. And that made it harder. But I think losing all that money — it’s very disappointing. You worked more than a decade on something, you summit Everest, you literally make it, and then it’s gone within the amount of time that you as a founder can’t sell your stock. It just vanished.
“By the time MoviePass was no more, the stock value — around $80 million dollars that Hamet and I had — was worth pennies," Spikes added.
04 Lowe and Farnsworth are indicted for fraud
In 2020, Spikes was asked to sit down for interviews with several government agencies, including the FBI, the Federal Trade Commission (FTC) and the Attorney General's office, in connection to allegations of fraud by MoviePass against customers. Reportedly, the MoviePass tech team was instructed by Lowe and Farnsworth to block high-frequency users from accessing the app as a means of curbing the company's financial losses. "MoviePass, MovieCrash" provides supplementary evidence to corroborate these allegations, including a recording of Lowe saying the company would eliminate box office hits from the app for a few weeks, as well as internal correspondence about the scheme that indicated the potential for FTC involvement.
In June of 2021, Lowe and Farnsworth reached an agreement to settle FTC accusations that they knowingly deceived their customers, neither admitting to nor denying any of the claims. In 2022, both men were indicted by the Department of Justice on one count of securities fraud and three counts of wire fraud. They are still awaiting trial as of May 2024.
"People like Ted are not there to build a business," said John Fichthorn, a financial analyst and venture capitalist featured in "MoviePass, MovieCrash."
"They’re there to sell you stock. It is not different than making a play on Broadway. You need a star, you need a performance, and you need a problem.”
"They’re putting on a play," Fichthorn added. "Instead of buying a ticket, you bought their stock. In both cases, you're left with nothing other than memories."
05 Spikes buys MoviePass back
Though much of "MoviePass, MovieCrash" serves to elucidate rather upsetting and unethical allegations, the documentary ends strongly on a positive note.
"I was always inspired by stories like Steve Jobs leaving Apple and then coming back," Spikes said near the documentary's end. "I was inspired by Michael Dell leaving Dell computers and him coming back. And there are so many stories in the entrepreneurial ethos where the founders came back. I could never live with myself if I didn’t try.
"Two brothers built that," he observed.
MoviePass' original founder reacquired the company out of bankruptcy, relaunching it into its second era. In 2023, MoviePass saw its first profitable year since the genesis of the company.
