HBO’s new documentary, “MoviePass, MovieCrash,” tells a story many of us know: how MoviePass, the subscription movie ticketing startup, was a catastrophic failure. After a series of incidents and deceptions, she filed for bankruptcy in 2020.
However, the film also tells the underrated story of two black men who sought to disrupt the cinematic space, but were then kicked out of the business and forced to watch from the sidelines as their creation burned.
Former Redbox and Netflix executive Mitch Lowe and Ted Farnsworth, CEO of analytics and consulting firm Helios & Matheson, are often considered the faces of MoviePass. However, none of them deserve recognition. MoviePass was originally co-founded by former Miramax executive Stacy Spikes and serial entrepreneur Hamet Watt.
The premiere of “MoviePass, MovieCrash,” available on Max starting today, comes at a time when just 2.7 percent of U.S. businesses are majority-black-owned, according to recent estimates from the Annual Business Survey. businesses. Spikes hopes this documentary will shed light on his perspective and highlight the need for increased funding for Black founders.
“The truth will be told,” Spikes told TechCrunch. He added that the documentary is not only about the “rise and fall of MoviePass” but also addresses the fact that we are still in the early days of the changing mentality of venture capitalists and that “more and more women and founders of color” are accepted.
(We recommend watching the documentary before reading this article.)
When Lowe was first named CEO in 2016, MoviePass had already been around for five years. This was initially a subscription where customers received their own debit card loaded automatically with the exact amount of a cinema ticket. Customers selected the movie they wanted to see in the MoviePass app. However, user growth was not where it should have been: the service hovered around 20,000 subscribers.
The company also needed more money, but it faced the harsh reality of the disparity in venture capital funding for black-owned businesses. To date, a tiny portion of funding goes to Black founders. In 2023, Black founders in the United States raised 0.48% of all venture capital, or approximately $661 million of the $136 billion allocated in total. This figure is the lowest recorded in recent history, with Black founders typically accounting for at least 1% of all venture capital investments deployed.
Ultimately, the founders believed that bringing in a “grey-haired white guy” would make other white guys invest “more comfortable,” Watt explained in the documentary. A year after Lowe’s arrival, Helios & Matheson purchased a majority stake in MoviePass for $27 million.
“You had these seasoned founders who knew what they were doing and were very successful and yet were hitting a ceiling in terms of their ability to raise capital. Then you have two white guys who can raise $150 million with the same brand,” Spikes told us. He assumed the role of COO until 2018. Watt remained a member of the board of directors.
MoviePass has quickly shifted gears under its new owner. To attract as many customers as possible, the company dramatically reduced subscription fees to $10 per month for one movie each day. The price change attracted around 175,000 users in 48 hours, giving the service mainstream prominence. By 2018, he had reached over 3 million subscribers.
“The $10 price was meant to be promotional. We were only going to put 100,000 people at that level. The moment Lowe and Farnsworth said they didn’t want to turn this off was a big red flag, because $10 is not a sustainable price. That’s just not the case,” Spikes added, explaining that the average ticket price was $11.50 at the time, so patrons going to see multiple movies a week was costing the company tons of money. ‘business.
In fact, MoviePass was losing millions of dollars every month. He lost $40 million in May 2018 alone.
Spikes’ warnings to Lowe and Farnsworth were ignored, and MoviePass fired him in 2018, he says. Watt was also released.
“Mitch and Ted were fighting back and saying, ‘We know what we’re doing. We bought you. Thanks for sharing,'” Spikes said in the documentary. “It broke my heart to see two black founders start a company the way we did, and then all of a sudden there was a board completely white administration panel.”
“He just wasn’t a constructive member of the team,” Lowe said.
Attempts to reach Lowe and Farnsworth for comment were unsuccessful.
MoviePass later went back on its promise of unlimited movies and began limiting its offering to three movies per month. The company also tried other revenue streams, like selling data to advertisers, producing movies through an in-house studio, and even a bizarre venture into the airline business.
From extravagant yacht parties to frivolous spending of $1.1 million on an unnecessary Coachella event, the spending spree illustrates an outrageous level of corporate greed.
Speaking about the Coachella event, Lowe said, “I felt resentful from the MoviePass employees (who weren’t invited.) Every individual has their different roles and not every role is a party .
“I’m sitting at home and on my Twitter feed, here’s Dennis Rodman coming out of a MoviePass helicopter at Coachella… (They’re) burning money. The staff are suffering…It doesn’t make any sense,” Spikes said during our interview.
Meanwhile, customer service employees and other MoviePass team members struggled with a sinking ship as the site faced repeated outages and angry customers. (Spikes claimed in a previous interview with TechCrunch that these crashes were intentional.) In the summer of 2019, a data breach exposed tens of thousands of MoviePass card numbers as well as the personal credit card numbers of clients.
During its short years under Lowe and Farnsworth, MoviePass collapsed. Both executives are currently awaiting trial after pleading not guilty to one count of securities fraud and three counts of wire fraud.
Spikes, on the other hand, managed to turn his story around. It purchased MoviePass in 2021 and relaunched it last year. It appears to have been successful to the extent that it became profitable for the first time in 2023.
During the interview with TechCrunch, Spikes also mentioned details that weren’t included in the new HBO film, such as the creation of a VR app allowing MoviePass viewers to watch movie trailers on the Meta Quest and Apple Vision Pro headsets. He hopes for a summer launch.
Watt founded his own venture capital firm, Share Ventures, in 2019, which invests in healthcare and technology companies.