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Ted Farnsworth, the former CEO of MoviePass and the guy who had the bright idea to pay $9.95 a month to watch unlimited movies, has admitted to defrauding the subscription company’s investors. According to the Justice Department, Farnsworth agreed one count of fraud and one count of conspiracy to commit security fraud and face up to 25 years in prison.
If you’re unfamiliar with MoviePass, Farnsworth isn’t the founder of the company, which was started by Urbanworld Film Festival founder Stacy Spikes as a limited subscription service designed to entice people to go to the movies more often. Farnsworth was the head of the analytics firm Helios and Matheson, which bought a majority stake in MoviePass in 2017 and eventually pushed the company to offer filmmakers access to one movie a day for just $9.95 a month.
Farnsworth’s plan attracted many subscribers—more than three million people registered for use. And that’s when the problem started. While Farnsworth met with the media to demonstrate the scale of the business and that the company would make a profit by selling customers, behind the scenes, MoviePass was. bleeding. It didn’t take long for MoviePass to backtrack on its promise of unlimited movies, when it first started. causing the suspension of popular films, face the suspension of his dutiesand change prices and plans with a little warning.
It was obvious that MoviePass was destined to fail when the unlimited plan was introduced, but Farnsworth told investors that the cost is sustainable and would be profitable on subscription payments alone. It turns out not, as the DOJ discovered that MoviePass lost money in the system. As for Farnsworth’s client drama, it was all smoke and mirrors, too. The Justice Department said its audit firm “did not have the ability to monetize MoviePass subscriptions.” In the end, MoviePass wasn’t making more money than its subscriptions — and it was costing the company so much that Farnsworth instructed staff to cut users from using the paid plan.
After Farnsworth it forced MoviePass into bankruptcyhe apparently also ran the play with another company called Vinco Ventures. According to the DOJ, Farnsworth and his co-conspirators siphoned money from investors by lying about the state of the business, while keeping the money in 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 is they are said to be beneficial (even users always complaining about glitches and problems).
