HBO’s new documentary, “MoviePass, MovieCrash,” tells a story that many of us know about: how MoviePass, the subscription-based movie ticketing startup, was a catastrophic failure. After a series of mishaps and deception, it filed for bankruptcy in 2020.
However, the movie also tells the underreported tale of two Black men who aimed to disrupt the moviegoing space but were then thrown out of the company and forced to watch from the sidelines as their creation burned to the ground.
Mitch Lowe, a former Redbox and Netflix executive, and Ted Farnsworth, CEO of analytics and consulting company Helios & Matheson, are often considered the faces of MoviePass. However, neither of them deserves credit. MoviePass was originally co-founded by former Miramax exec Stacy Spikes and serial entrepreneur Hamet Watt.
The premiere of “MoviePass, MovieCrash,” which is available on Max starting today, comes at a time when only 2.7% of U.S. businesses are majority Black-owned, according to recent estimates from the Annual Business Survey. Spikes hopes this documentary will shed light on his perspective and underscore the necessity of increased funding for Black founders.
“The truth is going to 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’re still in the early days of venture capitalists’ mindsets changing and that “more women and founders of color” are being accepted.
(We recommend watching the documentary before reading this article.)
When Lowe was first brought on as CEO in 2016, MoviePass had already existed for five years. It was initially a membership where customers got their own debit card that automatically loaded with the exact amount of a movie ticket. Customers selected the film they wanted to see within the MoviePass app. However, user growth wasn’t where it needed to be — the service was hovering at around 20,000 subscribers.
The company also needed more money, yet it faced the harsh reality of the disparity in venture capital funding for Black-owned companies. To this day, a minuscule portion of funding goes to Black founders. In 2023, Black founders in the U.S. raised 0.48% of all venture capital, so about $661 million out of the $136 billion allocated in total. This number was the lowest recorded in recent history, with Black founders typically making up at least 1% of all venture dollars deployed.
Ultimately, the founders thought that bringing on a “white male with grey hair” would inspire other white males to be “more comfortable” investing, Watt shared in the documentary. A year after Lowe joined, Helios & Matheson bought a controlling stake in MoviePass for $27 million.
“You had these seasoned founders who knew what they were doing and had a lot of success and yet hit a ceiling with being able to raise capital. Then you have two white guys who can raise $150 million off the very same brand,” Spikes told us. He took the role of chief operating officer until 2018. Watt remained a member of the board.
MoviePass quickly shifted gears under its new owner. To draw in as many customers as possible, the company lowered the subscription fee significantly to $10 per month for one movie every day. The price change attracted approximately 175,000 users in 48 hours, giving the service mainstream prominence. By 2018, it had skyrocketed to over 3 million subscribers.
“The $10 price was supposed 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 that off was a big red flag because $10 is not a sustainable price. It’s just not,” Spikes added, explaining that the average ticket price was $11.50 at the time, so customers going to multiple movies per week cost the company tons of money.
In fact, MoviePass was losing millions of dollars every month. It 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 let go.
“Mitch and Ted would push back and say, ‘We know what we’re doing. We bought you. Thank you for sharing,’” Spikes said in the documentary. “It broke my heart to see two Black founders create a company the way we did, and then all of a sudden, there was an all-white board.”
“He just wasn’t being a constructive member of the team,” Lowe said.
Attempts to reach Lowe and Farnsworth for comment were unsuccessful.
Later on, MoviePass went back on its unlimited movie promise and began limiting its offering to three movies a month. The company also tried alternate revenue streams like selling data to advertisers, producing movies via 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 exemplified an outrageous level of corporate greed.
When speaking about the Coachella event, Lowe said, “I sensed a resentment by the MoviePass employees [who weren’t invited.] Each individual has their various roles and not all roles get to party.”
“I’m sitting at home and in my Twitter feed, here’s Dennis Rodman getting out of a MoviePass helicopter at Coachella… [They’re] burning through money. The staff is suffering…It doesn’t make any sense,” Spikes said during our interview.
Meanwhile, customer support workers and other MoviePass team members were dealing with a sinking ship as the site faced repeated outages and angry customers. (Spikes claimed in a previous interview with TechCrunch that those crashes were intentional.) In the summer of 2019, a data breach exposed tens of thousands of MoviePass card numbers as well as customers’ personal credit card numbers.
In its short years under Lowe and Farnsworth, MoviePass crumbled. The two executives are currently awaiting trial after pleading not guilty to one count of securities fraud and three counts of wire fraud.
Spikes, meanwhile, managed to turn his story around. He purchased MoviePass in 2021 and relaunched it last year. It appears to be successful so far as it became profitable for the first time in 2023.
During the interview with TechCrunch, Spikes also mentioned details that didn’t make it in HBO’s new film, such as building a VR app for MoviePass viewers to watch movie trailers on Meta Quest and Apple Vision Pro headsets. He’s hoping for a summer launch.
Watt founded his own venture capital firm, Share Ventures, in 2019, which invests in healthcare and tech companies.
