MoviePass, a company that had a meteoric rise and fall a couple of years ago, is mostly remembered as a business idea that was too good to be true.
Subscribers could pay $10 a month for all the movie tickets they want, and MoviePass offered this without the cooperation of the theater chains themselves. This caused the company to lose staggering amounts of money, and because MoviePass ran this without major venture capital backing, the business model proved unsustainable, and MoviePass closed in 2019. As an aside, the company produced one of the worst movies of the decade, 2018’s Gotti, and later fronted a bizarrely mean-spirited advertising campaign which argued, unconvincingly, that critics had a vendetta against the film.
But now, there’s word that MoviePass was up to much worse things than merely running a business that failed. The company was revealed to be under investigation for fraud in 2018, and now we know exactly what happened.
As laid out by Matt Levine’s indispensable newsletter Money Stuff, the remnants of the now-defunct MoviePass recently reached a settlement with the Federal Trade Commission.
“MoviePass and its executives went to great lengths to deny consumers access to the service they paid for while also failing to secure their personal information,” Daniel Kaufman, the FTC’s Acting Director of the Bureau of Consumer Protection, said in the statement announcing the settlement. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises.”
MoviePass did this in three ways, the FTC says: They “invalidated subscriber passwords while falsely claiming to have detected ‘suspicious activity or potential fraud’ on the accounts, they “launched a ticket verification program to discourage the use of the service,” and they used “trip wires” that blocked certain users.
Money Stuff, likening this all to “super-duper fraud,” pointed out just how sketchy this all was.
“It’s pretty simple: What if MoviePass collected your $10 each month and then when you asked it for movie tickets, it ignored you? Then it could keep collecting your $10 a month without spending money on tickets. Eventually, you’d get annoyed by not getting what you paid for, and you’d try to cancel your membership and get your money back, but MoviePass could ignore that too and keep collecting the $10.”
The FTC even found emails in which MoviePass executives discussed their fears that the FTC was on to them.
The settlement with the FTC does not include a fine, nor has MoviePass been hit with federal criminal charges. However, the MoviePass executives did agree earlier this month to a $400,000 settlement, for “engaging in unlawful business practices,” with the Sonoma County District Attorney’s Office.