The very first day of SXSW 2024 a 96-minute documentary entitled “MoviePass/MovieCrash,” directed by Muta’ Ali, had its World Premiere at the Alamo Theater on Lamar Boulevard. It chronicled how two black entrepreneurs—Stacy Spikes and Hamet Watt—spent a decade developing a way to bring the masses back to the theater experience with a credit card-like approach to movie-going called MoviePass. They described it as “Netflix for movies.” Initially, the two founders had the idea that a movie patron would pay somewhere between $39.95 to $50 monthly to be able to attend 2 movies a month. At first, AMC was going to help roll it out; that all changed with a change in AMC leadership. So no special pricing for MoviePass subscribers.
MONEY NEEDED
Although the Black developers were quite qualified—Stacy Spikes had been Vice President of Marketing for Miramax Pictures and had handled the publicity of films like “Trainspotting” and “Scream,”— they didn’t have access to the kind of investment money to make MoviePass a reality. MoviePass needed seed money. Since only 1 to 3% of investment money goes to minorities or women, the Black entrepreneurs turned to Chris Kelly, a white guy and former general counsel for Facebook. Kelly had once run for Attorney General of California; he lost to Kamala Harris. Kelly was genuinely enthusiastic about the MoviePass project.
Kelly immediately gave the entrepreneurial duo $500,000 of his own money. He soon followed the first half-a-million with a second $500,000 of his own money. It wasn’t enough. Investors would have to be found. And it would be better for MoviePass’s fund-raising if the leadership of MoviePass were white, not Black. Or would it?
2 WHITE GUYS REPLACE THE 2 BLACK FOUNDERS
Chris Kelly, entrepreneur; investor in “MoviePass”
Chris Kelly (donor of the first million in seed money) suggested bringing in a guy named Mitch Lowe to facilitate securing more funding. According to Wikipedia, Lowe was president of Video Droid from June 1984 to March 1998.[4][5] After Video Droid, Lowe was vice president of Business Development and Strategic Alliances for Netflix from March of 1998 to January 2003.[6] Then, at McDonald’s Corporation, Lowe was Senior Director and VP of Operations from May 2003 to December 2005.[7] After McDonald’s, Lowe worked at Redbox as Chief Operating Officer (2005 to 2009) and President (2009 to 2011).[8] Mitch Lowe’s insertion into the company seemed logical. But Mitch Lowe brought in Ted Farnsworth, and Ted Farnsworth may be the biggest scam artist since Mike Lindell and My Pillow.
It was Farnsworth who coined the slogan “Any theater. Any movie. Any day.” And the original plans to charge a higher amount that might have yielded a slight profit (or at least allowed the company to break even) was jettisoned in favor of a ridiculously low fee of $9.95 that gave users unlimited access to movies any time anywhere. Some users appear onscreen and admit to seeing “Crazy Rich Asians” 14 times. (Makes you wonder.) The audience member next to me, from L.A., described how the MoviePass card quit working properly and calls to management were not answered. The apps kept going down. The servers were getting annhialated.
This situation seemed very familiar to me. During SXSW my SXSW-Go Express pass app continuously failed to work at exactly 9 a.m. each morning , usually when the most popular films were in hot demand (“The Fall Guy,” “Bon Jovi”). Three of us manned my phone, computer and Ipad to no avail. I was able to get exactly zero Express passes during 8 days, but I did get up each morning at what is, for me, the absurdly early hour of 8:30 a.m. to attempt to use it and, yes, it is exhausting to continually be told to “check back later.” In my own defense, I had used the App successfully in the years 2017-2023. I even had Tech Support check my phone at registration to make sure the “code” was properly linked. From then on I was continuously told to put in the same “code,” which I did. Alas, I got nowhere fast and was turned away from most popular films without the unattainable Express Pass. (3 a week was the limit; I got 0 in 8 days). This is something like what the L.A. user of MoviePass described to me from his days as a MoviePass subscriber.
CASH CRUNCH
Director of “MoviePass,MovieCrash” Muta’ Ali Muhammad.
The cash crunch for MoviePass was on; the influx of capital was paramount. Mitch Lowe suggested bringing in a second white guy named Ted Farnsworth. One of the two original Black founders, Hamet Watt described Watt as “slick” and said, “I could tell that we didn’t share the same values.” That’s putting it mildly.
Farnsworth and Lowe reconfigured the board so that they had the power. Soon Hamet Watt was relieved of his duties, while Stacy Spikes was kept on and made COO. As Spikes said in the documentary, “We took the money and we didn’t ask what you want to get out of it. You’re set up to fail.”
NEGATIVE SPIRAL
When Stacey Spikes, whose original idea this was, questioned business decisions the white guys were making, he was told, “this is a company, not a family.” At this point, a relevant clip of the Anger Translater from Key & Peele provided just the right degree of levity to the otherwise bland recitation of who was funding what and how things were going. The answer, under the new white guys, was: not well. Although they were giving interviews to whomever asked that promised that everything was possible, they had no special pricing deal with the movie companies and there was no way that the $9.95 price tag would cover the expense of purchasing $11.50 movie tickets for 1.5 million subscribers, especially those that were turning up at theaters 4 and 5 times a week.
Spikes, who had a longer tenure than Watt, said that the sudden influx of subscribers was so intense that they couldn’t keep up with the delivery of the MoviePass credit cards and had to hire a Brinks truck to deliver them nationwide. Things were hectic. The employees who remained on the payroll had to use extension cords to secure electricity. They had to borrow pens from the nearby bank. Seven employees were fielding complaints from unhappy customers nationwide. The customers had gone to their theater of choice only to have their MoviePass cards not work. That was partially because Farnsworth and Lowe had okayed shutting down the cards, especially during the showing of a big hit like “Mission Impossible.” Going to “Crazy Rich Asians” 14 times, as one subscriber did, had become a thing of the past, and a short-lived one, at that.
LOWE & FARNSWORTH
The new leadership of MoviePass eventually fired Stacey Spikes, too. The Dynamic Duo of Lowe and Farnsworth continued to spend money on a lavish scale, hiring unqualified people, going to Coachella and Sundance, backing movies that tanked, hemorrhaging $250 million in record time. While Stacy Spikes was still with the company, he described the experience as “We’re kind of learning how to fly the plane in mid-flight, and changing it from a two-seater to a Boeing 707.”
Meanwhile, as the former employees tell the story, only 7 employees were handling the phones, answering complaints from dissatisfied customers that their MoviePass didn’t work. They didn’t work because the two white guys were making the passes inoperable during peak periods of demand.All of the funding companies behind MoviePass went bankrupt, as did the company itself, taking with it the $80 million in stock options that the two founders had been promised when they were let go by the two free-wheeling white guys.
CRIMINAL CHARGES
Under Stacy Spikes and Hamet Watt, the company was losing $200,000 a month. Under Mitch Lowe and Ted Farnsworth that escalated to $30 million a month. It took 10 years to build MoviePass. It only one year to fail under the new leaders. Share value dropped from $8,000 per share to 2 cents. As co-founder Hamet Watt said, “We’re not behind the wheel. We’re not even close to the wheel.”
On November 4, 2022, Mitch Lowe, along with Theodore Farnsworth, the former CEO of MoviePass’ parent company Helios and Matheson Analytics, were each charged with one count of securities fraud and three counts of wire fraud stemming from their time together at MoviePass. They go to trial in September of 2024. Khalid Itum, a former furniture salesman who Farnsworth brought in and promoted, was charged with 2 counts of embezzling $260,000 during the Coachella fiasco. The two at the top face 20 years in prison if convicted.
Daymon Johns of “Sharktank” fame scoffed at the idea of losing $250 million in investment funding so quickly. With the remark that Lowe and Farnsworth seemed to be pursuing a “Thelma & Louise strategy,” the video of Susan Sarandon and Geena David sailing over the cliff in the convertible earned an appreciative laugh. I have to think that neither Stacy Spikes nor Hamet Watt were laughing, then or now.
CONCLUSION
If there is a happy ending, it is that the original MoviePass concept, after all the bankruptcies, was put up for auction and Stacey Spikes bought it back and, as of 2023, is trying to resurrect MoviePass. He remarked on how entrepreneurial giants like Steve Jobs and Michael Dell left their original companies, but came back after leaving, saying, “I’d never live with myself if I didn’t try.”