Former MoviePass executives settle FTC allegations that they ‘took steps to block subscribers from using the service’

MoviePass
MoviePass shut down its subscription service in September 2019.

  • An FTC complaint alleged MoviePass execs Mitch Lowe and Ted Farnsworth “took steps to block subscribers.”
  • The FTC obtained emails from the execs about a “deceptive” plan to limit user access to the service.
  • The complaint substantiated Insider’s reporting on how subscribers were blocked from the service.
  • See more stories on Insider’s business page.

The Federal Trade Commission on Monday announced that it has settled with the top executives of MoviePass, the defunct movie ticket subscription startup, over allegations that they “took steps to block subscribers from using the service” and also “[failed] to secure subscribers’ personal data.”

Under the settlement, former MoviePass CEO Mitch Lowe and Ted Farnsworth, former CEO of MoviePass parent company Helios and Matheson, are “barred from misrepresenting their business and data security practices” in the future, according to the FTC press release outlining the settlement.

“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,” said Daniel Kaufman, the FTC’s Acting Director of the Bureau of Consumer Protection, in the release.

ted farnsworth mitch lowe
Mitch Lowe, left, and Ted Farnsworth were both named, along with their companies, in an FTC complaint.

The FTC complaint, which was reviewed by Insider, alleged that both Lowe and Farnsworth “knew of, ordered, or helped execute” a “password disruption program” that limited the ability of frequent MoviePass subscribers to use use the service.

The complaint cited an April 2018 email it obtained from Farnsworth’s personal email that was sent to Lowe and others at the company. The email proposed a notice that falsely “informed subscribers that their account passwords were required to be reset due to ‘suspicious activity or potential fraud.'”

The complaint alleged that both Lowe and Farnsworth were aware of the program’s “deceptive nature,” noting that despite one executive’s warning that “there is a high risk this would catch the FTC’s attention,” Lowe went forward.

“Ok I get it,” Lowe responded via email, according to the FTC complaint. “So let[‘]s try this with a small group. Let[‘]s say 2% of our highest volume users.”

The FTC complaint substantiates Insider’s reporting in its rise and fall story of MoviePass, which detailed how Lowe ordered that heavy users of MoviePass – also known as “power users” – be blocked from seeing “Avengers: Infinity War.”

From the story:

Per Lowe’s orders, MoviePass began limiting subscriber access ahead of the April release of the highly anticipated “Avengers: Infinity War,” according to multiple former employees. They said Lowe ordered that the passwords of a small percentage of power users be changed, preventing them from logging onto the app and ordering tickets.

Insider contacted Lowe and Farnsworth’s attorney for comment but did not get a response.

FTC Commissioner Rohit Chopra said in a tweet on Monday that because MoviePass is now out of business, having shut down in September of 2019, “the agency was unable to obtain restitution for Lowe’s and Farnsworth’s victims.”

Last week, Lowe and Farnsworth agreed to a $400,000 settlement with four California District Attorneys’ offices that had alleged “unlawful business practices.”

MoviePass surged in popularity in the summer of 2017 after Helios and Matheson bought the service and drastically lowered the price to $10 a month to see a movie per day. But MoviePass burned through hundreds of millions of dollars and failed to find a business model that didn’t lead to massive losses.

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What the Super Bowl reveals about the state of advertising now

Hi and welcome to this weekly edition of Insider Advertising, where we track the big stories in media and advertising.

I’m Lucia Moses, deputy editor, and here’s what’s going on:

Remember you can sign up to get this newsletter daily here

Budweiser Clydesdales
The Budweiser Clydesdales parade around the field in an Opening Day tradition at Busch Stadium before the St. Louis Cardinals and San Diego Padres’ MLB National League baseball game in St. Louis, Missouri, March 31, 2011.

What the Super Bowl reveals

The developing Super Bowl advertiser lineup speaks to lot of what’s going on in advertising right now:

  • Perennial brands are pulling back on advertising during the game this year, notably brands like Pepsi and Coca-Cola that have had a hard year as the virus puts an end to big social gatherings and live events.
  • The absence of some of the big usuals comes as advertisers are dealing with the risk of trying to strike the right tone in a time of political and cultural division and health crisis. (Of course, it could be that the longstanding argument that the millions spent on the ads just aren’t worth it is gaining steam.)

The list of current advertisers includes companies have been thriving in the pandemic, like food-delivery apps and fast-food chains that are taking advantage of online ordering.

With many topics off-limits for ads, the Super Bowl also highlights the way brands are tying themselves to issues to win over consumers who increasingly care about what companies stand for.

  • Anheuser-Busch said it’s directing the $1 million it would have spent on a dedicated Bud ad to coronavirus vaccination awareness efforts while Chipotle is using its first Super Bowl spot to promote its environmental initiatives.

Abel Clark, Cision

Confusion at Cision

Cision is the biggest player in the $4.1 billion PR software space, with clients like Edelman and Google and a reputation for charging top prices.

Since Cision was acquired by Platinum Equity in January 2020, it’s shifted sales strategies, tried to sell its biggest property, Trendkite, and sought to merge with its top rival, Meltwater, Patrick Coffee and Sean Czarnecki report. Most recently, it just laid off staff after a string of top execs left.

Now, insiders are wondering what’s next for the company and if their jobs are secure.

From Patrick and Sean’s reporting:

Platinum’s goal was to integrate the 4,000-person company’s 12 acquisitions and use its position to dominate the industry, former employees said. 

But current and former Cision employees say there’s been a lack of communication from leadership since the Platinum acquisition, leading to confusion across the workforce.

“It is not a very transparent organization around changes and layoffs,” said a source.

Read their full story here: Insiders at PR software giant Cision are wondering what’s next after layoffs and an exodus of top execs


Ted Farnsworth
Ted Farnsworth attends the 27th annual Elton John AIDS Foundation Academy Awards Viewing Party sponsored by IMDb and Neuro Drinks celebrating EJAF and the 91st Academy Awards on February 24, 2019 in West Hollywood, California.

Blast from the MoviePass

Ted Farnsworth, the former chairman of MoviePass, is back.

He’s cofounder of a new venture called Zash that’s looking for media, entertainment, and content-focused technology companies to invest in.

Prospective partners might be interested in a refresher on MoviePass, which burned hundreds of millions of dollars before going bankrupt. Farnsworth also has a long history in penny stocks.

Read the rest here: The exec who oversaw MoviePass as it spiraled into bankruptcy is back with a new publicly traded venture – a month after he was part of an $8 million settlement with investors


Other stories we’re reading:

Thanks for reading, and see you here next week.

– Lucia

Read the original article on Business Insider