MoviePass, the struggling movie ticket subscription service, has been accused of changing user passwords in order to prevent heavy users from logging in.
Business Insider reported on Aug. 6 that CEO Mitch Lowe ordered employees to change the passwords of users without their knowledge last year as the company temporarily ran out of funds in July, 2018. The report, citing former employees, also said the lack of funds led to Lowe making “Mission: Impossible — Fallout” unavailable on MoviePass that month and ordering that half of subscribers be frozen out during the July 27-29, 2018, opening weekend.
Reps for MoviePass did not respond to a request for comment Thursday.
The report also said that Lowe made sure blockbusters would no longer be available on the app and that MoviePass enforced a “trip wire,” an automatic shutdown mechanism for all users that would activate if the company’s funds went below a specific monetary threshold. The threshold originally started at a few million dollars, but eventually was lowered to a few hundred thousand dollars.
On July 4, MoviePass announced that it would be out of commission for several weeks at least in order fix technical issues and finish work on a new version of its app. At the time, it said it “plans to use this time to recapitalize in order to facilitate a seamless transition and improved subscriber experience once the service continues.”
As of March 21, 2019, MoviePass’ parent company — Helios and Matheson Analytics — said it had cash on hand of about $2.8 million and $13.1 million on deposit with its merchant and fulfillment processors related to MoviePass subscription revenue. Helios and Matheson said it netted $5.56 million in new financing from “certain institutional investors,” which closed March 25.
Helios and Matheson’s net loss more than doubled in 2018, to $329.3 million, on revenue of $232.3 million, according to its latest financial filing. The company took a $38.5 million write-down for the third quarter of 2018 related to the impairment of goodwill in the MoviePass business, and it said it expects to record an impairment charge of $35.9 million for Q4 for MoviePass.
The number of MoviePass subscribers plummeted from more than 3 million last year to just 225,000 in under a year, according to a Business Insider report in April. The subscriber plunge stemmed from MoviePass’ change in August 2018 to eliminate the one-movie-per-day plan, priced at $9.95 per month, with a $9.95 plan allowing subscribers to see just three movies each month.
Earlier this year, it rolled out a refashioned “unlimited” option, for $14.95 per month, to again allow customers to see one movie daily but warning that movie choices will be restricted based on “system-wide capacity.”
Helios and Matheson is the target of a securities-fraud probe by the New York Attorney General, which is looking into whether the company misled investors. MoviePass also is the target of a class-action lawsuit by subscribers claiming the change in the “unlimited” plan was a deceptive “bait-and-switch” tactic.