FTC Gives MoviePass Execs A Wrist Slap For Changing Passwords So Users Couldn't Watch Movies

from the wrist-slaps dept

Originally, the MoviePass business model seemed like a semi-sensible idea, though we were quick to wonder if it would ever actually make a profit. Under the model, users paid $30 (eventually $10) a month in exchange for unlimited movie tickets at participating theaters, provided they signed up for a full year of service. There were, of course, caveats: you could only buy a ticket per day, and could only buy one ticket per movie. It also prohibited users from viewing 3D, IMAX, or XD films. Still, the proposal was widely heralded by some as a savior for the traditional, brick and mortar, sticky floor movie industry.

It wound up....not being that.

In 2019, a four-month investigation by Business Insider (paywalled) found that the company had been bleeding money for years, and misleading investors for much of that time. Not only was the idea never really profitable, the company couldn't even manage to acquire enough plastic to keep up with membership card demand. Showcasing the width and depth of the dodgy effort, at one point executives genuinely thought it would be a good idea to actually change user passwords so they couldn't use the service, thinking this would let them get their head above water.

Needless to say, this behavior was so extreme it finally got the attention of the under-funded and over-extended FTC, which finally announced it had struck a settlement with MoviePass. The settlement isn't much to look at: because the companies involved are bankrupt there's no financial penalty, but the executives behind the effort are barred from “misrepresenting their business and data security practices" and "must implement comprehensive information security programs." (Execs did have to shell out $400,000 in penalties to select California counties in a different agreement).

The full FTC complaint (pdf) indicated that the company's not-so-clever password changing efforts impacted roughly 75,000 subscribers in total. Those users were first blocked from using the service, then when they inquired why they couldn't login they were falsely told they were the victim of fraud:

"Under Respondents’ password disruption program, Respondents invalidated the passwords of the 75,000 subscribers who used the service most frequently while claiming that “we have detected suspicious activity or potential fraud” on the affected subscribers’ accounts."

The full complaint is worth a read, and includes details in several other bizarre efforts execs engaged in to prevent customers from actually using a service they paid for. From the FTC press release:

"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. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises."

It's not clear that a light wrist slap for executives years after it matters genuinely "protects consumers from deception," but in a country where a regulator like the FTC is routinely under-funded, under-staffed, and demonized, you get what you ask and pay for.

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Filed Under: fraud, ftc, movies, passwords, wrist slap
Companies: moviepass


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  1. identicon
    waisanw, 9 Jun 2021 @ 6:45am

    Easy solution

    They should have just used the same tactic as various cell providers and ISPs. Advertise "unlimited" and then add to the fine print that is limited to xx usage per month and anything over will be considered abusive and may result in extra fees or account cancellation. Then add some "convenience" or "infrastructure" fees on top of the advertised pricing to everyone under contract if they still aren't making a profit.

    reply to this | link to this | view in thread ]

  2. icon
    Chris-Mouse (profile), 9 Jun 2021 @ 7:28am

    when they inquired why they couldn't login they were falsely told they were the victim of fraud

    It sounds to me like they were the victim of fraud. The fraud being perpetrated by the company executives.

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Coward, 9 Jun 2021 @ 9:01am

    Re: Easy solution

    Advertise "unlimited" and then add to the fine print that is limited to xx usage per month and anything over will be considered abusive

    They did that. "Unlimited" meant 1 per day (28-31 per month). More strict limits and hidden fees probably would have attracted an FTC "punishment" (zero dollars!) for fraud anyway.

    Nothing you write really "solves" anything, because the business model was so dumb that they were selling unlimited movies for about the cost of one movie per month:

    [CEO] Lowe dreaded the company's power users, those high-volume MoviePass customers who were taking advantage of the low monthly price, constantly going to the movies, and effectively cleaning the company out. According to the Motion Picture Association of America, the average moviegoer goes to the movies five times a year [at $9/ticket on average]. The power users would go to the movies every day.

    Did they really think average users would sign up, and remain average? "Let's see, I normally pay $9 about 5 times a year, so why don't I give a company all kinds of personal information and spend $10 twelve times instead?" As if nobody at MoviePass realized (or they hoped no investors would realize) that maybe people were only seeing 5 movies a year because of the cost, and would watch more if that weren't a concern.

    Keep in mind that MoviePass were just giving theaters cash—at full price, by acting as a debit card—to let the customers in. They didn't have any kind of deal, nor any realistic prospects for making one. A user buying a single $10 ticket each month would leave MoviePass with zero profit, if they had no other expenses. (I'd guess that they were paying another 25-50 cents to use the debit card network, and that their employees were not working for free.)

    Any bullshit fees would likely have needed to be at least $5 per transaction to have even a remote chance of breaking even.

    reply to this | link to this | view in thread ]

  4. identicon
    Anonymous Coward, 9 Jun 2021 @ 9:05am

    Would you say they gave them a pass?

    reply to this | link to this | view in thread ]

  5. identicon
    Rekrul, 9 Jun 2021 @ 9:24am

    So you can start a business and then straight-up rip people off and face virtually no penalties.

    reply to this | link to this | view in thread ]

  6. identicon
    Anonymous Coward, 9 Jun 2021 @ 9:27am

    Wow! That must've really hurt them, i dont think!

    reply to this | link to this | view in thread ]

  7. identicon
    Anonymous Coward, 9 Jun 2021 @ 9:47am

    Re:

    Only in America.

    reply to this | link to this | view in thread ]

  8. identicon
    Anonymous Coward, 9 Jun 2021 @ 10:27am

    Re:

    I don't believe the settlement exempts them from criminal penalties, which raises the question: why haven't any prosecutors filed criminal fraud charges? It seems like it would be really easy to make those charges stick.

    reply to this | link to this | view in thread ]

  9. identicon
    kallethen, 9 Jun 2021 @ 11:27am

    Guess it really is easier to ask for forgiveness than for permission...

    reply to this | link to this | view in thread ]

  10. identicon
    Anonymous Coward, 9 Jun 2021 @ 12:19pm

    Moviepass was fun while it lasted, at least as for the subscribers like me. Take pity on the investors though.

    reply to this | link to this | view in thread ]

  11. identicon
    bobob, 9 Jun 2021 @ 12:21pm

    The only solution to the lopsided treatment of copyright is to simply violate copyright law. After all, many drugs have been illegal since before and many more have been made illegal since. That hasn't stopped anyone from obtaining what they want illegally and the crushing cost of trying to force compliance is finally starting to cause people to reconsider what they are willing to consider a crime, if only because they are less willing to pay to enforce bullshit.

    If someone is producing content and doing it in a way you believe is fair, donate to them for doing so. Donate more than they ask to encourage them. Donate if they are providing some content you consider useful, even if you don't necessarily need that content yourself. (An example would be someone who is producing educational content that is at level you have surpassed, but consider valuable.)

    If they want you to pay under threat of legal consequences, find some other way to get it so that they don't get your money to continue or become even worse assholes.

    One thing I have noticed is that where I may have paid as much or more than $250.00 in the past for a reference text, the backlash against publishers has resulted in high quality content, including textbooks and technical references at levels all the way from the lowest introductory level to research level references being free for anyone to download and print (if desired).

    Make it profitable to these people and unprofitable to copyright assholes. the copyright lonny will almost always win against public interest.

    reply to this | link to this | view in thread ]

  12. icon
    nerdrage (profile), 9 Jun 2021 @ 1:02pm

    you've already got what you want, be happy

    Yeah, for instance, Netflix is producing content and selling it for what I regard as a fair price, $9/month. I "donate" to them monthly. If I feel like their content is no longer worth even that paltry sum, I can pause my account for as long as I want and then reactivate it later when the good stuff is built back up.

    At the prices these streaming services are charging, there's really no excuse for piracy. AppleTV+, $5. Disney+ $8. How much cheaper do people expect to get billions of dollars worth of stuff?

    HBO Max is kinda outrageous at $15 but look what happened, it failed, AT&T gave up and tossed it into Discovery's lap and it will be up to them to figure out the solution. They should carve off the non-Warners stuff and add it to Discovery for $10/month with the "real" HBO content a $5 upcharge. So that works out to $15 anyway but in a more palatable form. Just one of the many problems Discovery gets to fix.

    reply to this | link to this | view in thread ]

  13. identicon
    Anonymous Coward, 9 Jun 2021 @ 5:43pm

    Re: you've already got what you want, be happy

    Or here's an alternative take, I can choose not to pay for these things or pirate them out of spite for the companies that determine a lot of our national policy through bribery.

    reply to this | link to this | view in thread ]

  14. icon
    PaulT (profile), 9 Jun 2021 @ 11:13pm

    Re: you've already got what you want, be happy

    "At the prices these streaming services are charging, there's really no excuse for piracy"

    At some point, it's not about pricing but convenience. Nobody's ever going to subscribe to all services, so you have to pick and choose them individually. Not too bad if there's only a few shows you're interested in, but if you have 12 shows spread across 12 different services, you're eventually going to get tired of switching and either stop watching a few shows or just pirate.

    The end result is the same even if you tell people the piracy option is unacceptable - it's the business model that led to it, and even if you can stop people from pirating you can't stop people from losing interest. Then, when you eventually convince people to come back for a specific show, you've already trained them to give you zero loyalty and drop you again as soon as they've had their fill.

    reply to this | link to this | view in thread ]

  15. icon
    Scary Devil Monastery (profile), 10 Jun 2021 @ 1:37am

    Re: you've already got what you want, be happy

    "At the prices these streaming services are charging, there's really no excuse for piracy."

    You somehow missed the point that money was never the primary motive for piracy.

    Convenience. Owning what you bought. Ethics (as in "no way am I giving The House Of Mouse my backing"). Availability. THOSE are the big drivers for piracy.

    Price has rarely been that important. Yet whether it's because all of the copyright cult is indeed that dense or whether they're ideologically unable to understand the last twenty years worth of studies around piracy, every damn time they try to produce a solution for their perceived problem, that "solution" is always one which retains all the major piracy motivators.

    And then they whine that "you can't compete with free" all evidence to the contrary.

    The real problem is that any middleman using copyright as primary business model remains beholden to the illusion of control. That's why this conflict will remain for as long as copyright in its current form exists.

    reply to this | link to this | view in thread ]

  16. identicon
    Anonymous Coward, 10 Jun 2021 @ 7:13pm

    Re:

    Guess it really is easier to ask for forgiveness than for permission...

    Kind of irrelevant, because:
    a) nothing in the FTC's press release or proposed order says the company asked for forgiveness or admitted doing anything wrong
    b) the FTC does not grant permits for fraud (although one could argue that it would be better than the status quo: permits could have application fees, whereas zero-dollar fines for dead companies bring no money to the FTC)

    reply to this | link to this | view in thread ]

  17. identicon
    Naughty Autie, 11 Jun 2021 @ 10:16am

    Re:

    "If they want you to pay under threat of legal consequences, find some other way to get it so that they don't get your money to continue or become even worse assholes."
    I have. In the last couple of years, I have watched an absolute crapton of movies, including Soul, and not one of them generated licence fees for the studios, nor can I be rightly accused of 'piracy'. All I have to do is trawl CEX, a pre-owned DVD stall in my local market hall, and various charity shops, and I'm golden, with nothing the movie studios can legally do to me. I don't know exactly what it's called in the UK, but the First Sale Doctrine exists here, too.

    reply to this | link to this | view in thread ]


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