Posted by Trevor Russomanno.
An Uproar Over Movies
Over the past few years, streaming service have become a prime source of entertainment for people around the world. There is so much competition in this market as each service is trying to gain more subscribers than their opponents are able to. Because of this, many people have opted to avoid going in person to movie theaters to watch new films. In an effort to regain this public outing that was liked by so many at one point in time, the company MoviePass was developed. Simply said, their service allowed users to pay a base fee of $10 per month and would be able to enjoy one movie in theaters per day for an entire month. When created in 2017, this idea seemed to be brilliant, however, things would change very quickly.
In an article posted by Denny Jacob on The Wall Street Journal, the downfall of this company is explained. When the company was created, the CEO’s J. Mitchell Lowe and Theodore Farnsworth expected it to succeed exponentially. Because of this, they devised a plan to increase the company’s stock in an effort to gain more shareholders. This, however, did not occur as the price they were charging users, became unable to sustain. This story did not stop here, though, as the two former CEOs were brought to court as charged in a securities fraud case.
In 2019, the company officially closed after multiple efforts to keep its name afloat. At this point, both men were indicted with charges regarding the idea that “…[they] knew the monthly offer wasn’t sustainable and promoted it to drive up the Helios stock price” (Jacob). Additionally, they had been charged with making false claims regarding the data analytics they would receive. This would have been another source of income for the company to cover the unsustainable overhaul they attempted to achieve. To conclude, this case can be viewed as something quite significant as many companies may do something similar to drive up their stock prices. Ultimately, though, it ends it poor outcomes for those in charge as they are faced with multiple charges and lose the short-term success of their company.Trevor is majoring in marketing and IT management at the Stillman School of Business, Seton Hall University, Class of 2024.