MoviePass Is Under Investigation For Fraud, Misled Investors

Published on October 22, 2018

Gotta love a good dose of corporate drama.

Remember when we published an article about MoviePass when it was really struggling this summer? We didn’t forget. The company is back again, but this time the drama has gone legal. The parent company behind the movie subscription service is being investigated by the office of the New York Attorney General for allegedly lying to investors about how sustainable their brand was. Yes, that’s right—someone actually believed Helios & Matheson when they said their company was sustainable.

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Although MoviePass is under investigation, it didn’t stop the company from implementing new features on its subscription app. Users may have noticed that the app began rolling out peak pricing this month. Peak pricing is the MoviePass version of things like surge pricing from rideshare companies like Uber and Lyft. These features charge app users more to use the service during a time when a lot of people are trying to use the service at once. This means you’ll likely see the price of a Friday night blockbuster go up when theaters are busy.

MoviePass says that peak prices “are determined based on movie demand and popularity.” Wouldn’t this mean that the company can just charge its customers whatever it wants? Seems a bit suspect. The company says that peak pricing won’t impact availability and pricing for every single movie. The company released a handy video about the new feature here. If it seems like all of these changes, limits and restrictions are making the service not worth your time, you’re not alone. People are beginning to lose faith in the company, just when Helios & Matheson need them the most.

Why MoviePass Is Under Investigation

MoviePass is under investigation—or rather, Helios & Matheson is—because it could have violated the Martin Act. If you’re not familiar (who would be?), the Martin Act is an anti-fraud measure meant to protect investors and financial markets from falling victim to scam by new companies. Companies that present themselves falsely, fudge information or straight up lie to gain investment can be freely investigated by the New York Attorney General, according to the act. Allegedly, Helios & Matheson violated that act when they acquired the funding for the company.

This probe isn’t the only legal trouble Helios & Matheson has gotten in with investors. In August a class action lawsuit was filed against them. The lawsuit came after they failed to mention that the company’s business model was not at all sustainable. After the company failed to make one of its payments to its fulfillment processors, the world knew just how much financial trouble MoviePass was in.

MoviePass remains afloat for now, though its impending death could come soon. May she rest in peace when that day comes.

Julia Sachs is a former Managing Editor at Grit Daily. She covers technology, social media and disinformation. She is based in Utah and before the pandemic she liked to travel.

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