4 ms·

> MoviePass parent Helios & Matheson Analytics Inc. omitted and misstated its financial prospects in press releases when it touted a "sustainable" business mode

by kosei 8y ago

> MoviePass parent Helios & Matheson Analytics Inc. omitted and misstated its financial prospects in press releases when it touted a "sustainable" business model, the shareholders claim in lawsuits filed in Manhattan federal court. Is this for real? Any outsider could have seen that this model was unsustainable from the start, with the business buying tickets at full price and then selling them at an unlimited rate for $9.99. To claim ignorance here as an investor just seems negligent.

smnrchrds 8y ago
If the company actually made false statements, it would be illegal. They should have known better than to believe me is not a valid defence for securities fraud.
- hn_throwaway_99 8y ago
  True, if they actually lied, but I think saying "we have a sustainable business model" wasn't necessarily false, even if lots and lots of people thought they had no chance of success. The only way they could have succeeded is if they received sweet deals with theaters, which never happened.
  - sokoloff 8y ago
    “Business model secured.”
- kosei 8y ago
  Sure, if they falsified their books, that's absolutely illegal. But "they told me their business model was sustainable, and I believed them and gave them my money" doesn't seem like a reasonable argument either. If that's how those investors fund their companies, I've got this nifty bag of magic beans they might be interested in... For $1M, they'll grow $2M in beans, I promise!
  - smnrchrds 8y ago
    > For $1M, they'll grow $2M in beans, I promise! You are reinforcing my point. If you do that, it would be fraud, plain and simple. You would have to pay the investors back and you will spend a couple of years in prison. You can't show up to the court and say, but your honour, they should have known better. Well, you can, but it would not change the court's decision in your favour. Communications with the investors is not a place to play loose. If you say we are profitable and you are not, or we are sustainable and you are not, or we have a buyer lined up and you do not, you would find yourself in a world of trouble.
    - hn_throwaway_99 8y ago
      The argument we are making is that MoviePass's business model WAS sustainable, it's just that the model was predicated on the very risky proposition that they'd be able to get sweet deals with movie theaters, which didn't happen. Tons of people felt that their model was extremely unlikely to come to fruition, so they didn't invest. We don't know the full story of what was said, and it is possible the defendants lied about factual content, but right now it just sounds like sour grapes.
    - ryanwaggoner 8y ago
      One of those things isn’t like the others. Profitable and having a buyer are factual. Sustainable is a forecast, and you can definitely be wrong about forecasts with investors. That’s kind of the standard outcome.
  - talltimtom 8y ago
    Why not? The alternative would be that any company could outright lie to investors and the go to court with a defense of “well you honor, they believed our lies and gave us money, so really, they are to blame!” That’s just wrong.
- EGreg 8y ago
  That seems to be the defense Alex Jones’ layer used.
differentView 8y ago
How would an outsider know if they had any kickback deals and/or if they were selling usage data or generating income some other way?
- deleted 8y ago
  [deleted]
- kosei 8y ago
  https://www.wired.com/story/moviepass-second-act/ https://www.wired.com/story/moviepass-second-act/ > It pays theaters full price for each ticket, whether a member visits once or 31 times a month. It has to provide for customer service to support those 1.5 million people, many of whom have lobbed valid complaints—MoviePass issues debit cards to each of its members, and initially couldn't keep up with demand—as the service struggled with its rapid expansion. And that’s on top of the usual, unglamorous costs of running any business. (Backends don’t maintain themselves.)
adrr 8y ago
They looked at people's movie habits and wrongly applied that to an "all you can eat model". I'd guess the average person sees 6 movies a year. This is quite common. I worked at a telecom that sold 0.99 unlimited 1-day calling cards and we predicted would spend less than 1 hour on the phone. People spent an average of 2+ hours on calls which made the product lose money. And some people spent all day on the product.
- indecisive_user 8y ago
  Early adopters to moviepass were mostly movie fanatics that went to the theaters more than average. They could only ever make money if they convinced the people that hardly every go to the theaters to sign up en masse, but even at $10/month they couldn't get enough of that demographic before their cash ran out. It's not an entirely dissimilar premise as Netflix. If all of Netflix's users started streaming as much as the top quartile do, they'd probably be in a bind as well with the huge increases in bandwidth and server costs.
  - Operyl 8y ago
    That's not entirely true, since the majority of bandwidth is actually offloaded by ISPs with the Netflix Open Connect program. https://openconnect.netflix.com/en/ https://openconnect.netflix.com/en/. Sure, there'd be extra costs in distributing some of the more unused catalog to the machines, but realistically most people are going to be watching newer content en masse and not a large spread.

by kosei 8y ago

smnrchrds 8y ago

If the company actually made false statements, it would be illegal. They should have known better than to believe me is not a valid defence for securities fraud.

hn_throwaway_99 8y ago
True, if they actually lied, but I think saying "we have a sustainable business model" wasn't necessarily false, even if lots and lots of people thought they had no chance of success. The only way they could have succeeded is if they received sweet deals with theaters, which never happened.
- sokoloff 8y ago
  “Business model secured.”
kosei 8y ago
Sure, if they falsified their books, that's absolutely illegal. But "they told me their business model was sustainable, and I believed them and gave them my money" doesn't seem like a reasonable argument either. If that's how those investors fund their companies, I've got this nifty bag of magic beans they might be interested in... For $1M, they'll grow $2M in beans, I promise!
- smnrchrds 8y ago
  > For $1M, they'll grow $2M in beans, I promise! You are reinforcing my point. If you do that, it would be fraud, plain and simple. You would have to pay the investors back and you will spend a couple of years in prison. You can't show up to the court and say, but your honour, they should have known better. Well, you can, but it would not change the court's decision in your favour. Communications with the investors is not a place to play loose. If you say we are profitable and you are not, or we are sustainable and you are not, or we have a buyer lined up and you do not, you would find yourself in a world of trouble.
  - hn_throwaway_99 8y ago
    The argument we are making is that MoviePass's business model WAS sustainable, it's just that the model was predicated on the very risky proposition that they'd be able to get sweet deals with movie theaters, which didn't happen. Tons of people felt that their model was extremely unlikely to come to fruition, so they didn't invest. We don't know the full story of what was said, and it is possible the defendants lied about factual content, but right now it just sounds like sour grapes.
  - ryanwaggoner 8y ago
    One of those things isn’t like the others. Profitable and having a buyer are factual. Sustainable is a forecast, and you can definitely be wrong about forecasts with investors. That’s kind of the standard outcome.
- talltimtom 8y ago
  Why not? The alternative would be that any company could outright lie to investors and the go to court with a defense of “well you honor, they believed our lies and gave us money, so really, they are to blame!” That’s just wrong.
EGreg 8y ago
That seems to be the defense Alex Jones’ layer used.

differentView 8y ago

How would an outsider know if they had any kickback deals and/or if they were selling usage data or generating income some other way?

deleted 8y ago
[deleted]
kosei 8y ago
https://www.wired.com/story/moviepass-second-act/ https://www.wired.com/story/moviepass-second-act/ > It pays theaters full price for each ticket, whether a member visits once or 31 times a month. It has to provide for customer service to support those 1.5 million people, many of whom have lobbed valid complaints—MoviePass issues debit cards to each of its members, and initially couldn't keep up with demand—as the service struggled with its rapid expansion. And that’s on top of the usual, unglamorous costs of running any business. (Backends don’t maintain themselves.)

adrr 8y ago

They looked at people's movie habits and wrongly applied that to an "all you can eat model". I'd guess the average person sees 6 movies a year. This is quite common. I worked at a telecom that sold 0.99 unlimited 1-day calling cards and we predicted would spend less than 1 hour on the phone. People spent an average of 2+ hours on calls which made the product lose money. And some people spent all day on the product.

indecisive_user 8y ago
Early adopters to moviepass were mostly movie fanatics that went to the theaters more than average. They could only ever make money if they convinced the people that hardly every go to the theaters to sign up en masse, but even at $10/month they couldn't get enough of that demographic before their cash ran out. It's not an entirely dissimilar premise as Netflix. If all of Netflix's users started streaming as much as the top quartile do, they'd probably be in a bind as well with the huge increases in bandwidth and server costs.
- Operyl 8y ago
  That's not entirely true, since the majority of bandwidth is actually offloaded by ISPs with the Netflix Open Connect program. https://openconnect.netflix.com/en/ https://openconnect.netflix.com/en/. Sure, there'd be extra costs in distributing some of the more unused catalog to the machines, but realistically most people are going to be watching newer content en masse and not a large spread.