Brought the European unlimited movie subscription model to the U.S. with a clever workaround. Used branded debit cards to bypass theater resistance, letting customers see movies without theater cooperation. Beta tests drew 19,000 signups in days.
What Changed
New majority owner dropped pricing from $50 to $9.95/month to chase growth. The math was catastrophic: they lost money the second anyone saw two movies. Selection bias kicked in — only heavy moviegoers signed up, not casual viewers. Burned $200M in six months while lying to investors about profitability.
Where it Landed
Shutdown in September 2019. Parent companies filed Chapter 7 bankruptcy. CEOs Lowe and Farnsworth pleaded guilty to securities fraud, facing 5-10 years in prison. Founder Stacy Spikes bought assets and rebooted with sustainable pricing.
The Principles
1.
Unit economics aren't optional. If you lose money on every transaction, volume just accelerates the crash.
2.
Selection bias kills pricing experiments. Gym memberships work because gyms are painful; unlimited movies attracted power users who actually used them.
3.
Lying to investors doesn't save you. Farnsworth and Lowe destroyed their reputations and freedom trying to prop up a broken model.
Builder's Takeaway
3 warning signs your pricing will torch the business:
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You lose money the second a customer uses the product twice
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Your model assumes people won't use what they're paying for
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You're hiding the truth from investors to buy time
