- Mitch Lowe, who has been a leader at Netflix, Redbox, and MoviePass, is releasing his book “Watch and Learn” on September 6.
- He talked with Insider about the time WME head Ari Emanuel almost bought MoviePass.
- Lowe also revealed how a swanky Coachella party made him realize MoviePass was doomed.
Since the collapse of movie-ticket-subscription startup MoviePass in 2019, its former CEO Mitch Lowe has been trying to figure out what went wrong.
How did a promising app that caught the interest of so many moviegoers lead to the loss of hundreds of millions of dollars and investigations into its practices from the likes of the FTC and the SEC?
“I didn’t have the energy for all the different things I should have done,” Lowe told Insider, as he reflected on the last few years during a Zoom chat earlier this month from his home in Mexico.
Lowe has put even more thoughts into a book, “Watch and Learn: How I Turned Hollywood Upside Down with Netflix, Redbox, and MoviePass” (available on September 6).
Describing himself in the book as a “zen disruptor” thanks to his Buddhist beliefs, Lowe narrates his colorful life in which he had a front-row seat for major shifts in Hollywood. He recounts becoming an executive during the early days of Netflix after working in the home video space; making Redbox a billion-dollar company when he was its COO (2005 to 2009) and president (2009 to 2011); and, finally, leading the meteoric rise and fall of MoviePass.
It’s the latter part that’s especially fascinating to read as Lowe gives an insightful glimpse inside the walls of the startup at its best and worst times. That includes his realization that one of his executives, Khalid Itum, was gunning for his job (Itum eventually took over the day-to-day operations from Lowe), and how a deal for MoviePass to be sold to WME head Ari Emanuel was upended by the CEO of MoviePass’ parent company, Ted Farnsworth, who Lowe felt was too aggressive at the negotiating table. It’s a deal Lowe still feels could have kept the company afloat to this day.
Lowe spoke with Insider about what went wrong with MoviePass, which was recently relaunched by cofounder Stacy Spikes, and how a sobering chat with Netflix cofounder Reed Hastings led to a major wakeup call in his career.
This interview has been condensed and edited for clarity.
You say in the book something that Stacy Spikes has said, that the $10 a month price was only supposed to be temporary. Looking back, was it a mistake to keep it at that price for so long?
When I look back now I know two things I would have done differently. But the timing of raising the prices, that’s not one of them.
If you look at our forecast from November of 2017, it always showed raising the prices in March or May of the following year to $14.95. Of course, we kept putting it off. But it’s more about your sustainability. The theory that I was operating under was build a large subscriber base and learn how to monetize that subscriber base. And the difference between $9.95 and $14.95 is you would have fewer newer subscribers at $14.95. I had gone back to all our analysis at Netflix where as we lowered the price we got more and more casual users who used the service less.
But the main issue was running out of capital. Because had we not been owned by a publicly traded company we would have had a lot more time. The momentum was progressing, but just not fast enough relative to the funding. The crazy thing is, looking back at all of this, all of this occurred over a nine-month period. It wasn’t like we had a couple of years.
The thing I should have done, and this is where Stacy was absolutely right, was instituting a waiting list. Instead of accepting all and also figuring out at the same time how to get discount tickets from theaters, sell moviegoers other stuff, sell data or advertising, what I should have done was take a few customers at a time instead of everyone all at once. Stacy always told me when he didn’t have enough capital he would do a waiting list.
Was that attitude at the time because you thought the subscription climb was never going to stop? That you all were headed for greatness?
It was more every time I would ask the question to everyone that I worked with, the answer back was to just grow, grow, grow. The growth will solve the problems.
So, a waiting list is something you would do differently. You said there were two things you would change, what is the second thing?
Not be owned by a publicly owned company. [Laughs.] You have a huge expense being public, the executives spend a huge amount of time on the aspects of that rather than solving the business problems.
You mention in the book parties MoviePass threw at Coachella in 2018. This is something Insider reported on, in which MoviePass spent more than $1 million to promote the brand by throwing lavish parties during the festival. You say in the book it was something you and Ted disagreed on doing. Explain why this for you was the moment, as you wrote, when you “started losing faith in the future” of the company.
I had this experience before at Redbox in my last year or so where some of the executives wanted my job. I guess in hindsight I was somewhat naive thinking that people will always do the best they can and work as a team. In regards to Coachella that was when I realized we weren’t all on the same page. We weren’t working functionally as an organization because it was clear to me that someone who reported to me was going directly to my boss, Ted, and making decisions without involving me about things that were big.
And you’re referring to Khalid Itum.
Yeah. And believe me I don’t mind people talking to each other or coming up with ideas, I’m not a huge organizational structure person, but it comes with a certain amount of trust for that to work. There still needs to be a certain amount of trust and it undermined that trust.
With Khalid taking over the day-to-day from you, was that your decision?
I would say it was me seeing the writing on the wall and just being proactive about not waiting for it to happen. I said in the book about the organization becoming dysfunctional and the outcome of that is that there was a better relationship between Ted and Khalid than there was between myself and Ted by that time. [Insider contacted Itum for comment but didn’t get a response.] And at the same time all this other stuff was going on in my personal life. I was just finalizing a divorce, so it just seemed like the right time.
In hindsight, was the picture in front of the AMC marquee the right decision?
No. [Laughs.] The conclusion that I had come to was the olive branches we had extended to exhibition would not be affected by that because —
The tree of that olive branch was dead already.
Not dead. I always felt the economics would eventually convince the naysayers to change their opinion. At least a negotiated working relationship. But over time, I’ve learned how naive I can be when thinking that what’s good for you and is good for me leads to a deal.
In regards to the MoviePass staff — product manager Eric Jeng left the company by sending a company-wide email that called the working environment toxic, MoviePass was sued by former marketing director Madison Geery who alleged sexual harassment by consultant Bob Ellis — looking back, what could you have done as the CEO to make the staff feel more comfortable and safe?
Things moved so fast that really in the end it would have been almost impossible to create and nurture the kind of culture I wanted and believed in. I’m not blaming my team, but I didn’t have the right team working with me. Part of it was pushed on me, part of it was in the expedience of time I had to accept it, and in the right environment I would have made a bunch of changes. But there just wasn’t time to do that. I will always say, having an amazing positive culture is a whole lot easier when things are going well. It’s a lot harder when things are going downhill.
Something I truly believe in is having people willing to speak their mind and say just how bad things are. I never tried to quiet people internally, if they said something wasn’t going well I always embraced it. Not everybody in the organization supported that but I always did. But I wanted them to look at things from my perspective. If I’m going to listen to you, please listen to me and recognize that I am the boss, so ultimately, I have to make the choice and you might not agree with it.
You wrote takeaways at the end of every chapter, and in your final one you wrote: “Forgetting all the lessons and techniques and strategies you have learned is a path that can lead you to failure.” Noting the “zen disruptor” label you have given yourself in the book, how did you lost sight of that when it came to MoviePass?
I got completely distracted. Every day it was solving a small problem and not looking at the big picture. I wasn’t spending time building allies. I was spending time kind of mitigating the immediate problem, whether it was an employee or whether it was a fraud issue, or working on changing the model, or how do we attract a more casual customer. I had lost my focus on the big picture. Which really means you need lots more allies than enemies. All those lessons, all those things about building a great team I lost.
In the book you reveal that Ari Emanuel and WME wanted to buy MoviePass in 2018. If that deal went through would MoviePass have closed its doors?
I don’t know how the pandemic would have affected it, but definitely the clout of the deal would have made it work. I didn’t mention in the book the directors and other people in the movie business who realized that MoviePass could help their revenue. WME representing practically half of the major stars and directors, it would have made so much sense. I was all for it. I didn’t care what price. It would have overcome all the resistance we were getting from people in the industry like AMC. It would have been an amazing future.
But Ted was too aggressive in the negotiations.
Yeah. But it’s so hard because at that moment there were all kinds of positive things happening so it wasn’t completely crazy that his valuation should have been higher. We had won the bid to buy Landmark Cinemas, there were a couple of movies MoviePass was going to work on, things were positive. But I remember Ari telling me not to worry about anything, we’re going to get “schmuck money,” meaning that if everything works out the shareholders of MoviePass will make out down the line. [Insider contacted Emanuel for comment but didn’t get a response.] But sometimes those deals are hard to structure. The buyer is often in the driver’s seat and sets milestones that maybe are hard to accomplish. But I thought this was the thing that was going to help us overcome all the resistance.
In regards to the settlements you made with the FTC and the SEC … are you allowed to ever work at a company like MoviePass again?
I cannot talk about any of the settlements. It’s better for me not to comment on them.
How did your “zen disruptor” mentality evolve through the eras of the business you navigated through — video stores, movies-to-mail, streaming versus theatrical?
There was no real plan. No philosophical strategy behind it all. It was how I dealt with each opportunity or each moment. And the way I think about Buddhism as part of my life is that you never know what is going to result from the next moment in your life. I found over and over again, times where had I taken a legal sheet out, and put a pros and cons to pursuing this endeavor or going to that place, I probably wouldn’t have done 90% of the things that I did. And even though probably 50% of the time I could have saved myself a lot of pain and loss, I wouldn’t have become a part of Netflix, and Netflix may not have started if I had that pros and cons thing. The most crazy thing could end up being amazing, and the most amazing thing could end up being horrible.
You didn’t go to college and you never finished high school, so you really learned through experiencing things. Once you got into the business world was it a fake it till you make it mentality?
I always had a lot of confidence in my ability to learn really fast and to adapt. So it wasn’t fake it till you make it, it was more like I’m a sponge and I want to be around people who can teach me all kinds of things that I don’t know and am fascinated by.
But in the book it seemed there were moments of panic for you. Like you wrote that you “didn’t know jack shit” when you first started at Netflix.
Yeah, and what is true for all these disruptive ideas, which is just presenting a new idea for something that has been done before. If you know exactly what you need to know, likely someone else has already done it. You throw yourself in the foxhole and try to figure it out.
An example of that is the thing that really made your name at Netflix, which was your idea of putting the footage of Bill Clinton’s testimony of the Monica Lewinsky affair on DVD and making it available for subscribers. It had never been done, but you had to go figure out if it could.
Right. And this is where I think the really good entrepreneur mindset is they are able to connect the dots. To take the internet and combine it with the post office and then implement it into a new thing.
But you also had to roll with the punches because in this case Netflix mailed out thousands of the Clinton testimony on DVD and somehow a batch of porn DVDs were mailed out to subscribers as well.
[Laughs.] In hindsight, the things I enjoyed the most were the totally unpredictable things and also the lack of regular resources to do things. So in those days making DVDs, you couldn’t find in every town a place that would press DVDs nor create the masters. So the only place we could find that could stamp these DVDs was a place that also did porn.
We hadn’t slept in three days and once we got the master that they could produce we weren’t looking at anything closely because we had to mail them out. We rushed them back to the Netflix offices and it was only then we saw on the hub it didn’t say “Clinton” it said “Cliton,” which we all thought was funny until we learned that there were a couple hundred porn DVDs in the batch.
You are very candid in the book that Reed Hastings gave you some tough love. He let you go at Netflix basically because he felt you weren’t cut out to work for a company of the magnitude Netflix was aspiring for. But then you went and became the CEO of Redbox, which under your reign became a billion-dollar company. What changed for you?
What Reed said really was motivating. It was basically a kick in the pants, him saying I couldn’t handle this. It made me want to prove him wrong. In this particular scenario, I kept thinking what do I need to know and the bible that helped me was the Harvard Business Review magazine. [Redbox founder] Gregg Kaplan has a Harvard MBA so I would go into his office and he had a stack of HBR magazines. I would borrow them and read them cover to cover and I just was a sponge. I learned this analytical way of looking at things. That taught me a lot.
And also, and I wrote this in the book, I hit a wall at Redbox. My executive team that had gotten us to over a couple hundred million dollars in revenue also hit a wall. I got introduced to Clyde Lowstuter, this organizational psychologist, and he’s the one who got me to understand something. I always felt you had to be democratic and treat everybody the same, and treat them like you want to be treated, and he basically told me that’s the stupidest thing he’d ever heard. And he was right. People have different interests. They have different motivations and goals. He told me what I had to figure out was what each of my leaders wanted and motivate them to get that if they achieve their milestones and goals. And that was the secret.
Once the Redbox chapter of your life was over, why didn’t you just tip your hat and ride off into the sunset. Consult. Speaking tour. Kick back.
Some of this will sound pretty stupid, but I wanted to show that I wasn’t just lucky. Like with Netflix I was super lucky, but I wanted to show myself, not anybody else, but just for myself, that I could be successful again. I tried to retire. I tried to not work and took a four-month trip to Southeast Asia. And I tried to be an advisor, but I learned that it wasn’t fulfilling. I wasn’t in the trenches. I was basically giving advice, but whether people took it or not was up to them. And [Netflix cofounder] Marc Randolph and I talk about this all the time, our favorite moments were when we didn’t know what to do, and we all got together with smart and passionate people and figured things out. Those were the most fulfilling moments. So I just wanted to go back to that experience.
When I was offered to be CEO of MoviePass, I felt my whole career had led up to this moment. I’m totally prepared to make this work. I later learned I was not up to the game.
Stacy has relaunched MoviePass. What advice do you have for him?
I hope the best for him. I should have listened to him more often than I did, so he should just follow his own instincts, because if I did follow more of his advice, who knows what would have happened.