.tv 10 Lessons from a failed online TV startup

[localexperts]

http://venturebeat.com/2009/04/29/10-lessons-from-a-failed-startup/

A friend of mine just posted this on my FB page. I found it interesting, especially 2)

"2. Content businesses suck (or: do it for love and expect to lose money). Producing quality content every day is a herculean task, especially live. The idea of creating both the content and technology for PlayCafe seemed achievable, but TV networks focus on distribution and studios on production for good reason: both are hard. Dev and I knew we were production novices but we thought live-filming a pretty girl delivering trivia with one camera guy was simple enough. We were wrong; the business was beyond our pay grade.

Watch American Idol, the country’s most popular show, and you’ll see how often they screw up despite massive resources: sound and video fail, hosts and contestants stammer, camera angles are wrong, stretches get boring, and it happens despite a reality format that is simpler than live sports or news. They also don’t have to deal with DOS attacks, server downtime, scalability, or customer support like we did.

I would advise any entrepreneur or investor considering content to think twice, as Howard Lindzon from Wallstrip warned us. Content is an order of magnitude harder than technology with an order less upside; no YouTube producer will earn within a hundredth of $1.65 billion. This will only become more true as DVRs and media-sharing reduce revenues and pay-for-performance ads eliminate inefficient ad spend, of which there is a lot. The main and perhaps only reason to do content should be the love of creating it."

Discuss.

 

[equity78]

Read the whole article on Venture Beat, Thank you for posting Local. Did you understand some of the comments at the end who ripped him saying he would fail again and investors beware. They gave no real support to their criticism, typical.

 

[localexperts]

Probably his version of Screech - if you know what I mean.

 

[GoneWalkabout]

I found the article compulsive reading. Thank you for bringing it to our attention.

Sadly, although I felt some sympathy for the writer, I also think he may have been doomed to failure before he even started. His tone suggested he may have been a 95%er. Great idea, great belief, great execution, then decides to pack because it in because it didn't get to the 'millions' point quite fast enough.

I actually felt more sorry for his investors - but they must have been very blinded by ignorance. Why would you invest in someone who didn't even have his own money invested in his own idea - just other peoples!

The guy was never going to lose anything personally - just his momentary kudos!

The sharper the edge - the sharper the cut!

 

[localexperts]

Sadly, if anyone followed the last crash. I know companies making millions in revenue shut down because it was too difficult to turn them into billion dollar companies. A 10 million annual revenue company to most VCs is a failed company.

 

[Green Moon]

Sadly, if anyone followed the last crash. I know companies making millions in revenue shut down because it was too difficult to turn them into billion dollar companies. A 10 million annual revenue company to most VCs is a failed company.

This is so true. But the same goes for divisions of big companies, they will often shut down a subsidiary or division that doesn't get big enough fast enough, even though there are enough revenues to make a small independent company drool.

Of course, that is why, in part, you find entrepreneurs creating new businesses. I know a number of successful small businesses that would be considered "failures" by VCs or Fortune 500 companies.

 

[gr8trfoo]

i thought this was a great read, especially if one follows all the links to where there are some real interesting stuffs.

one thing i didnt like was it seems short on hard numbers. for instance writer says

It was a huge undertaking, but despite great engagement — users watched for 87 minutes per session and 40 percent returned within a week — we didn’t reach enough users

well how many users did they have?!

he later reports trouble with his marketing plan but again it doesnt drill down to the meaningful.


his biggest trouble seems to have not known what business he was getting into. he admits to his team being "production novices". exactly what business did he think he was getting into??? seems like maybe it was the "find some venture capital" biz.

This is so true. But the same goes for divisions of big companies, they will often shut down a subsidiary or division that doesn't get big enough fast enough, even though there are enough revenues to make a small independent company drool.

when you saying "shut down" and "enough revenues to make a small independent company drool" dont you mean that these divisions were still losing money despite steady revenues? why would anyone shut down a division that was earning a profit?

as for vc's shutting down a company it seems clear that they shut off the money tap that keeps the company alfloat. otherwise how would they have the power to shut down a company?

 

[localexperts]

In most venture backed companies, the VCs have every board seat but 1 or 2 so they can do whatever they want because they have the shares and board control. Remember when VCs come on board, they hold preferred shares of stock and in some cases each class of stock has a board seat. The VC controlled board then picks their own CEO.

And if a company is shopped and there is no interest, instead of firing the people necessary to make the company profitable, the VCs will shut it down.

 

[gr8trfoo]

In most venture backed companies, the VCs have every board seat

Any enterpriser that gives up control of their company gets what they deserve. Of course if you need the money then you need it.

BTW - did anyone notice what the URL of this guys company was - looks like: PlayCafe

No small wonder that their marketing plan sucked. I guess the VCs got what they deserved in this case.

I think the main lesson is that anyone who wants to grow a succesful business needs to get the right people in place. The first thing the right people will probably do is throw out the plan. I've heard it oft said those who fail to plan plan to fail. However once you have a great plan its advisable to not let it get in the way. Ike, arguably one of America's all time great planners, once said "plans are mostly worthless but planning is essential". Mike Tyson concurred with that sentiment when he said "Everyone got a plan... till they get hit in da mouth".

At least this fellow has taken a good and honest look at the failure. He admits he underestimated the production side, which to me is the very core of this business. But if there users were in fact sticking around for more than an hour and coming back frequently then it couldnt have been all that bad.

He also admits underestimating the marketing needs. In this business there should have been at least 2 marketing depts - one for ad sales and one to attract users. I suppose if they could have convinced users to pay2play the games (poss if there were cash prizes involved and the games were "of skill" and not soley "of chance") then they could have foregone ad sales but then again why? Personally I think users LIKE ads. Some ads at least. In fact if there are no ads I think people are suspicious.

Its too bad they couldnt keep it going. Seems like they'd gotten over some rough ground and had made valuable discoveries. No one is closer to success than when they are about to give up.

 

[localexperts]

Most VCs won't give you the money without board seats.

I only know of one startup who took VC money that didn't have a single VC on their board.

 

[bigdipper]

Any enterpriser that gives up control of their company gets what they deserve. Of course if you need the money then you need it.

BTW - did anyone notice what the URL of this guys company was - looks like: PlayCafe

No small wonder that their marketing plan sucked. I guess the VCs got what they deserved in this case.

I think the main lesson is that anyone who wants to grow a succesful business needs to get the right people in place. The first thing the right people will probably do is throw out the plan. I've heard it oft said those who fail to plan plan to fail. However once you have a great plan its advisable to not let it get in the way. Ike, arguably one of America's all time great planners, once said "plans are mostly worthless but planning is essential". Mike Tyson concurred with that sentiment when he said "Everyone got a plan... till they get hit in da mouth".

At least this fellow has taken a good and honest look at the failure. He admits he underestimated the production side, which to me is the very core of this business. But if there users were in fact sticking around for more than an hour and coming back frequently then it couldnt have been all that bad.

He also admits underestimating the marketing needs. In this business there should have been at least 2 marketing depts - one for ad sales and one to attract users. I suppose if they could have convinced users to pay2play the games (poss if there were cash prizes involved and the games were "of skill" and not soley "of chance") then they could have foregone ad sales but then again why? Personally I think users LIKE ads. Some ads at least. In fact if there are no ads I think people are suspicious.

Its too bad they couldnt keep it going. Seems like they'd gotten over some rough ground and had made valuable discoveries. No one is closer to success than when they are about to give up.

there's a LOT of wisdom in your post Finster... i think it does come down to the people. some people can get things done and some can't/won't. it was brave of this gentleman to admit his shortcomings and where they may have missed. as you alluded to - i wonder what their plan was from the get go? i couldn't agree more with your last sentence too...

 

[gr8trfoo]

Most VCs won't give you the money without board seats.

I only know of one startup who took VC money that didn't have a single VC on their board.

To my mind it would be smart to get a couple of VCs involved if only for their experience and connections regardless if you need the money or not. But I wouldn't want to hand them ultimate control. A board seat or 2, yes, absolutely, no deal if they didnt. The majority vote, no way!

I'm not saying I'd always have to have the majority vote in my own pocket. Having a decent number of independent directors is important and if they are truly independent then their vote could swing. Hopefully they'll earn their stipends and speak up when the leadership is about to make a very bad step and also be able to articulate why.




---------- Post added at 06:21 PM ---------- Previous post was at 06:10 PM ----------

there's a LOT of wisdom in your post Finster... i think it does come down to the people. some people can get things done and some can't/won't. it was brave of this gentleman to admit his shortcomings and where they may have missed. as you alluded to - i wonder what their plan was from the get go? i couldn't agree more with your last sentence too...

Thanks. I've been thru a couple rodeo's already, have the grey hairs to prove it. I always belived I could manage everything on my own and it seems like I've always been wrong about that. Maybe I've finally learned something.

The description of their site reminds me of a cable show on a few years back called "Midnite Money Madness". I'm almost certain this fellow or someone closely associated had seen it.

To call MMM a "skill-based" game is stretching it but technically thats what they tried to portray. Viewers would call in on a 900 line (paying $1.99) and they would then try to solve the on air puzzle, usually something so apperantly and ridiculously simple you couldnt help but give it a try. Of course the devil of it was the simplicity because there could be a fairly large number of possibly correct answers and no logical way to know if any of your "skillful" guesses were the one correct one. "BZZGGGHT, Sorry, next caller..." The prizes were in the few hundred dollar range.

I later met some of the producers in Vegas at NAPTE and it turns out they have versions of this game for almost any country and language. If you have a tv station or cable network with available airtime they can monetize it.

 

[localexperts]

To my mind it would be smart to get a couple of VCs involved if only for their experience and connections regardless if you need the money or not. .

LMAO. VCs say they produce connections. Not true - my experience with four VC backed companies.