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Summary:

PlayCafe, a startup whose existence and funding we were first to report on over the past couple years, is closing shop. Co-founder and CEO Mark Goldenson sent us a post-mortem email about the online game show company tonight. PlayCafe had raised $930,000 from First Round Capital […]

PlayCafe, a startup whose existence and funding we were first to report on over the past couple years, is closing shop. Co-founder and CEO Mark Goldenson sent us a post-mortem email about the online game show company tonight.

PlayCafe had raised $930,000 from First Round Capital and angel investors, and now has returned the $300,000 that remained. The company will be in “hibernation” unless anyone wants to buy its assets.

Goldenson said via email that PlayCafe’s live game shows did not attract enough live viewers to monetize. While users stayed for 87 minutes per session, with 40 percent returning within a week, there were only hundreds of them — not enough for a business model.

Goldenson also said in a long post-mortem email to friends and associates that he felt like he missed opportunities to prove PlayCafe’s worth to partners like CBS, FreemantleMedia and GSN — which might have been potential acquirers had PlayCafe worked harder to develop the relationships.

Among other more general startup lessons in the email, Goldenson had some particular thoughts relevant to online video:

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
triviawith 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
.

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  1. Sad news, and best wishes to all employed there. The upside is that they are already trying to articulate and share the lessons they learned. At a media event I attended recently, one of the artists in the audience asked “Has the barrier to entry become TOO low?” Not sure of the answer, but the challenge of creating compelling content that will pay the bills rather than simply entertain a select group seems to be more and more on everyone’s mind. Hopefully the meritocracy that has such wonderful shows to emerge in the early years of NewteeVee will not be overwhelmed by the sheer enormity of viewing choices.

  2. Hi,

    Can only wish the best of luck to all concerned for future employment.

    However, I’m not sure I can agree that the concept of Playcafe has no potential, rather it was probably simply a lack of distribution and awareness; the stats of 87/40 kind of prove the massive opportunity.

    On normal broadcast television, multiple operators have shown potential from the Biggest of Fremantle to Cellcast, they have all shown the viability of alternative interactive revenue.

    Here’s some links:

    http://www.cellcast.in/oas.htm http://www.cellcast.tv/html/tv/interactive_tv.asp http://www.sit-up.tv/ http://www.quizmania.tv/

    People are willing to take part due to the social and engagement/entertainment basis, as they do with online casual games and poker, rather than explicit transactions or expectations of financial returns.

    Kind regards,

    Shakir Razak

  3. Playcafe was a great idea, but did basicly 0 to promote. I’d often ask what they were doing to promote n they’d act snotty about it, with a product will sell itself attitude basicly. Theres no reasonable way anyone could ever explain to me how that could have possibly spent $600k of investor money. The ppl on cam were cool, but quite frankly not even remotely pretty or proffesional enough, that coupled with video quality a $800 dollar trip to best buy would have eclipsed, made the whole thing look public accessy. The set or lack there of looked pathetic, it was basicly 2 steel racks from ikea, and a pro wrestling table match table, with some sheets thrown over em n a crummy 600 dollar walmart lcd tv on it. Nothing they did with their sound mixing etc, required little more then muting/unmuting the stereo mix button on any pc, yet they had a giant soundboard that constantly confused em. Everytime they’d get the system working, thatd last 2 weeks then they mess with it and itd fail. There were some weeks they just had to plain call it a night no game.
    Now all of this would have been a growing pain etc, had it been what it looked like, which quite frankly is something that coulda ran on any gaming pc n a semi decent server. But knowing now that this thing spent $600/$900k roughly in investor money is sickening. And quite frankly baffling to me that the investors aren’t suing , if for nothing else just to figure out where they coulda possibly spent 600k in the discovery phase. Especially when the default excuse from the ppl running it whenever there was a issue was, well we aren’t made of money, when apparently they had money to burn honestly.

  4. Not surprised. My family (and extended families) used to play most every weekday evening. We all looked forward to it.

    But, after after a short while, they made clear their political preferences by insulting the opposing interests. Listening and watching their more-than-obvious facial expressions to their liberal (read: anti-conservative) stand eventually became too much. I’m sure they turned off MANY other participants as well.

    Not smart business to “pick a political side” with your viewers unless 1) you are confident that they share the same political views as you and/or 2) don’t need those that may become offended.

    I emailed Mark, but, I guess he disagreed. I’ll never know because he never responded.

    Were they really stupid enough to think all of their “customers” thought as they did??
    Apparently so.

    Did they learn a lesson?
    Doubtful – I’m sure they still don’t get why such a great concept failed.

  5. How in the hell did PlayCafe spend $630,000? They only had 250 shows. That’s a whopping $2,520 per show! Of course, there were two shows per night, so the actual daily cost was $5,040. Mark and Dev cannot explain how their overhead was so high for an internet broadcast which used a free service provider. With only a few hard assets and a crew of interns running the show, there is no way PlayCafe cost more than $5,000 per day. My suspicion is Mark and Dev pocketed most of the $630,000.

    The #1 reason PlayCafe failed: Poor Management.
    In fact, Mark and Dev were completely hands-off. Until a business can successfully turn a profit in varied economic climates, there are no vacation days for teh operators. Mark and Dev were on vacation from Day 1.

    2: A TON of missing cash. As stated previously, there is too much money left unaccounted for by the operators.

    Finally, #3, content. Yes, Mark, PlayCafe was content-driven but you missed the point. Content has to update and improve over time or you will lose your audience. Any game developer who reads your excuses for failure – in essences, puting the blame all on content – would laugh at you. I did.

    Content is the life-blood of entertainment. Simply finding a few pieces of content the players enjoy and repeating them ad infinitum is simply asking players to leave – if not pure laziness.

    PlayCafe did not have a business model. The investors were given something which resembled a business model but I guarantee it was all conjecture and wishful thinking.

    Content-generation, in ANY form or format, would have been PlayCafe’s business model if it were properly run – which it wasn’t.

    Lastly, does anyone have Daniella’s phone number? I have a poll I’d like her to pick. :) OH! Bad Kemp.

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