PlayCafe Shuts Down, Returns Funding to Investors

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
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
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