Julie JacobsonUPDATE: After announcing that is was ceasing operations having run out of money, Kaleidescape has since announced that it has resumed operations following a company restructure, slashing expenses and obtaining the investment needed (with no change of control). Read the full story here.
After much speculation this weekend due to a forum on www.kscapeowners.com suggesting the company is closing, movie server manufacturer Kaleidescape has confirmed it is shutting down, having run out of money.
“I never planned for this day,” an emotional Cheena Srinivasan, Kaleidescape CEO, tells CE Pro. “This channel has become family for us.”
Cheena says the company has come close to finding a buyer, but was unable to finalise any deal.
Kaleidescape started in 2000 with a movie server that enabled users to copy their DVDs, store them on a hard drive and play them through an elegant UI.
By 2005, the company had earned such a (great) reputation in Hollywood that the movie studios, as represented by the DVD CCA, sued Kaleidescape on the grounds that it enabled users to rip/copy DVDs – a mortal sin in Hollywood.
It was a long and expensive legal battle that finally ended in 2014 with a settlement that basically left Kaleidescape unable to sell its flagship DVD-copying machines anymore.
Fast-forward to 2016 and the company has moved to a cloud model, inking deals with six of the seven top studios to create an online library for movie and TV downloads in the highest resolutions available.
In 2012, Kaleidescape “set an audacious goal to compete with the Goliaths” of cloud-based content, Cheena says. “We convinced all seven studios to compare us to a mini-Amazon or Apple but for the premium market.”
It was an expensive proposition to create an online movie store, build a storage unit (server) and endure security and quality audits from the studios.
Security in particular was a major project, given the bit-for-bit downloads that only Kaleidescape offers. But the company delivered an end-to-end ecosystem that was completely locked down, and the studios bought in.
“Basically we had sky-rocketing costs,” he says. “We had the solution, but we had to spend money. We exhausted our financial resources.”
Kaleidescape tried “very hard” to raise money, he explains, but new funding didn’t come through.
Back in 2014, the company explored the potential of licensing its technology – not just the content-management platform that makes the company so famous, but the rock-solid security architecture that is unique to Kaleidescape.
That plan fell flat, but Cheena believes in the high value of Kaleidescape technology.
What’s Next for Kaleidescape?
First: Who would buy Kaleidescape?
“Anybody that feels basically that there exists a market of cinephiles – movie lovers that do not want to compromise on the experience, yet want to benefit from [content] delivery, from a cloud-based architecture,” Cheena says.
He is absolutely convinced that there is a big market of cinephiles, noting the success of Sony’s new premium Z-Series 4K TVs, which apparently sold out in the first day.
Was it a mistake for Kaleidescape to focus solely on the premium market, delivering the highest quality lossless video possible?
It’s hard to tell, but it was the luxury experience that was the company’s lifeblood, dating back to its launch in 2000 under the leadership of founder Michael Malcolm.
“We were going to do something super-great,” Cheena, a co-founder, recalls. “If we want to do something great, it has to be high quality.”
Over the course of 16 years, Kaleidescape would not compromise. Therefore, it could never get below the $4,000 price point to reach a broader market.
Moving forward, Cheena says the company is assembling a “small SWAT team” to wrap up the process.
“We’re going to take care of the customer,” he says.
Yesterday was a devastating day for Cheena, having to stand before his “beloved employees” to break the sad news.
“They are family to me,” he says.
Cheena laments the “death of an icon” and hopes that someone will resurrect the technology.
“My prayer is there comes a buyer out of this,” he says. “We want to make sure the beautiful work we’ve done doesn’t go to waste. The world deserves to see how close to the finish line we were.”
Managing director Mike Beatty of UK distributor, Pulse Cinemas comments:
Posting on Kscapeowners.com, a Kaleidescape dealer writes:
I spoke with the CEO, he did confirm that the company has effectively halted most operations, and instituted layoffs of most employees. The reasons are not really important at this point, but obviously are finance related as is the case in almost all such closings. He was genuinely concerned about the impact this will have on all K owners, but wanted to make it clear that he will do whatever is reasonably possible to try and continue some form of support for current owners. The ability to do this is contingent on many factors falling in place as the process of restructuring moves forward. Lawyers are involved as well, so naturally they will have an impact on how this all evolves, and what the company can and cannot say in the coming weeks/months, so don’t expect much in the way of answers in the short term.
As already pointed out by one member (above), the Store is still operational, so for those with stored content in the Store (i.e. purchased movies waiting to download, or Store bought movies that have been deleted from a server but available to re-download), I would take steps to download that content as soon as possible. There is no guarantee as to how long the Store will remain open, it could close at anytime.
A selection of other posts on the forum seemed to confirm the news before it had been announced:
Jim: Yes, sorry to confirm the news, but K closed their doors today and laid off all workers.
Let me also add that at this point no one outside of K, and most of those inside K, have no additional info other than what I posted above. Needless to say, it’s a shock to many people.
Let me also say, I’m not sure what can be done going forward, or what the Exec’s at K have in mind for what remains of the company, or what plans they may have (if any) to bring it back at some point, but I plan to be available to do whatever we can do to somehow continue supporting current K owners.
I also want to make it clear to anyone that recently purchased a K system through any dealer anywhere in the world, I can assure you those dealer’s had no idea this was coming. We’ll see where this goes, and I’ll be here to report on anything K related going forward.
Best to all…..hang in there…..more to follow…
Josh: A very sad day… for the hard-working and talented Kaleidescape employees most of all. I’ve been lucky to get to know at least a dozen employees there and they were ALL very dedicated, smart, and knowledgable.
For owners, I really hope that some sort of deal can be worked out for ongoing service, warranty repairs, parts, and for the ongoing maintenance of the critical Movie-Guide database. Without at LEAST those four things, the degradation in utility of our expensive equipment will be pretty rapid.
It’s the end of an era… “access over ownership” tech trend (among other things) claims another victim.
This article first appeared on CE Pro, with contributions from CE Pro Europe.