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Kaleidescape is Shutting Down: Interview with CEO Cheena Srinivasan

‘My prayer is there comes a buyer out of this,’ says Kaleidescape CEO Cheena Srinivasan, as iconic maker of home automation-friendly movie players runs out of money.

Kaleidescape is Shutting Down: Interview with CEO Cheena Srinivasan
One year ago at CEDIA Expo 2015, Kaleidescape introduced the Strato movie player and 4K UHD online movie library that was to become the company's flagship ecosystem for lossless video distribution, with an unrivaled platform for security and performance.

Julie Jacobson · August 20, 2016

Kaleidescape, the icon of high-performance movie players, lossless video downloads, elegant home automation integration and beautiful user experiences, is shutting down.

The brand has become a staple in virtually every high-end integrator’s portfolio. If you wanted bit-for-bit video rendering from a DVD, Blu-ray or movie download, you used Kaleidescape. If you wanted the most elegant user interface available, you used Kaleidescape. If you wanted instant access to the best scenes in any movie, you got it with the press of a button through Kaleidescape’s exhaustive curated metadata. If you wanted premium integration with a home-control system, Kaleidescape was your go-to brand.

But all that high quality came at a very steep price and Kaleidescape ran out of money.

“I never planned for this day,” an emotional Cheena Srinivasan, Kaleidescape CEO, tells me. “This channel has become family for us.”

Srinivasan says the company has come close to finding a buyer, but was unable to finalize any deal.

Kaleidescape began life 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. (See: DVD CCA Is an Innovation-Stifling Cartel.)

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.

“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.”

— Cheena Srinivasan, Kaleidescape CEO

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, Srinivasan 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.

Part 2: Goodbye Kaleidescape, Thank You for Your Service

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,” Srinivasan 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 Srinivasan 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,” Srinivasan 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,” Srinivasan, 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, Srivinasan 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 Srivinasan, having to stand before his “beloved employees” to break the sad news.

“They are family to me,” he says.

Srinivasan 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.”


From the Archives: DVD CCA Is an Innovation-Stifling Cartel


UPDATE: 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 owner's, 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. 



  About the Author

Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]

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Comments

Posted by kscapedealer on August 22, 2016

I have always had a feeling throughout the many years of dealing with Kaleidescape as a dealer that the company is full of arrogant people - as far as the sales and management people go. Support staff are very helpful and do not give me this impression.

Although I have not exchanged words with Mr Malcolm and Mr Srinivasan, I would assume the culture is set by example. They have consistently shown no interest in listening to my considerable experience in my marketplace, or in what my clients tell me they want. This was just my experience and I have enough sense to doubt my own perception as being inaccurate (is it just me?).

However, in the light of this news, one has to ask - what kind of a company/persons would reward their dealers by letting them learn of this information from the internet? As audiofn has said, we were selling units right up till not long ago, and that is morally criminal behaviour, if not legally so.

Their reliability and user friendliness is legendary. We will miss being able to sell the product.

One has to wonder if they sold players that just plays files from their own servers and a few reliable NASes instead of fighting the CCA/MPAA/Hollywood, would they be in this situation now? Ripping bit for bit is not exactly difficult. They could certainly have sold ripping hardware (speedreader2, etc.), scalable servers and players completely as separate product lines that interoperates with selected brands/hardware.

The support guys (Rusty, Tim, Andy, etc.) are really awesome. I feel sad for good people losing their jobs, if that is the case. I hope the company is bought up and the direction and culture changes significantly and dealers and customers are able to continue using the products.

Posted by TheDarkKnight on August 22, 2016

The movie industry is repeating the same mistakes made by the music industry years ago. When Napster made it somewhat mainstream to get music (albeit, illegally), the music industry decided to focus all of their efforts on fighting the future, rather than monetizing it. KScape created the best interface and sought to legally allow consumer to catalog their movies. But instead of embracing it, they decided to milk it through rising costs. Fortunately for music lovers pandora’s box (no pun intended) was already opened enough to enable consumers to take their music anywhere, anytime. Now it’s the movie industry’s turn!

Posted by Harald Steindl on August 22, 2016

Could this be a sign of people dont really get much out of owning technology compared to wanting to use it?
Much like car sharing and the like.
But besides this part I would be interested in learning how many employees they had recently and what they did all day long?

Posted by jmcdermott1678 on August 21, 2016

I think the CEO’s statement of saying “how close we were” is absolutely correct, but there is also a “too late” to be thrown in there.  They waited too long to bring in the store format, and did too little to bring it into more homes with a more modest price point.  For years when looking into less expensive alternatives for my clients, I’ll admit I thought KScape would always be there for those willing to invest in it.  In the days of streaming compressed, stripped down video, there is a market for something better.  Unfortunately they got to the party too late.

Posted by audiofn on August 21, 2016

This is devastating news to us.  We have been a dealer since almost day 1.  I feel for the employees but mostly I feel for the dealers that now have to figure out a way to navigate this mess.  It is upsetting to me that K-skape has decided to keep the dealers out of the loop and were are finding out about this from the internet.  What am I supposed to tell my clients with the little news that they have offered up?

I think that Kaleidascape owes us answers to these questions so that we can prepare our clients.

1)  Will they be refunding systems that were recently purchased?  I just took delivery of a player just this week!  I am sure I am not the only one.  What about systems that were sold 4 months ago?  I am guessing that all the dealers are going to have to buy those systems back?  I know we are taking a good hit not his one player. 

2)  How long will the store realistically be staying open? 

3)  What is the plan for us to be able to service the systems that are out in the field?  We have some systems that are up to 6 servers!  Is all that stuff just going to be tossed in the trash as soon as multiple drives fail?  Is K-scape going to get us something to be able to format drives?  What about when people need new storage and they need the cages/drives. 

If I had answers to those questions I may feel a little better about this.  Currently it does not feel very good to be able to only shrug my shoulders and say I don’t know.  Not what they want to hear and not what I want to be doing.

Posted by supremeav on August 20, 2016

this is incredibly disappointing to hear… :(

Posted by TotalControlRemotes on August 20, 2016

Living proof that a great product, concept and design are still not enough.  I have noticed a significant demand for media servers and movie collector products decrease significantly over the years.  Could this company have held on to a dying technology for too long?  Maybe, but god how good it was for those who could afford it.

Posted by TSprague on August 20, 2016

Going to take a while to digest this but for now…Good Scoop Julie!

Posted by 39CentStamp on August 20, 2016

Kalieidescape is the only reason we haven’t built our own box for clients…and now that we are forced to do that we might as well build in anonymous torrenting. Thanks, Hollywood!

Posted by 39CentStamp on August 20, 2016

Kalieidescape is the only reason we haven’t built our own box for clients…and now that we are forced to do that we might as well build in anonymous torrenting. Thanks, Hollywood!

Posted by TSprague on August 20, 2016

Going to take a while to digest this but for now…Good Scoop Julie!

Posted by TotalControlRemotes on August 20, 2016

Living proof that a great product, concept and design are still not enough.  I have noticed a significant demand for media servers and movie collector products decrease significantly over the years.  Could this company have held on to a dying technology for too long?  Maybe, but god how good it was for those who could afford it.

Posted by supremeav on August 20, 2016

this is incredibly disappointing to hear… :(

Posted by audiofn on August 21, 2016

This is devastating news to us.  We have been a dealer since almost day 1.  I feel for the employees but mostly I feel for the dealers that now have to figure out a way to navigate this mess.  It is upsetting to me that K-skape has decided to keep the dealers out of the loop and were are finding out about this from the internet.  What am I supposed to tell my clients with the little news that they have offered up?

I think that Kaleidascape owes us answers to these questions so that we can prepare our clients.

1)  Will they be refunding systems that were recently purchased?  I just took delivery of a player just this week!  I am sure I am not the only one.  What about systems that were sold 4 months ago?  I am guessing that all the dealers are going to have to buy those systems back?  I know we are taking a good hit not his one player. 

2)  How long will the store realistically be staying open? 

3)  What is the plan for us to be able to service the systems that are out in the field?  We have some systems that are up to 6 servers!  Is all that stuff just going to be tossed in the trash as soon as multiple drives fail?  Is K-scape going to get us something to be able to format drives?  What about when people need new storage and they need the cages/drives. 

If I had answers to those questions I may feel a little better about this.  Currently it does not feel very good to be able to only shrug my shoulders and say I don’t know.  Not what they want to hear and not what I want to be doing.

Posted by jmcdermott1678 on August 21, 2016

I think the CEO’s statement of saying “how close we were” is absolutely correct, but there is also a “too late” to be thrown in there.  They waited too long to bring in the store format, and did too little to bring it into more homes with a more modest price point.  For years when looking into less expensive alternatives for my clients, I’ll admit I thought KScape would always be there for those willing to invest in it.  In the days of streaming compressed, stripped down video, there is a market for something better.  Unfortunately they got to the party too late.

Posted by Harald Steindl on August 22, 2016

Could this be a sign of people dont really get much out of owning technology compared to wanting to use it?
Much like car sharing and the like.
But besides this part I would be interested in learning how many employees they had recently and what they did all day long?

Posted by TheDarkKnight on August 22, 2016

The movie industry is repeating the same mistakes made by the music industry years ago. When Napster made it somewhat mainstream to get music (albeit, illegally), the music industry decided to focus all of their efforts on fighting the future, rather than monetizing it. KScape created the best interface and sought to legally allow consumer to catalog their movies. But instead of embracing it, they decided to milk it through rising costs. Fortunately for music lovers pandora’s box (no pun intended) was already opened enough to enable consumers to take their music anywhere, anytime. Now it’s the movie industry’s turn!

Posted by kscapedealer on August 22, 2016

I have always had a feeling throughout the many years of dealing with Kaleidescape as a dealer that the company is full of arrogant people - as far as the sales and management people go. Support staff are very helpful and do not give me this impression.

Although I have not exchanged words with Mr Malcolm and Mr Srinivasan, I would assume the culture is set by example. They have consistently shown no interest in listening to my considerable experience in my marketplace, or in what my clients tell me they want. This was just my experience and I have enough sense to doubt my own perception as being inaccurate (is it just me?).

However, in the light of this news, one has to ask - what kind of a company/persons would reward their dealers by letting them learn of this information from the internet? As audiofn has said, we were selling units right up till not long ago, and that is morally criminal behaviour, if not legally so.

Their reliability and user friendliness is legendary. We will miss being able to sell the product.

One has to wonder if they sold players that just plays files from their own servers and a few reliable NASes instead of fighting the CCA/MPAA/Hollywood, would they be in this situation now? Ripping bit for bit is not exactly difficult. They could certainly have sold ripping hardware (speedreader2, etc.), scalable servers and players completely as separate product lines that interoperates with selected brands/hardware.

The support guys (Rusty, Tim, Andy, etc.) are really awesome. I feel sad for good people losing their jobs, if that is the case. I hope the company is bought up and the direction and culture changes significantly and dealers and customers are able to continue using the products.