Goodbye Kaleidescape, Thank You for Your Service

Kaleidescape took big risks fighting Hollywood, and then embraced the establishment that tried to destroy it, creating a one-and-only movie download service, always focused on a premium user experience.

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The news that Kaleidescape is shutting down brought sadness to the home-technology integrator community. The “death of an icon” is what Kaleidescape CEO Cheena Srivinasan called it, and rightly so.

There have been scores of comments about the closing, most of them sweet and nostalgic, sprinkled with the predictable I-told-you-sos.

The winning comment comes via Facebook from Mike Wood, long time A/V editor and PR pro.

“Ironically,” he writes, “there will be a lot of people in the film industry who will be upset to find out that their Kaleidescape systems are now defunct.”

The film industry tried its best to kill Kaleidescape, starting in 2005, when it sued the five-year old company that should have been only the tiniest blip on its radar. That’s when the studios, as represented by the DVD CCA, filed a lawsuit against the tiny, yet highly visible, maker of movie servers.

It was a violation of the DVD CCA license to allow the copying of protected DVDs, the secretive, cartel-worthy organization declared. After nine grueling and expensive years fighting the lawsuit, Kaleidescape agreed in 2014 to cease production of the allegedly infringing DVD servers.

We can’t say for sure that the DVD CCA (“Hollywood”) eventually put Kaleidescape out of business, but it was certainly a significant contributing factor.

The irony is this: The reason that start-up Kaleidescape got the attention of studios in the first place is that all the big Hollywood producers, actors, directors and other A-listers all owned Kaleidescape systems! They all wanted the premium movie-watching experience that only Kaleidescape provided.

And now they won’t be able to enjoy that experience, thanks in part to the crippling lawsuit they inspired.

“The idiocy and ignorance of Hollywood has cost our industry so much and ultimately only hurt our channel,” says one integrator commenting on Facebook. “This is a perfect example of the needless casualties that Hollywood has brought about. And for what? What good does this gain Hollywood?”

We can argue all day long if it was Kaleidescape’s pride – only the very best experience would do, regardless of price – that led to the company’s demise.

“[T]hey seemed to have a brilliant product at sky-high pricing,” says a consumer posting on meridianunplugged.com. Keeping the “brilliant” while losing a bit of the “sky-high” would have been ideal but we can always say that about high-end products.”

Setting Kaleidescape’s business model aside, we can say for certain that the DVD CCA lawsuit had a devastating effect on the company.

Kaleidescape Played by the Rules

Kaleidescape was the only one on the planet that played by the spirit of the rules, locking down their ecosystem to ensure digitized content could not leave the premises. They put a high price on their products (more than $20k at the time of the lawsuit) to self-qualify law-abiding DVD-copying consumers.

All the while, consumers could enjoy $20 downloads from overseas that allowed, indeed encouraged, the illegal ripping of rented or shared DVDs.

I bet they’re sorry now.

We don’t quite know what will happen now that Kaleidescape has closed shop. Someone will buy the assets at least – maybe the brilliant interface, maybe the rich library of movie metadata including hand-curated bookmarks to the best scenes in every title, perhaps the end-to-end security architecture that Hollywood embraced in Kaleidescape’s dying days, along with the relationships that Kaleidescape (ironically) won with all seven of the major studios. Six of them today supply titles, with bit-for-bit rendering up to 4K, to Kaleidescape’s online store.

Kaleidescape could have taken the easy way out a few years ago, grabbing its money and closing the doors, blaming its demise (rightfully) on Hollywood and the DVD CCA.

But the company persevered, fast-tracking its business to an online content model, which everyone can agree was long overdue.

As Kaleidescape CEO Cheena Srinivasan tells me, the next phase for the company was “audacious.”

A few years ago, he intimated there was no other choice than to get Hollywood to embrace a premium online model and to select Kaleidescape as its partner.

It seems nothing short of a miracle that Srinivasan and team were able to crawl back to studios and get them to agree to an online library that would allow users to download bit-for-bit content at the same price as any other service.

“I had this idea,” Srinivasan recalls. “Befriend Hollywood, be their best friends. From the DVD days, we have always been known as ‘the best.’ There would be no compromise.”

He knocked on a whole lot of Hollywood doors before Warner Bros. agreed to give its former nemesis a chance. The Kaleidescape Store launched in December 2012, with Warner Bros. its only supplier.

The other studios fell into line over the next couple of years. Six of the seven majors were on board, and Srivinasan says the seventh was ready to sign.

At the end of the day, the studios agreed with Kaleidescape’s premise that consumers craved — and studios needed — a high-quality download service to replace the dying video stores.

“We built a movie store second to none,” Srinivasan says.

But it all came at too great a cost. The time it took to close deals with the studios, coupled with the onerous R&D that would satisfy Hollywood’s rigorous security and performance standards, took a toll on Kaleidescape.

“Basically we had sky-rocketing costs,” Srinivasan says. “We had the solution, but we had to spend money. We exhausted our financial resources.”

The industry owes Kaleidescape a debt of gratitude. No matter its faults, the company laid the groundwork for an exceptional integrator and customer experience.

I think we can all agree with Srinivasan's greatest wish for Kaleidescape: “My prayer is there comes a buyer out of this. 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.”

Amen.

Looking Back

Here’s what I wrote back in 2012 in a blog titled, “Can Warner Bros. Save Kaleidescape?

Warner Bros. needed a test bed. Kaleidescape was a good one.

Assuming the experiment works out, the studio will look for bigger opportunities to sell high-quality downloads to the masses. Once that happens – and unless Kaleidescape goes way down-market – Warner Bros. really won’t care about the niche market that Kaleidescape serves so well.

Neither will other studios.

So here’s my prescription.

Kaleidescape needs to step in with a lower-priced solution that employs its stellar user interface but compromises on video quality: think Vudu HDX on steroids with the Kaleidescape GUI.

Sell a multiroom ecosystem for less than $1,500. Gain some critical mass and the attention of more studios, and then use those relationships to continue to improve the top-of-the-line movie servers that have made Kaleidescape famous … and infamous.

About the Author

Julie Jacobson
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Julie Jacobson:

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson

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