Matchstick to refund everyone's money
kickstarter.com
kickstarter.com
"The product is fully functional today, with the hardware design final, tooling complete, and manufacturing ready to ramp up in the next 30-60 days"
followed six-months later by:
"We want to update the hardware" and "is being updated to support DRM" amd the ship date being moved back to now.
A lot of people backed Matchstick because it was going to be open - the plans were all available for download, it was all ready to go, and we were going to have kit in our hands really quickly. Instead we were going to get something that was slowed down by six months so that it could have closed DRM-support added. And then it's cancelled because they added support for something that wasn't even part of the original campaign!
It's not surprising that the backers are upset.
Then Kickstarter came along, and the premise was, “Gives us $X0,000 and we’ll do our best to give you product Y as a so-called-reward. But this is not a store.”
So now you’re giving them money, but you still aren’t a customer!
Because people are now using this as astro-turf marketing campaigns for products that are already funded by other investors, or as market research, or as a line item on their pitch deck to raise money from investors.
In this egregious case, the company seems to have had no intention of really entering into a “deal” with the backers of its kickstarter campaign, it was entering into a deal with its other investors, in accordance with a business plan its backers have never seen. Thus, they struggled to build DRM into the product, although DRM had nothing to do with the product they promised their backers, and everything to do with their other business dealings and plans. And now their backers are discarded like a one-night stand, but hey, here’s your own money back.
Frankly, this stinks.
If you go on Kickstarter and say you’re going to build product Y, that’s what you should do. If your business plan requires raising Kickstarter backing and then going after investors, you should say so up front and not pretend you are off to start work as soon as the project is funded.
And as for the investors, shame on you. If you invest in a company that has entered into an agreement with backers to build product Y, you should actually make them do that, or not invest in the first place.
Whatever pivot the go on to do, everyone has been forewarned that simply giving them money and receiving promises in return means very little to them, their attitude seems to be, “well, if we change our minds, we just give you your money back and do whatever we like.”
That is not a principled way to run a business. If they couldn’t build this thing with the funds raised on Kickstarter, then they shouldn’t have been on Kickstarter.
Sounds like they tried to take something to market with an investment, and returned those investments because they couldn't make it work.
Just because they didn't go to a series C and waste a ton more money doesn't make them any less "principled"
If you always needed $X+W money, and always planned to build product Y+Z, and Z sinks the whole thing, then you have misled the original backers.
I agree that if they couldn’t make the original Matchstick--the one they promised to their backers--work, they should return what they can. But if the thing that doesn’t work is a business that is a lot more complicated than the thing they put on the Kickstarter, they shouldn’t have been on Kickstarter to begin with.
Second, the surrounding events do matter. They claimed to be raising money to build a product. Then, their efforts bogged down because they tried to build an entirely different product than they originally promised.
Where I'm from, we call that lying. But, for fun, let's check out their own words:
Q: Why did Matchstick select Microsoft PlayReady ?
A: Matchstick intends to offer DRM on its platform and bring premium content to its users in the quickest timeframe possible. Microsoft PlayReady offers a mature technology, has relationship with premium content providers and is quick to deploy on the Firefox OS platform.
Funny how a solution that is so 'quick to deploy' could sink the whole ship, hey?
Let's put it differently: they raised money to build X. They attempted to build X+Y, they fucked up. Maybe they were dishonest about their plans. But in the end, they decided to give the X money back, which raises them above 99% of companies out there.
If they were principled, they would have followed through with the original product. Instead they used the money to start building something slightly different. It was a bait and switch.
Giving people's money back is saving face to avoid a huge backlash.
Things change, other groups get involved. That's just real life, hell, look at Oculus.
I'm normally the last person to get libertarian about "you agreed to this contract", but this seems to be one case where it's appropriate. Or does it need more warning that you're not buying an extant product?
In a word, no. Kickstarter explicitly forbids using Kickstarter to create and fund a company. You fund products on Kickstarter and if a company cannot deliver that product without "pivoting" or changing it dramatically, then give me my fucking money back. I'm not funding your adventures in learning how to run a business. I'm funding a fucking product.
You do realize that most HDMI chips require you to sign that you will adhere to HDCP?
I've always thought that "this thing might totally fail" was something that people understood when backing a kickstarter project.
The idea that if they fail, they have to refund everybody's contribution kindof stinks, since I've always thought kickstarter was for people trying new things (which is obviously going to have a lot of stories about failure)
Maybe there is more to the story here.
Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that."
This comment can similarly be improved by removing "Maybe you should actually read the story". Since it's merely a trope by which forum users take jabs at each other, HN can do without it.
Yes, Kickstarter projects are legally obligated to fulfill their promised rewards, or else provide refunds. It has always been this way. Really, the only difference between Kickstarter and a preorder is that the schedule is a lot looser.
As you say, the older ToS looked a lot like a pre-order which wasn't really the intention and didn't frankly make a lot of sense for a project that had some material probability of failing. After all, if the money is gone, it's not there any longer to issue refunds.
The effect is that KS can be used for projects that may fail. And quite right too, since that was its original aim (before it got saturated with companies using it as pre-sales / marketing / investment credentials / etc.
As far as I'm aware kickstarter isn't really supposed to be used as an interest free loan, which is the problem. That's not what people were funding.
This is plain crazy. Netflix can't offer their service without DRM, Intel can't even release a chip without supporting DRM. How on earth did anyone expect this to be succesful without DRM? In the kickstarter movie they even show clips of Game of Thrones and John Oliver, how did people envision the Matchstick to play that content without DRM support?
And then the craziest part, after working for 11 months with I imagine a team of at least 3 but probably more, they fail which is understandable but then they refund the kickstarter campaign. That means they actually have 470k lying around. Probably from VC funding.
So they used the kickstarter money as leverage in VC negotiations, got funded. Then worked for 11 months on something the kickstarter backers didn't ask for which creates a backlash, then they decide to drop the kickstarter. I wonder what their investors think of it "Oh yeah, the initial 17000 people that believed on our project whom we woo-ed you with? Yeah they're not happy with the direction we're going in so we're dropping them". So now it's just going to be an HDMI TV stick which to my knowledge already exist right?
(BTW the proper way this should've gone is: After 11 months Matchstick admit they got nowhere because of supplier issues (i.e. they couldnt get DRM) have run out of money and give up. The backers sue for reimbursement. Matchstick LLC files for bankruptcy, court finds no wrongdoing, no one gets money. The end and everyone lives happily ever after. Faith in Kickstarter restored)
The Sony Dash was the only locked-down "tivoized" (in the rms sense of the word) "chumby powered" device and also the only "chumby powered" device that had netflix support. These two facts are not unrelated.
Another possibility is this : http://www.faqs.org/patents/app/20120243158 although I don't see that it has been allowed yet so perhaps not a "real" patent?
I'm one of the people who would have settled for working hardware and just a basic Linux port with graphics support.
And, really, they couldn't find someone to continue working on it with all those proceeds?
If I was in their position I would consider releasing without DRM. Then after it ships and assuming people like it - if they want netflix support tell them to phone netflix everyday. I doubt netflix wants their support lines tied up.
However, after they collect the money the supplier says - actually it will cost X+N dollars. (X+N) + Y > the kickstarter amount. Perhaps they also found other issues which will cost extra money (perhaps needing to hire another developer).
The only DRM that's even remotely defensible is like what KDE's PDF viewer has: a checkbox that says "Enforce DRM restrictions". For that, we don't need anything more than a couple of flags and some copyright metadata.
Step 0: There is no "we". There are millions of individuals in thousands of companies across dozens of industries with wildly divergent goals, priorities and philosophies.
Depends who you ask. I imagine the RIAAs and the MPAAs would respond "We'll keep doing it until people stop pirating". Otherwise the response would be along the line of "Until they realise it doesn't stop us pirating anyway"
People will always pirate digital goods, so there'll always be DRM.
Personally I'd be fine with transcoding videos on the fly from another machine to remove the DRM, but I suppose that defeats the purpose of a small hdmi stick if you have a full powered desktop running in the next room over. But really most of the stuff on my local netowrk doesn't have DRM and I don't do a whole lot of online streaming beyond Amazon Prime and I have an app on my TV for that. I suppose all I really wanted was screencasting without having to pay $100 for a WiDi adapter. Oh well.
But at least I'm getting a refund, so I don't suppose I have any ill will for the team. I have backed projects before that did a magic trick with my money - one shoe KS took $130 for a pair of boots and kept up a sham for almost a year, even claiming that production had started and we would see our boots in a few weeks (it was always just a few weeks away), and then abruptly vanished. So I hope whatever project the Matchstick team works on next pans out better for them.
That would probably be either illegal or against the ToS of the streaming service they were trying to add.
They should as it's one of the remedies Kickstarter requires projects to pursue should they be unable to complete the project and fulfill the rewards:[1]
> If a creator is unable to complete their project and fulfill rewards, they’ve failed to live up to the basic obligations of this agreement. To right this, they must make every reasonable effort to find another way of bringing the project to the best possible conclusion for backers. A creator in this position has only remedied the situation and met their obligations to backers if:
> [other required remedies]
> * they offer to return any remaining funds to backers who have not received their reward (in proportion to the amounts pledged), or else explain how those funds will be used to complete the project in some alternate form.
[1]: https://www.kickstarter.com/terms-of-use#backer-creator
Hyperbolic imagery aside, the expectation is already there. They can't just walk away from the project with a shrug should it fail: they have a contractual obligation to demonstrate that they did not squander their funds and to provide the best possible outcome to their backers. If they fail to do that, the terms of the agreement allow backers to seek legal action:
> The creator is solely responsible for fulfilling the promises made in their project. If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers.
In this case, Matchstick's project creators have assessed that they have enough money to pay everyone back, so they're doing exactly what the terms of the Kickstarter agreement between backers and project owners have obligated them to do: provide the best possible resolution to backers by, in part, returning the money.
Another project may determine that they can't pay everyone back: in that case, they're subject to the requirement that they "demonstrate that they’ve used funds appropriately and made every reasonable effort to complete the project as promised". If they can't do that to the satisfaction of every backer, they're still on the hook. That's why a lot of times, project failures will have a note about providing a refund to anyone who requests one instead of Matchstick's strategy of proactively refunding everyone.
https://www.kickstarter.com/projects/matchstick/matchstick-t...
I wonder if there is more to the story. Maybe the company is pivoting.
To be honest, I would be quite surprised if anyone receives any money back. The "everyone should have their money back by the end of September" thing seems quite long. Having seen some other, very similar scenarios play out, to me it sounds like they did something else with the money and are trying to stave off the consequences of it or are trying to buy time hoping for a miracle that will allow them to replace it.
The DRM that apparently blew up the project wasn't in scope when I backed it. This was supposed to be an open source, No-DRM stick. After they had everyone's money, they decided to build a Chromecast clone instead. Classic bait-n-switch.
Like Sanddancer says, it's just feature-creep that scuttled the project, not a malicious misrepresentation of the product.
It's more like you pre-order a pocketless shirt, I'm not able to retrofit a pocket onto it and so I refund your money.
In that reply I explain what I felt I was baited with and what it was switched for. Maybe you could explain how you feel the term should be used, since you feel my usage was incorrect?
If so, I agree with that---hence my point that it would be easier to work.
1) get a refund, lose the ticket you'd been lucky to get at face value back into the pool, probably never to be seen again for the same price. 2) hold onto your ticket, wait a year, go see the gig
It therefore resulted in $millions being held by the organisers for over a year - there are extremely low risk ways to gain a meaningful profit from a large amount of capital. Intentionally or not, and whether or not it was invested by them during that year, this situation turned out to be a great way to get a huge, zero-interest loan of said capital.
I'm not sure if there are laws that prevent this kind of thing from happening, but it's certainly easy money in theory.
Obviously if the starting capital is less, you could potentially notch up the risk of the investment etc, but that's a very meaningful profit for most companies I should think. At the least it's a very valuable individual's salary for a year.
So what could be happening here is that a big company was the target audience all along. Raise a bunch of money with a "disruptive" piece of hardware, garner hype, get some venture money, return the Kickstarter cash.
That seems totally plausible to me. To the VCs these guys look like semi-sure bets to get gobbled by MS or Sony or Netflix or, hell, anyone looking to enter this space.
I was baited with this: "The product is fully functional today, with the hardware design final, tooling complete, and manufacturing ready to ramp up in the next 30-60 days. We also have fully functional sender apps for Firefox, Chrome, iOS, and Android - you can Fling from any of these platforms on almost any laptop or mobile device." [1] And this: "Hardware is done! It was actually previewed in June-" [1]
That expectation was switched for this: "After struggling with the DRM development based on Firefox OS for most of this year, we realize continued development of DRM, though showing early signs of promise, will be a long and difficult road. We have come to the conclusion that we will not be able to reliably predict the completion date of the DRM development without significantly more research, development and integration." [2]
So I donated to a project that was 30-60 days away from start of manufacturing and instead found my donation being used to fund development of something else. Why is this not a bait-n-switch? If I'd known what they were going to build, I would have just bought a Chromecast back in October of 2014.
[1] https://www.kickstarter.com/projects/matchstick/matchstick-t...
[2] https://www.kickstarter.com/projects/matchstick/matchstick-t...
And I am sooo deceived now: they can't handle DRM? NO PROBLEM! They are running late? NO PROBLEM! Just get me what you promised me whenever you get there! I wish I was offered a choice, here, instead of being forced to take my money back.