NewsCom Opts out of Digital Railroad Asset Acquisition
Newscom, reportedly the company that submitted their letter of intent to acquire the assets of Digital Railroad (From Bad to Better - Likely Acquisition of DRR Assets By Newscom A Good Thing, 11/1/08), has taken themselves out of play as a party interested in the final disposition of those assets. "We looked at it long and hard", said Bill Creighton, Managing Director of Newscom. "We were the company that had expressed an interest, but after we looked at the numbers - the cost to operate the system, and the fact that many of the subscribers had left, it just wasn't workable", said Creighton.
Newscom was the one company who had expressed an interest in paying cash for the assets. Another rumored company was proposing an equity stake, but that has, to date, remained a rumor. "We're no longer interested in Digital Railroad. We wanted to be, but it just didn't make sense from a business standpoint, and that's what this is about - business."
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9 comments:
I don't know much about hosting, but I'm surprised that it's so costly to host that system. If PhotoShelter can operate at a profit, why can't DRR? What kind of clunky resource-intensive sowtware are they running? Their technology platform must be really poor.
Who ever said/knows if PhotoShelter was making money off of archives? We only know they slimmed down their lines of business to conserve the last $1MM of cash they have (and will get from their VC's).
In a few months we may be seeing PS go the way of DRR.
According to Grover and others, PS is indeed making money - as well they should.
i don't think PS is not making such big money as they say...anyway PS is on the same way as DRR if they don't change their business model pretty soon
Stefano and Anonymous:
If you have some legitimate information please pass it not - but if you are just trying to stir the pot of speculation - you are doing more harm than good.
And Stefano - since you seem to be such a business whiz - I am curious why you think that PS needs to change it's business model - what changes would you suggest???
I happen to have it on good authority that PS it doing just fine.
They closed the Collection, which was costing them money, to protect their archive business that is making them money. It was a painful decision, but it was the smart thing to do. If VC money had not dried up due to the current financial crisis - then they would have kept the Collection going.
The big issue here is that DRR took so much VC money (aprox. $20 million) that they lost control / ownership of the company - and the decision to shut down and how the shut down was handled was left to Diablo who could care less about photographers and their pictures. But even though it was Diablo who pulled the plug on DRR - I feel that the creators of DRR are ultimately responsible for loosing control of their company and allowing this situation to occur.
PS on the other hand has only taken $4 million in VC money and thus the owners still control the company as they own the majority of the stock. So, this situation that many find themselves in with DRR could not happen at PS. And according to Grover Sanschagrin (one of the owners) - they have money set aside just in case something unimaginable were to happen that would cause them to close up shop - so that photographers would have plenty of time to retrieve their archives. But they are no where close to that scenario. The important thing is that they have thought about it and that they have a plan for PS customers - just in case. Which I think is very smart and responsible!
Following are a couple of posts by Grover from a thread on Lightstalkers that speak to these issues. (But you should read the entire thread to understand the context of his posts - http://www.lightstalkers.org/drr-photoshelter-and-trust ).
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Trust should be earned, and not assumed.
Some people say that we (PhotoShelter) failed because we closed down the Collection. Other realize that it was something that needed to be done to save the company.
It was not an easy decision to close down the Collection. We weren’t forced to do it because of “bad planning.” The economy simply changed, and VC funding evaporated nearly overnight.
Any company that was counting on additional VC funding for their survival is finding themselves in a very difficult situation right now.
In terms of trust – I think our management team made the right decision — protecting the archives of 35,000 independent photographers vs. letting the bank account run dry while counting on a miracle.
by Grover Sanschagrin Block | 29 Oct 2008 16:10 (ed. Oct 29 2008) | San Francsico, United States
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... I think the real issue here is maintaining control of the company, and not letting it fall into the hands of bankers or liquidation firms who don’t understand the concerns of photographers or the value of a person’s copyright.
I’m not sure that anything I can say here will convince you that we’re trustworthy, but I can tell you that in the event that something should happen that would force us to shut down, there is money set aside to fund that very process.
This means we would remain in control of the systems until the very end, and would most definitely continue to protect our user’s images just like we do today.
The good news is that we’re in no way even close to the above scenario. By shedding the Collection, we cut our burn rate significantly. We have no debt, and the revenue that comes in from the Personal Archive is enough to fund the company indefinitely.
by Grover Sanschagrin Block | 29 Oct 2008 16:10 (ed. Oct 29 2008) | San Francsico, United States |
Dear Jock,
i'm not trying to speculate nor doing more harm than good on others problems, what i was saying is based on my knowledge and understanding of the market.
Dont need to be biz whiz to see how the photo market has been changing since a while and how it's still changing, sooo fast.. i assume that you as a photographer should have already tasted it..
What PS did about closing the collection was absolutely right, that way of making money simply doesn't work..,and it's not a matter of having more VC money, if PS and DRR turned both into marketplace is just for one reason... payback their lease to become profitable faster.
Shame that DRR gambled all those money on turning the company into a stock photo company instead of improving the application to make it work better..
i personally found their way of promoting it pathethic and lying..
I wonder how so many photographers couldn't realized it before.. today just need to found a company with lot's of money involved in and make lots of advertising to reassure people that's a serious company and will never fail..!!! ( today, look at some american banks that almost nobody would have believed possible to fail...)..
I don't want absolutely scare you about PS financial health, they are just fine at the moment, true, and are investing to improve the application which is always good.. but they will need to change their business model if they want to survive to competition in the very near future.
By the way you could tell us about your experience with PS and archive, are you selling pictures with it ?
P.S. if you pass by Paris one of these days drop me a line we'll go for a drink and will explain what i suggest as business..
All the best,
Stefano
Stefano:
It is true that these are very uncertain times and anything can happen. But I think what is important for people to understand is that just because DRR failed does not mean that PS will fail. Their financial situations being very different. PS is healthy - and DRR is dead - end of story.
And I think their business model is quite good - I still do not understand why you think they need to change it?
As for my experience with PS - it has been nothing but positive. The product and service are fantastic and the PS team keep making improvements that continue to amaze and get the PS community excited about using their product. It took me all of 5 min. to create my customized website - what could be easier?! The viral marketing features - eCommerce - virtual agency - and the list goes on...
I use PS as an archive for my most important images and as a tool to help service my clients. I have used PS to facilitate sales that I wouldn't have made otherwise - it is such a powerful tool to have in ones arsenal! I have been a customer since PS started and now I couldn't imagine running my business without it.
Thanks for the invite and back at you if you are ever in Brussels.
Best,
jock
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