Wowio Deathwatch

By | Saturday, January 31, 2009 5 comments
Chris Crosby recently tweeted that Plantinum/Wowio still owes him money from the second quarter of 2008. Plantinum President and COO Brian Altounian responded by saying that they're still "working on it... It's got to come from investors since revenue dollars are still low. Investors don't like old debt."

So what he's saying is that he can't pay off Chris and however many other creators he owes because he's screwed up enough that potential investors think he's a bad risk, and potential advertisers think his products aren't worth advertising in, and his potential customers aren't buying his stuff.

I'll add to the equation that reporting from Alexa, Technorati, and Google all point to a general decreased interest in Wowio...

(Note that Google's chart, by the way, has to change scale in mid-2008 because numbers had dropped so significantly.)

I don't know how much money is owed to all the creators by Plantinum/Wowio but at this point I'm pretty sure they're not going to get paid. Keep in mind that Plantinum's staff has been working on minimum wage since last October as it is. Frankly, I can't understand how they're able to remain in business if they can't pay their employees beyond minimum wage and they can't pay off their debts and they don't have any money coming in.
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Talk about talking out of both sides of one's mouth! One week ago, you blog about the changes in Diamond's distribution model that will put the smaller independent publisher out of business and then today, in one blog you both a) root for an independent publisher's demise and b) knock an online distribution company that is trying to provide a fair and sustainable alternative to that old school monopoly. You are typically uninformed and completely illogical. If you think that the rules of business today and into the future resemble anything of the past prior to September, 2008, you are living under a rock.

Investors and financiers are looking at a playing field that is entirely different from any other time in history. Their standards are much higher because they can afford to pick through numerous undervalued opportunities. Read a finance board once in a while. Enter the stock ticker symbol of any public company and look at its value today compared to a year ago. Look at it's 50-day and 200-day moving average and I can guarantee you will see a swift slope southward. So, yeah, investors can be picky about the companies they look at and they typically don't like old debt. Ford Motor trades at less than $2/share, Apple is at 50% of its 52-week high as is Google, Microsoft and more than 95% of all stocks currently trading. We've been a public company for exactly 1 year (and during the worst year in US stock market history) and we are not a blip on anyone's radar. Yet we seem to be a constant target for this industry's vitriolic critics. Instead of rooting for a company that is trying to expand horizons and reach to advance in this industry that is monopolistic in almost EVERY area from publishing to distribution, you and others have continued to root for our demise. You must feel really good about yourself.

As for the Wowio model and issues with old payments, again, you have no idea what you are talking about. Platinum purchased Wowio in June of 2008. Q2 royalties were earned and the liability was incurred BEFORE our purchase. We reoriented the business model to make the business sustainable. Who do you think was paying publisher royalties during the two years prior to Platinum's purchase? Advertisers? Sponsors? NO! They came from Wowio founders and initial investors who, after two years, decided they didn't want to shell out royalties without an income stream. They had two choices: be bought or file bankruptcy. If they chose #2, none of the publishers would ever get paid a dime. By being bought, they increased their chances to prolong their business life and get those publishers paid. Our change in the business model has been to pay the publishers when a book is paid for, either by a reader or a corporate sponsor. Maybe you haven't noticed that the last 6 months of 2008 have seen record declines in advertising and consumer spending, among many other financial indicators. So, yeah, it's taken us a bit longer to get those publishers taken care than ANY of us expected or have wanted. But we are still trying to do the right thing.

But don't take ANY of that into consideration while rooting for our demise. The State of California has the 8th largest GDP in the world and is weeks from being completely insolvent. Are you rooting for it's demise? Are you leading the cheers for the fall of housing prices and layoffs and an increase in bankruptcies, foreclosures and unemployment? How about standing apart from the crowd and actually rooting for companies to win. Root for companies in this industry you love so much. Support innovation. Support outside-the-box thinking. Support those who are trying to make a difference and survive this horrendous economy. No, it's much easier to do what you do - talk out of both sides of your mouth as long as it bashes SOMEBODY.

Thanks for taking the time to respond, Brian.

I was actually a big proponent of Wowio back when I first heard about it in late 2006. At a conceptual level, I think it's absolutely fantastic. I continued rooting for Wowio up through the time when they were taken offline for the month of July '08. I was, in fact, excited once the site came back online and was blogging about it that very day.

At the time, I was disappointed that the advertising model that had been used previously was no longer sustainable, but I understand the need to change. Where I started seeing problems, though, was in charging for public domain material that was pulled from existing sources online that were providing the same material for free. That's certainly legal and I can't fault that, but it strikes me as a questionable practice at best.

And I do understand that much of the debt was incurred by Wowio before you purchased it but, speaking as someone who's got an MBA and does understand a thing or two about business, it's a superiorly bad business decision to either A) buy a company which owes any amount of debt with no plan for repayment, or B) buy a company with no knowledge of the debt it already has. I'm not familiar with the due diligence that may have been done on your part, certainly, but the only other option I'm seeing is amoral and I'd like to give you the benefit of the doubt that you're not deliberately trying to ruin people.

Yes, all markets are down right now and I fully understand that tough, often cold, business decisions need to be made. But this all came about after Plantinum's decision to buy Wowio. It came about after Wowio re-opened its doors after that month-long hiatus. Yes, Wowio's numbers went south along with everybody else in September, but they had already been heading that direction for over a month. That wasn't because people knew the economy was going to tank; that was because people saw the Plantinum-run Wowio and didn't like what they saw. There was less content and less reason to partake of what remained.

I said very clearly earlier that I think we DO need more online distribution methods in place. But I don't think bad business practices are a valid means to achieve that end. Yes, online content distribution is a comparatively new market and there are going to be people conducting experiments that either fail outright or need to be continually adjusted and modified. But there are still basic business practices that don't change, and taking on debt without having any method of paying it off is almost certainly not sustainable, regardless of what market you're in. That's just bad business, and it's one of the reasons the whole economy is having problems right now.

I understand that you wouldn't have had the cash on-hand to pay all the creators everything they're owed immediately after purchasing Wowio. But we're over six months out, and I have yet to hear of anyone receiving even partial payments. There's been no communications about what sort of repayment plan(s) might be in the process. There's been no evidence at all that any efforts have been underway to rectify the situation. Just vague "We're working on it" notes, and then only when someone complains. That is, plain and simple, bad business. It inspires cynicism and distrust, and undermines whatever branding you might be trying to achieve otherwise.

For what it's worth, I don't wish for Wowio's or Plantinum's demise. I'm not looking for someone to pounce on for the sake of a blog post. (Most of what I write here is, I think, rather optimistic, in fact.) I want diversity in comics and in comics distribution. But from a business perspective, I simply do not understand how a business run so poorly can continue to operate. I call it a "Deathwatch" not as an ideal, just as an observation of what I see already happening.

Again, a great concept, but one that's been very badly managed.

I get it, Sean. I don't really believe that you wish anyone's demise and I appreciate the tone of your response. I understand how things can look from an outsider's perspective although, as is often the case, without the complete picture, it's mostly just circumspection and assumption that lead to judgment calls and second-guessing. Unless you are sitting in my chair or attending our Board meetings, it really is just armchair quarterbacking.

As an officer in a public company, there is only so much I can say about specific business decisions but let me say that when the decision to acquire Wowio was made, there was an extremely clear path to paying off that debt. At the 11th hour, that path took an unforseen detour. Of course, in hindsight, this was at the beginning of the collapse of the financial markets so it is now understandable but at the time, it was quite a blow. Because I still believed that Wowio was/is an absolutely amazing opportunity, based on a technology built by an incredible team (former NASA engineers, by the way), I felt it was worth it to reconfigure the acquisition and pursue an alternative funding source to repay the debt. As I mentioned before, it has been nearly impossible to raise funding for ANYTHING over the last 6 months.

We continue to pursue financing alternatives. You are right that we have not been good about communicating and I take the blame for that. I don't think it's a good practice to give false hope and our folks want a specific date of payment. I hate giving dates without being absolutely sure I can hit them - I don't think that's amoral or bad business as you claim. I think it's a more respectful position to take. I can say this (although I know it doesn't give any specifics), this debt is high on our list of priorities to pay and we are making every effort to get it taken care of.

We are starting to see things turn a little for the better - we do think that 2009 will be a landmark year for the company. To that end, we still believe that we present a tremendous value proposition for an investor or financier looking for a broad entertainment play and we hope to see some players come to the table in the very near future. I am hoping the story of Platinum is going to be one of survival and redemption. We aren't the evil corporate suits that we have been painted out to be - our goal has always been to create an opportunity for great success for as many people who wouldn't otherwise have the chance. Our team has put everything at risk to make this dream a reality. To have that effort maligned by people who don't know the complete story is an injustice to that sacrifice. I appreciate your optimism and clear thought on subjects in the industry - when it comes to us, I wish we would be given the benefit of the doubt sometime and not just be blasted because we're easy targets. Thanks for letting me respond. -Brian

Anonymous said...

Platinum can't pay their bills, yet the principal investor/owner, Scott Mitchell Rosenberg, just made three purchases of stock on the open market for around $21k.

Why wouldn't he simply invest the money directly into Platinum so that they could pay their creators and employees?

Interesting too that the stock price has doubled since his buying began . . . market manipulation?

Anonymous said...

Communication? That would be nice Mr. Altounian. I am one of those many owed money by wowio. I am a nobody compared to some on the list and only owed a paltry hundred dollars or thereabouts. But what really has irked me, is the outright disregard for all the publishers which built wowio into a at one point of time, interesting place for comics readers and publishers. I would have loved a few memos along the way from you and your people, about what was going down. I heard everything about wowio's collapse through third part websites.

And yet still you communicate through a third party website this newest information, rather than send a simple mass email to all the publishers.

But yes remember we all have contracts, and I guess if a few of us got together to call a lawyer on all this, I guess we could eventually maybe get paid. But I would rather see wowio succeed. I am waiting... and waiting...