I don't buy it. This happened because Apple hasn't launched the rumored tablet, and the potential for holiday sales is huge. Here's the main point:
We think they were attempting to renegotiate the equity split on the company behind CrunchPad, which was to acquire Fusion Garage. Renegotiations are always fine. But holding a gun to our head two days before launching and insulting us isn't the way to do that.
Sounds like Chandra started with a very heavy-handed offer at renegotiation, part of the implied threat being "you can't back out now that you've made such a public commitment to this project". The only way to respond to a heavy hand with with your own heavy hand - and this post is it, it's all just part of the renegotiation. Another point I don't buy:
I never envisioned the CrunchPad as a huge business. I just wanted a tablet computer that I could use to consume the Internet while sitting on a couch. I've always pushed to open source all or parts of the project. So this isn't really about money. It was about the thrill of building something with a team that had the same vision. Now that's going to be impossible.
It's a great story we all know - the "unhyped cool side project" hype, Linux being the best example. From the looks of the demo shot , whether anyone "envisioned" it, or not, it will be a huge business, especially with no competitors. Arrington knows it and Chandra knows it. I just hope their lawyers can come to an agreement before christmas, so I can get one :)
The Christmas retail season is here already. It is far too late to "come to an agreement before Christmas".
Even assuming that all the manufacturing, the shipping, the wholesaling, et cetera are done and the product is sitting in the back of the stores waiting to go out tomorrow -- which I seriously doubt -- there's the little question of marketing. There's just no time for it before Christmas, in a crowded market filled with companies grasping for marketshare. The ad space is sold. The magazines have gone to press. So nobody on Earth is going to know about the CrunchPad before Christmas, let alone want one, except for Techcrunch readers and their Twitter followers. Any plan to sell a lot of CrunchPads within a few weeks of launch necessarily relies on the pre-release marketing that has been performed by Techcrunch. But that has just been blown sky high. Are many Techcrunch readers going to be fool enough to buy the product, even if a BUY link appears tomorrow? Even putting aside all notion of reader loyalty, I don't like spending money on products that turn out to have been built by unreliable companies with legal threats hanging over them.
You're gonna need a better conspiracy theory. How about "the Chinese secret service loved the CrunchPad so much that they placed an order for 1 billion units and demanded an exclusive..."
Although it may seem like an irrelevant point, I'm guessing the price was a big contributor to the project death.
Why? because when you say up front (with no experience in hardware/manufacturing design) that you're going to sell it for $x the scramble then becomes "how can each party squeeze margin out?" When theres very little margin, parties are more willing to bluff knowing that they can walk away and there was almost no $ on the table.
Hardware has this problem, and I've seen it so many times, that the founder prices the hardware at only a bit (say ~30%) above the parts cost, not realizing the tons of NRE expenses, ballooning BOM, contractor costs, and the hundreds of other ways the price can easily double. Then they're stuck: the investors/contract manufacturer/designer/customer hates them. That leads to abandonment.
Please please please, if you decide to do any kind of hardware, add an extra 40% margin on top of whatever you pick. If you don't need it, you can always cut the price later! :)
You might even take after Apple and price it at double your materials cost. That might seem like a lot, but it forces you to make a compelling product that competes on features instead of chasing the bottom dollar. You can always lower the price if you're in a bind, but raising it is almost impossible.
If you're successful at selling that, you'll see healthy returns. I heard a recent blurb that Apple took 90% of the profits on laptops costing more than $1,000. They certainly didn't sell 90% of the laptops in that bracket.
What I'm saying is, dont double your materials cost, thats not nearly enough. You need to add margins TWICE - two 40% margins. Thats 3x material cost, 4x is even smarter. Skimping on margins kills, you can -always- lower the price later.
Mike left a comment when someone asked that same question in the post:
"of course there is more to the story. but the point is we’d gotten past all the ugly sausage making that goes into any startup and had moved to within days of launching it. An email to us saying “the economics don’t work, we have to talk” would have been a reasonable request. But telling us that we aren’t important to the project, and stating that we don’t own the intellectual property, is just bizarre."
Still. I find the most upsetting part of the article "And then the entire project self destructed over nothing more than greed, jealousy and miscommunication." <- that quote. That quote shows his personal feelings about what happened and it's very sad that such an amazing project could be destroyed so easily.
I don't share any of the hate the author probably does; however, I do feel extremely sad about the entire ordeal.
(ps: I, with a friend of mine, had already started programming to make some applications we thought would be perfect for it.)
I think there's always more to such stories but rarely do the other parties know it. In my experience the biggest contributor to products dying is passive aggressiveness. If you're in a partnership where you don't feel you can air your grievances they'll just build up inside until you hit the last straw and everything explodes. I suspect that's what happened here.
On the upside, thanks to my Boss foolishly putting enough faith in this project to bet on it's eventual existence (and write several blog posts he's probably embarrassed by now) I'm now $100 bucks richer.
Yeah, that post has the subtle stench of BS. I haven't followed the Crunchpad ordeal all that closely, but they've never been all that forthcoming about problems and this announcement smacks of manufactured drama.
Honestly, everything I've ever seen with regard to Arrington or TC has been surrounded in "drama" and hype, both things I'd rather simply avoid.
I truly don't understand the appeal, but I'm curious... Are there any hackers out there who think that TC provides any form of intriguing technical commentary? Or that he's a legitimate "visionary/evangelist" in things dot-com?
If the answer to both is "no", what's left? Why do we have so many TC stories?
Are there any hackers out there who think that
TC provides any form of intriguing technical commentary?
You are making two assumptions here:
1. Hackers are only into technical commentary
2. TC promises technical commentary and under delivers
I don't think either of them are true. For a lot of us, particularly those doing startups, an article on TC about our company can be worth many times more than frontpage NYT story. I say that from experience.
Even if you dislike TC's content, dismissing its potential value to your business would be stupid.
I've had a number of startups get their post on TC, which resulted in tons of clicks on our homepage, and basically nothing beyond that. These startups ranged from VC funded to boot strap, and I can't really say the "publicity" we received was useful in any way.
1. We got incredible SEO out of it. As a result of TC, we got on top of digg/reddit. Each of those gave us dozens of more linkbacks. This significantly helped us with our seo strategy that got us sustained 80-90,000/uniques a day within 3 months.
2. We got into ycombinator. I believe without getting onto TC, it would be very hard to get traction. And without traction, a site like ours would be a very tough sell(as much to ourselves as to investors)
Before we launched, our 3 month plan was to get on TC. That we got on it a few days after launch put us way ahead.
The appeal of TC (for me atleast) is that they produce a lot of content. The subjective nature of the content is one aspect I won't address, but the simple fact is that they are very active reporters. Like it or not, it is often the first place I hear about up and coming startups.
Yes, TechCrunch is great and has a substantial position in our vague industry. Arrington has almost single handedly resulted in a spotlight being cast onto us that simply didn't exist before. I'm not saying someone else couldn't have done it, and maybe perhaps better, but Arrington was the one to step forward to the plate and TC has done a lot more good for our industry than bad.
From the start the promise of building a large touchscreen tablet for $300 was simply impossible. Either they were naive or dishonest. The 12" LCD touch panel alone is likely $200-$300 in bulk or even more. How can you price a product at retail below the cost of an individual component? As the price crept up to $400, then $500 and probably more realistically $800-$1k I think Mr. Arrington needed an end game that didn't make him look dishonest or naive. An IP dispute solves that problem nicely. Of course he could be telling the truth but based on the pricing fib/naivety I'm skeptical.
I've seen large "touch panel" layer parts for various devices for well under $100 and 1080p 22" TN LCD screens with built in speakers for $100-$150, so a 12" touchscreen panel would likely be nowhere near $200.
I was involved in a similar project ten years ago. At the time we had no problems getting to ca. $500 with a 10.9" LCD/touch combo, obviously otherwise with very modest specs (a NS x86 clone, 32MB RAM, 16MB flash) but enough to get Opera running on a stripped down Linux with a number of other apps. Sourcing a reasonably priced touch screen was definitively not what killed that project.
I'd be very surprised if $300 would've been impossible today, even with a larger screen, though of course that depends on the rest of the specs. Especially given the specs of my new $500 laptop. Sure, it lacks a touch layer, but its also spec'ed far higher than you'd need for a pad like this.
Resistive is what was common before capacitive came along - I'm sure we've all played with them extensively at some point. Take my Garmin GPS for example, it's got a resistive screen that, coming from a daily iPhone user, just doesn't work. I have to practically stab it with a fingertip to get it to register, and even then it's pretty consistently wrong, and will often think I'm tapping the button next to it.
The iPhone set the bar - and manufacturers have responded. I doubt you will find a single manufacturer now who is trying to peddle resistive touchscreen phones in their new products. Nokia, Moto, HTC, etc, appear to only have capacitive touchscreens on the roadmap - for good reason.
Most tablet PCs are feeling incredibly dated for the same reason - IMHO the next product to enter this field will need capacitive sensing, or die.
Maybe not much more, though. As I've warned even my own partners, it's sad, but people often change over money. The near readiness and impending launch probably got some people excited. Let this be a lesson, especially on an entrepreneurial board like this: agree on partnership terms and expectations up front, and also get it in writing.
Yep. I too think TC isn't the most truthful media outlet. TC has a lot of power as a media outlet, and there have been a couple of incidents where I think they are abusing that power. This is just another case of that happening. Justified or not you have separate your personal feelings from your coverage, and I don't think Mike can do that.
Arrington mentioned that the deal being contemplated involved a new entity buying Fusion Garage. I'm sure that would have required the approval of FG's shareholders, who don't currently seem to be strongly behind Chandra.
If that's all actually the case, then perhaps the mistake was failing to recognize early enough that Chandra wasn't the final decision maker.
Well he says in the article "We jointly own the CrunchPad product intellectual property, and we solely own the CrunchPad trademark." So I'm thinking he probably has this covered, though it may be the other company sees a way around this or does not care about legal implications. It may be the product gets knocked-off by some overseas company before ever being produced itself (look out for the the iCrunchpod).
It sounds like kind of hard ball that's being played by Fusion Garage could almost certainly be overcome with some effort. Not to justify it, but it's not uncommon for people who feel like they're getting screwed to renegotiate at a time when they feel they have leverage.
My guess is that Arrington was overwhelmed with how out of control the project got. He jumped at the best opportunity to get out of the whole thing, without looking like he just flat out gave up.
Like some people do in relationships they want out of. "Oh, fine, don't want to see that movie? Well let's just break up then!"
Good idea. A similar thing happened to me when working with a team in another country. In my case the group were a bunch of good friends.
From my experience, they didnt respect or understand all the work that I had done on my end. And I blame the fact that I was so far away that I didnt realise that this was the case. I also owned a big part of the equity in that relationship.
And similarly it happened just when we were about to sign a big contract.
I however think that Arrington can fix this. Printing this on his website was probably the stupidest thing he could have done w.r.t trying to get the relationship back on track.
I'm saddened to hear what happened (even if what has been explained about his Singapore-based partner, Fusion Garage, is not really what happened). The dangers of long-distance outsourcing - emails can be ignored easily, connection can be broken at will. No ACK. Hopefully this doesn't become a HBS case study (on dangers of outsourcing and IP ownership).
"I have to applaud Michael Arrington for going out of his comfort zone and taking on a sizeable project that is not guaranteed to be successful but if fairly successful, will make a small impact on the tech industry, rather than just reporting on it (like he does now)."
I wrote that comment 5 months ago, and I think Michael Arrington has a better understanding of the tech industry now. I don't think he will give up on launching a product.
Hardware is difficult. Not just a bit more difficult than software, but WAY more difficult (and is inclusive of software, usually at a lower level). For a small company at least the manufacturing is outsourced, and often the design as well. Who gets the IP and who has ultimate control are MAJOR issues that are often not given enough attention up front. Sure, every relationship is rosy at the start. But imagine that you have hit a major roadblock that prevents a release (because invariably, you will get stuck and have to find a solution), what happens now? Who gets to decide? This stuff needs to get hashed out before the first contract is signed. And often time the problem is going to be your outsourced design firm or manufacturer, so I'd say the contractor needs to stay at an arms length away so that you can change if need be, even if it costs more cash. The flexibility might keep your venture alive.
"A major multi-billion dollar retail partner has been [..] offering to sell the CrunchPad at a zero margin to help us succeed in the early days. They were also willing to pay for the devices on order instead of 30 days after delivery, a crucial cash flow benefit [..] Intel [..] has assisted us repeatedly with engineering and partner advice, and gave us pricing that was ridiculously generous [..] Other partners were eager to promote and sell the device for little or no benefit on their end other than “supporting the project.”"
Does anyone see a problem here? You think TechCrunch would be able to honestly report on these "partners" while being in such close relationship with them?
I think the key difference is that Apple (probably) built a working prototype themselves before showing it to Foxconn. This way IP rights were completely owned by Apple. Foxconn may have helped tweak it, but the rights still belonged to Apple.
It sounds like both TechCrunch and Fusion Garage have rights to different parts of the IP. So TechCrunch can't go to Foxconn (and neither can Fusion Garage) w/o violating the IP rights that the other party has.
It adds significantly to their credibility that they appended this to the article:
Update: On Nov. 30, 2009, CrunchPad’s Michael Arrington announced that the product introduction was being canceled, owing to a business dispute. By giving an award to a prototype, PM took a risk: that a promising product created by a smart group of people might fail to be realized. In this case, it seems, we were a bit too quick to act on our enthusiasm for an innovative idea. While this product is not coming to market, Popular Mechanics anticipates that tablet-style devices for consuming media will represent an important trend in the coming year.
FusionGarage won't be developing this themselves. They will just covertly sell full documentation to some Chinese company that will manufacture it in huge quantities for Asian markets at first. We are going to see CrunchPad in few months from now under completely different name.
b) they registered it on the 17th, when I already had the domain for more than a year.
c) the product is already dead
But yeah I know they can probably still nab it, if they try, but I figure if they do, I can still win from riding their bad publicity wave. It'll have everything: a clumsy company forgetting to register a domain for their product + company name(lollerskates) and that same company using big mean lawyers to steal the domain away from their fans(boo lawyers, boo big business).
And who knows, maybe the reason I registered the domain was to sell my own line of CrunchPad Yoga Mats.
Is the CrunchPad really dead? Honestly? I'd put my money on no. Arrington is way too "powerful", and did too much, to just roll over for a few bad apples. My guess, is that, at this very moment, his mailbox is exploding with tons of emails from Fusion Garage competitors, offering to finish the project for him.
And if they aren't...then their CEOs need to be kicked out.
Where else, will you find a partner, who has the connections to have a major retail chain(most likely Best Buy) who not only are willing to help you with shipping costs by letting you use their planes, but will also sell your product with zero margin and will pay upfront?
Where else, will you find a partner, who has the connections to get your people advice from the guys at Intel? And a huge discount on pricing?
Where else, will you find a partner, that already has investors lined up for the project?
Where else, will you find a partner, that already has brand recognition, with millions of people?
And it's about to be eclipsed by a silly (or not silly...) rumour of a tablet that has hardware and software with a serious reputation behind it and a marketing program that involves billions of people.
There was excitement around $300. This can't be made in low volumes and have margin for everyone involved for $300. And who is going to pick up the phone to help me network it to my router? Who is going to pick up the tab for replacing my exploding battery?
Someone got nervous when they all looked around in their three way agreement when it came time for one of them to write the check to make the first couple thousand.
If there just was device that let us browse the web (much like Chrome OS would do), integrating an unlocked 3G modem (where I can drop any SIM card and configure it in 30 seconds) and good WiFi support, in the range of the 200$-400$, I'd buy it. Right now.
I'm the kind of guy that loves to be connected (reading HN/Greader/Twitter), mostly when I'm out from home (that can be anywhere). I can wait to contribute (hey, it's okay to not have a physical keyboard when I mostly read webpages), but I just can't stay more than two days without checking the mail or opening Twitter (I'm addicted, I know...)
The iPhone is good enough for that, but I need something bigger with multitasking (or at least some decent browser-tab management). That can be used outside. And the CrunchPad looks much like what I want (indeed Chrome OS does!).
I'm sure that Arrington knows the potential of this project. So this is probably not its dead note, but a resurrection note. about:phoenix :-)
Mostly though I’m just sad. I never envisioned the CrunchPad as a huge business.
...makes me think there were handshakes where there ought to have been contracts (or the contracts should have been more tightly specified). It wouldn't be the first time people have cooperated in a spirit of mutual benefit without fully appreciating the efforts and value demanded of each other other, and both sides end up honestly feeling they've been ripped off - the engineering guys had to solve tougher problems on narrower margins than is economically feasible, the creative and marketing people having made expensive brand and financial commitments based on optimistic engineering estimates.
All the same, it would have been wiser to announce that the project had run into a legal hurdle and leave it at that, saving the complaints for a court filing rather than taking them public. Too bad. I would have happily bought this product at $400 :-/
What a huge disappointment. I was really looking forward to this as an example of how one could work themselves into the hardware market as a start up, and as healthy competition to any other large touch-capacitive device to come out in the next few years.
Im not surprised; I have said (if you'll pardon the big headedness) it was an ambitious product moving into a very fickle niche market (that is still only on the verge of "mainstream") and, most importantly, possibly moving into Apple territory (never going to end well).
Im a little surprised it ended in an internal dispute - my thinking was the funding would run out and the product wouldn't be good enough to sell well. (and then either Apple launch a tablet or the market just fizzles out). With that said this could still be the cause - it's at this point people would probably start to look really hard at the sale point economics.
This is why Apple's policy of not talking about unreleased products make perfect sense. Steve Jobs probably experiences this on a regular basis. For every iPhone smash hit, he must've gone through tens or even hundreds of duds.
If Arrington wasn't completely full of shit, he'd actually open source some or all of it instead of just "pushing" for it. I mean, it's a dead project right? If it's dead, then release what you've got to the community and watch someone else follow through.
Also how would he ever let Fusion Garage "jointly own" part of the IP? That sounds like a terrible idea. The only way that happens is if his "team" couldn't actually make the thing work (which is what I'm reading between the lines). So he's over a barrel because he promised WAY too much and couldn't actually make it happen.
The problem with open sourcing their IP is that Fusion Garage could then turn around and start manufacturing the devices, cutting Arrington completely out of the loop. They would just have to be careful that the separate Arrington IP doesn't taint their existing proprietary parts of the Crunchpad.
The idea would be that any other hardware manufacturer could also build them not just Fusion Garage.
If they both have ownership rights, as Mike says in the article, then they can both decide how to use them. Fusion Garage has decided to use them to produce the Tablet on their own and TechCrunch has decided to opensource it and allow any manufacturer to produce them.
Normally I avoid TechCrunch and their drama. But this one is shaping up to be pretty good. If it happened the way Arrington said it did, then the company he chose to partner with is monumentally out-of-touch. But I've got a feeling that there is going to be more to it than that.
There was an awful lot of "deals with partners to sell it at cost" in there. If I was Arrington's partner looking to recoup my investment on my part of the project, that might not sit well with me, particularly if I had no say in the matter.
For Mike, it was an ego thing. He promised the crunchpad for less than the price of just the screen when this all began. Perhaps FG didn't want to cash that particular ego cheque.
When did they hint? All I've seen is unfounded rumors for the last few years.
If Apple did come out with a tablet you can be sure it'd be $1500+.
Speaking of unfounded rumours... This may be an educated guess, it may be an excellent hunch, it may be a brilliant prognostication. But unless you're quoting a source or have inside information, it's still an unfounded rumour.
You're explaining why your opinion or guess or hunch or prediction or whatever you want to call it is likely to be correct. i don't dispute it, nor do I suggest I hold a different opinion.
However, I am suggesting that your opinion/hunch/prediction is unfounded. Meaning, it is speculative and not based on some specific factual evidence in hand.
For example, if you heard about the pricing from a buddy that is working on the apple.com web site you would be passing evidence along.
I'm not suggesting you shouldn't be speculating along these or any other lines. I just found it interesting that you would mention unfounded rumours in the same comment as sharing your own speculations about what Apple might or might not do.
The likelihood of Apple releasing a tablet, I'd say is low. But they could. Fair enough. I don't think they will, but that wasn't my point.
However, if they do release a tablet, there is absolutely no way on gods earth, they would ever make a competitively priced one. For a start, it'll cost more than the iPhone, or it simply won't make any sense. So we're up to the $500 mark already.
My point was, that even if Apple come out with a tablet tomorrow, it will definitely, categorically, not be in the same area as the crunchpad was planned to be - cheap.
There's nothing else to a tablet if you're one of the scores of computer makers that has already done exactly that (tearing off the lid, keyboard, and touchpad and put in a touchscreen).
For Apple, I don't know. They haven't invented it yet and I've learned that they can be more creative with years of product development time than I can be with a few minutes of writing comments. But they sure as hell won't release something that isn't significantly different in some way than what's been released before in the tablet space.
They are probably holding off more for software that makes a tablet make sense rather than just hardware. The hardware is a known quantity, but software for a tablet form factor has IMHO never really been worked out well.
Sure it might make a great piece of kit for an artist to take around, but how big of a market is that?
I'm thinking that a more innovative approach would be in order for it to really work.
This is why I nearly always have as close to 100% ownership or involvement with my projects as possible, even if it means keeping things small. Other people can be idiots, or they can be great, but it's a helluva risk (to me) to waste my time to only find that out years down the road.
Yuck! So bad. Was expecting its launch for a long time. Now that its gone, we might have to wait for apple to come out with its device which apparently nonone knows! as cwan pointed out, this is not something that materializes over a week. Fishy Fishy!
I went on their website and it made me a weird impression... First, their site is indeed completely outdated (last post: 4th February 2009) and second: it doesn't look very serious... almost nothing on it...
If the product has real and imminent commercial potential, there will soon be an equally dramatic announcement of a mutual compromise. The intervening PR about the feud will have only drawn more attention to the eventual launch, to the benefit of both sides.
If the product has technical or cost-of-production flaws that undermine its commercial viability, the feud provides time and cover to work them out -- or abandon the project entirely, blaming the failure on the other side as a face-saving measure.
I'd actually view this as a slight positive signal of the CrunchPad's viability, especially if lawsuits are filed. Battles are more serious over things of real value.