You may have noticed things have been pretty quiet from Chew HQ over the last few days and I wanted to share what’s been going on behind the scenes. The below is pretty long, but the detail is necessary for the full picture. It will likely come as a shock - but we’ve delayed sharing this information until we had something concrete to give you. That time has now come.
tl;dr - our infrastructure was heavily misused in December at a large cost to us. It is more than we can afford, and the combined total of that and our regular running costs is enough to put us out of business. I’d appreciate your thoughts on what we do next - please see Next Steps.
In mid December, we discovered our infrastructure had been misused. Pirates(s) had used Chew’s platform to illegally rebroadcast a major sporting event – streaming their live content on our infrastructure, while delivering it on their own ad-supported websites. The required hotlinking safeguards were not available as a feature of our Content Delivery Network provider until a few months before the compromise (long after our system was first developed) - and as such those preventative measures were not in place.
Prior to subscriptions and the optimisation of our infrastructure, we were spending £8-10k PCM on infrastructure. December’s invoice came to just under £30k with the fraudulent usage. Today, our monthly infrastructure expenditure is around £5k (largely due to the changes we have made to how and when we retain video archives of shows). We have reached our first 100 paying subscribers, generating £1k a month, so are 20% towards covering system infrastructure costs. All in, with everyone taking salaries (including consultancy staff), operating costs are now less than £10k a month.
Our infrastructure provider has decided that, because the compromise was preventable (despite the fastest possible action taken to remedy it), we are liable for the fraudulent cost. However, they have conceded 50% of that cost as an “act of good faith”. Including genuine usage, and 50% of the fraudulent activity, our outstanding December invoice stands at £22,500. The provider has since agreed to allow us to spread this invoice, on top of our normal usage, over six months. I am waiting on confirmation, but my understanding is that if we do not clear these payments, including our outstanding January (£6k) and February (£5k) invoices, the infrastructure provider is likely to suspend or terminate our account - which will mean the end of the Chew service.
While this has been going on, I have continued to meet with and talk to current and potential investors. The general consensus is, and continues to be, that we’ve done incredible work with a very small team and not a huge amount of money. And we have. The team has done some truly astounding work over the last three years I’ve been working on Chew, and I continue to be amazed, on a daily basis, by what we can and have achieved.
However, we are only two months into subscriptions (our first income as a business). From an investment point of view, with the impending infrastructure bills, I’m looking at having to raise around £35k to clear these invoices; let alone continue operating the business.
And, as time goes on, the investment I thought would be coming doesn’t look like it is. My warmest new potential investor decided not to continue dialogue with me last week. Our current investors have offered less than the outstanding invoices total and are uncomfortable investing more, given the risk level from an infrastructure point of view.
With the first infrastructure instalment due in the near future, I am unable to pay salaries (having also not taken one personally since last September). As a small team, running on very tight budgets, there aren’t many costs to trim to extend our runway without new investment.
I am uncomfortable asking the team to take pay cuts on already small salaries or to work unpaid - and, given the uncertainty about making it through the next few months (let alone any longer), the decision between our advisors, the team and I seems to be that the team start looking for new work elsewhere while I continue to try and keep the lights on.
As of this week, I will likely be the sole remaining team member working on Chew fullt-time. It is likely our infrastructure provider will suspend our account if I can’t clear the bills. Without an operational account, Chew is unable to function.
As a community-based service, it is you - our users - who ultimately power the Chew service and business. I have our investors’ blessing to take whatever course of action we feel is right, but I’d like to put a few suggestions to you for what happens next. Here’s what I feel we have in terms of options:
Accept we’ve reached the end of the road Allow users to download content, remove/ delete accounts (if wanted/ needed), refund any active subscriptions with >1 week left to run and then turn Chew off at a set date Crowdfund/ raise enough donations to cover our outstanding bills/ continue operating If every active registered user bought a subscription we’d have enough to clear what’s owed and continue operating on a monthly basis. We could also do a crowdfunding-style campaign where we raise donations from users to continue operating Find a new home for Chew We find a buyer who is willing to take over the operation of the Chew business and allow it to continue operating - or parts of the business (like we did with Mixify and its users, rather than the entire Mixify platform) which result in Chew going offline and users joining another service.
We’ll add these options as a vote to Slack - please leave your thoughts as a thread comment/ vote on your preferred option or send me a DM to discuss. Again, I am sorry to share this with you so late after the initial occurrence, but given the uncertainty I didn’t want to put you under undue stress or upset until we knew possible outcomes.
Please get in touch with queries, thoughts and feedback.
Wil & Chew team