Reminder: Streaming Was Completely Insane Before The Days of Netflix
Video streaming is booming right now, with companies spending billions launching services like Disney+ and Amazon Prime Video (and streaming being one of the eight forms of human entertainment allowable at this very moment). There's almost more streaming platforms than actual shows, meaning that 30 percent of Hulu is now just the CEO reading his Wario fanfiction, while DCUniverse is desperately trying to cut a bunch of '70s pornos into a new Green Lantern movie. (We had a third joke, but Netflix is spending $45 million turning it into a 13-episode tween dramedy.)
But this is actually the second video streaming boom. The first started in the late '90s, with the New York Post noting that hot startup Pseudo was facing fierce competition from the likes of DEN and Pixelon. Except that each of those companies quickly collapsed into an almost unbelievably bizarre disaster, entirely unrelated to each other. Within two years, a legendary rock band had been tricked into reuniting, a future bitcoin tycoon had fled to Spain out of a fear of assassins, and $32 million had been invested in a company run by a man in clown makeup. Let's start with ...
In late 1996, a guy calling himself Michael Fenne arrived in California, living out of his car and showering at the beach. He announced that he had invented an amazing new way to stream live video over the Internet and launched a company called Pixelon, which became one of Silicon Valley's hottest startups. The company quickly raised $35 million from venture capitalists and signed deals with Paramount and Will Smith to stream trailers and music videos online. Glowing press coverage claimed the "million-channel universe" was "arriving ahead of schedule."
There were just a couple minor problems with this incredible success story: Fenne was actually an escaped con artist named David Kim Stanley who had fled Kentucky after scamming over a million dollars up and down the Appalachians. Also he hadn't invented anything -- Pixelon was just secretly using existing video tech like Windows Media Player in all their demos. It was basically the Theranos gambit, if Elizabeth Holmes had turned out to be Bernie Madoff in a wig. And things only got weirder from there.
It turned out Fenne was running the company like a bizarre cult, with his disembodied voice regularly booming over loudspeakers instructing employees to "report to the woodshed, your uncle is going to give you a whooping." Engineers were required to attend regular prayer sessions held in near-total darkness, while it wasn't uncommon to walk into Fenne's office and find an employee kneeling on the ground while Fenne laid lands on his head. And it's really not a good sign when your CEO appears to be modeling his leadership style on Jim Jones. No sysadmin job is worth chanting ecstatically while your manager tries to offer his severed tongue to the Tuunbaq.
Things all came to a head when Pixelon spent $16 million, virtually all their available cash, on an insane launch party at the MGM Grand in Las Vegas. The horrendously-named "iBash '99" was a day-long extravaganza hosted by David Spade and featuring live performances by KISS, Sugar Ray, the Dixie Chicks, and the Who. The Who had actually broken up years earlier, but Pixelon threw so much money at them that they got them to reunite. Seriously, the Who reunited for this shit! The whole thing was supposed to be livestreamed around the world, but Pixelon's fake tech obviously failed to work properly.
The party was the last straw for the board, who called an emergency meeting to investigate. They probably saw this as a boring corporate investigation, rather than something out of True Detective, but quickly became horrified by what they found at Pixelon HQ, where Fenne had started declaring "God has blessed me with a unique ability to defy reality." They actually started to worry they might be murdered by the CEO's armed bodyguards if they tried to fire him. Two board representatives had to use a secret signal to get an employee to call the police. Say what you will about Adam Neumann, at least they got him out of WeWork without having to battle some kind of freelancer militia.
The aftermath of his firing revealed Fenne's secret identity. It also revealed that all his amazing streaming demonstrations actually used publicly available technology, barely more advanced than hollowing out a computer and sticking some glove puppets inside. Investors did not get their $35 million back.
Pixelon's rival as the hottest internet video startup was a company called Digital Entertainment Network (DEN). Just weeks after Pixelon flamed out, DEN began an even more spectacular collapse.
The startup promised to make TV "obsolete" by producing its own shows and streaming them on-demand anywhere in the country. This was obviously a good idea in theory, but it was also extremely beyond the technology of the time, which is why Netflix was still sensibly mailing DVDs to your house. DEN's reality shows and teen dramas were also terrible even if you did somehow manage to watch them. This didn't stop the company raising $90 million from investors like David Geffen and Bryan Singer.
DEN found every show idea in the pockets of a dead body behind VH1 headquarters.
The company spent that money like water, hosting lavish parties and paying insane salaries to top executives. Founder and CEO Marc Collins-Rector lived in a luxurious Hollywood mansion with DEN's two vice-presidents: his boyfriend Chad Shackley and Brock Pierce, the 17-year-old former child star of movies like The Mighty Ducks and First Kid. In fact, a surprisingly large number of Collins-Rector's employees were underage boys, which should have been a warning sign. Very few legitimate corporate careers start with an unsolicited message on Club Penguin.
The official explanation was that the company just wanted to be young and hip, which was also why the aforementioned wild parties were packed full of teenage boys. But MTV were young and hip, they still weren't recruiting exclusively outside high school swim meets. It should also have been a little concerning that Collins-Rector, 40, and Shackley, 24, had been dating for eight years. Not since the Berlin Wall came down have so many warning signs and red flags been collected in one place. Shortly before a planned $75 million stock offering, Collins-Rector was accused of abusing a 13-year-old customer service rep at his previous company. Numerous other allegations of child abuse followed.
At this point, Collins-Rector apparently had some sort of mental break and declared that the charges were part of a conspiracy by David Geffen to steal his company, using the actor who played Pyro in the first X-Men movie as a mole. Convinced that Geffen would surely dispatch assassins to silence him, he hired a "professional kidnapper" and self-proclaimed former CIA agent who specialized in smuggling wanted criminals out of the country. That guy apparently encouraged Collins-Rector's paranoia, because clients will pay a lot more for protection if they believe a murderous music mogul is about to activate Blink-182's deadly sleeper agent training.
In May 2000, Collins-Rector, Shackley and Pierce were spirited out of the US on a private jet. An international manhunt ensued, and the trio were eventually discovered in a Spanish villa, which also contained "guns, machetes, a trove of jewels, and child pornography."
Collins-Rector was subsequently convicted of child abuse and DEN collapsed entirely. In a weird postscript, Pierce became an early bitcoin investor and is now a fairly odd billionaire, variously described as a "creepy, sleepy cowboy from the future" and "a man who would be an excellent cult leader if he only had the essential malice and attention span."
At this point California had seen two streaming startups tank, so naturally New York had to respond. And they managed to do so in the most on-brand way imaginable. While Silicon Valley loves to overhype a charismatic scammer, and Hollywood remains about as committed to child safety as a Victorian coal mine, the Big Apple saw its own streaming startup destroyed by sheer insufferable bullshit. Seriously, a multi-million dollar company degenerated into one of SNL's Stefon sketches.
New York's hottest video startup was Pseudo, which faced the exact same technical challenges that DEN ignored and Pixelon lied about fixing. The company's channels were only accessible to the tiny fraction (under 2%) of Americans with high-speed broadband, and even then they played on a grainy four-inch box in the center of the screen. But founder Josh Harris still raised $32 million from major investors. Unfortunately for those investors, Harris quickly lost his grip on reality. He now insists that Pseudo was never a real company at all, but rather an "elaborate piece of performance art."
Pseudo spent millions on funding bizarre art projects (a regular collaborator was a performance artist named Mangina with a plastic vagina taped to his groin) and throwing lavish parties at company HQ, where things were so wild multiple key employees quit to enter rehab. Harris himself started going to work in full costume as "Luvvy the clown" and refusing to break character. At one point, "Luvvy" crashed into one of Pseudo's livestreams and spent 20 minutes shouting "Boing! Boing!" in answer to all questions. Tech founders have a reputation for eccentricity, but ideally that means something like "he doesn't wear shoes" and not "we fear his clown persona is taking over."
This is a pretty strong sign not to take compensation in stock.
Things came to a head with Quiet, a month-long live-streamed "event", in which 60 artists would live in "pods" in a converted warehouse, their every action live-streamed on 100 channels. The warehouse would include exactly one shower, "housed in a clear geodesic dome and in full view of the banqueting hall, close to actually public toilets and an interrogation room in which podwellians would be grilled to the point of breakdown, both upon entry and at the whim of an Interrogator." It would also include an elaborate $50,000 temple, which nobody would be allowed to enter, "a toxic waste dump complete with flammable chemicals," a subterranean nightclub called Hell, and a gun range stocked with live ammo and submachine guns. Toxic chemicals, unsecured firearms, and unlimited free alcohol -- what could go wrong!
Not enough, as it turned out. Pseudo's board point-blank refused to finance the deranged project, at which point Harris flew into a rage and insisted he would pay for the whole thing himself. He promised $100,000 to any pod-dweller who could last two weeks in his live-streamed labyrinth. But all 60 resolutely stuck it out and Harris suddenly realized he was on the hook for a lot of money. According to Wired, he ended up pulling a string of outrageous stunts in an increasingly desperate attempt to get the cops to shut Quiet down before the deadline on New Year's Day.
But the police ignored him even as he advertised live sex shows and fired a gun near some local politicians. He then installed a glass window display featuring erotic trapeze art and live fellatio that brought Broadway to a standstill. He encouraged increasingly wild behavior, culminating in a nude shower fight that ended with a woman crashing through a glass wall with a man biting her ass. In the end, Harris was reduced to personally calling the cops on his own art show. But nothing worked. As New Year's Day broke, Harris gave up and his video team went home. At which point the warehouse was immediately stormed by like half the cops in the city.
After that whole debacle, Pseudo understandably failed to find new investment and soon filed for bankruptcy. Harris subsequently wired his loft full of cameras and spent six months live-streaming his whole life on the Internet, bathroom visits included. He later lost all his money and currently lives in a modest apartment in Vegas, where he insists the FBI are monitoring his every move with hidden cameras and sleeps with a knife in his hand in case of assassins. But half the people in Vegas are knife-wielding clowns who once built their own sex labyrinth, at least Harris managed to trick a bunch of wealthy investors into paying for the whole thing.
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