The Wall Street Journal published a piece Wednesday about the implosion of One Up Sports, a video startup that had reportedly promised investors 7 million hours of video and $100 million in ad revenue.
In many ways, this is the archetypal story of a start-up going under, only with an even steeper fall than usual.
According to the WSJ, One Up Sports backed out of a widely lauded acquisition of Insider Sports and now owes money to distributors and employees. Several former staffers and freelances say One Up Sports has stiffed them, and a company One Up Sports bought in 2015 has sued claiming the site has missed payments totaling $650,000.
Via the WSJ, here’s more:
The $4.2 million in debt financing and equity that OneUp raised last summer and a $600,000 loan in December weren’t enough to cover costs, according to Mr. Trousdell, particularly with costs for deals and legal fees. He says the company raised $25 million over more than five years — what he called “a tight budget.” He wouldn’t name his investors, but MLB Advanced Media and the National Football League are among his shareholders.
“Our biggest challenge was lowering the cost of content creation and monetization,” said Mr. Trousdell.
Yes, when your challenges include costs and revenue, you’re probably in for some trouble. If creating content was too expensive, One Up Sports should probably have realized that before it tumbled deep into debt.
One Up Sports’ model is to round up digital rights to highlights from sports leagues, then edit them and put them into their digital platform to display on local media websites. It seems that the company paid more in rights fees than it could afford and ended up in over its head, despite some big-name investors. The company was likely harmed by competition from Perform and others, which drove up the rights costs and resulted in everyone burning through venture capital money.