Ossic Throws In The Towel, Won’t Deliver Headphones To Backers

[kcarbotte]

Ossic announced that it is closing shop. The company burned through its Kickstarter funding on product development and failed to secure investors to put the Ossic X 3D headphones into mass production.

Ossic Throws In The Towel, Won’t Deliver Headphones To Backers : Read more

 

[SkyBill40]

I smell a class action for breach of contract coming, not that it'll matter all that much seeing they're going belly up.

 

[stdragon]

The "perfect" is the enemy of the good.

When you're short of funding, be sure that at the end of the day, get a product out ASAP to recoup the losses. Profits can further fund R&D for version 2.0 later

 

[Gam3r01]

The short mention of VRs infancy I believe is a large portion of their issues.
Excluding the whole mess of screwing over kickstarter backers, if VR was more available and established someone else would have taken it on/invested as well.

Being first does not make you the best, especially if you never make it at all.

 

[SkyBill40]

Being first does not make you the best, especially if you never make it at all.

Or, if you make what amounts to a questionable effort in the first place and then squander all the capital put towards it and produce next to nothing to show for it. Such is the case here.

 

[Gam3r01]

Being first does not make you the best, especially if you never make it at all.

Or, if you make what amounts to a questionable effort in the first place and then squander all the capital put towards it and produce next to nothing to show for it. Such is the case here.

Thats the other issue, when someone/some company has an idea but no idea how it will actually come together.

 

[casey_souder]

You forgot the $3.2 million that was also raised through Indiegogo and the undisclosed amount that they received from people that pre-ordered the headphones directly through Ossic's website.

 

[cryoburner]

It's bizarre that they got as far as having everything designed, and even delivering a handful of early units, and yet still managed to fail so hard. I can see why they had trouble securing more funding though. At least for VR, this concept actually seems rather redundant. There's no need for the headphones to track their own position if the user is wearing a VR headset that is already doing just that. A 3D microphone array with 6 mics also seems fairly pointless when VR headsets include microphones as well. And any audio processing can be performed on the PC, or whatever other host device is running the simulation, so having a "32-core processor" onboard seems unnecessary for that.

And outside of VR, these headphones would basically just be simulating a surround speaker setup in headphone form. For games or movies where you are likely to encounter positional audio, a person's head is going to be mostly stationary anyway, since they're looking forward at a screen, so again, the tracking might not be of much use. And unless you need headphones to avoid disturbing others, this doesn't really do much that a surround speaker setup won't do, and isn't going to recreate low-frequency sounds as well as a speaker system with a proper subwoofer. I guess you could have an approximation of a surround setup while on the go, but these don't appear to be the most portable headphones either.

About the only advantage I can see over a pair of stereo studio monitor headphones for VR is that having multiple speakers inside would allow the sound to be affected by the unique shape of one's ears, potentially making the positioning feel slightly more accurate than sound delivered directly into the ear canal. Even four speakers per ear still won't provide completely accurate positioning though. Plus, there might need to be explicit support for the headphones in any VR software you use, otherwise the software may only output a stereo signal with simulated 3D positioning effects already applied, messing up the headset's own positioning.

I'd be interested in seeing a summary of where these millions of dollars actually went to though. Someone obviously made a lot of money out of the endeavor, even if the company is claiming that some of their employees were working "without salaries" in recent months. It's certainly easy for someone to work without pay if they already pocketed a large some of money for their services over the course of development.

Of course, people should also be a little more careful about throwing money at a company that proudly proclaimed in their crowdfunding campaign that they "started in a home living room" just a year and a half prior. The same goes for all the tech sites reporting on campaigns like this. This was a newly-formed company that never actually delivered a product before, and it should really be pointed out in articles like these that there is the possibility that a product won't get delivered, and that those thinking they're making a purchase could potentially be out hundreds of dollars.

 

[BaRoMeTrIc]

I smell a class action for breach of contract coming, not that it'll matter all that much seeing they're going belly up.

Kickstarter is a crown-sourced venture capitalist site. You are investing in products that are theoretical, prototypes, or in early production. You are taking a risk that the product may never come to market. Successfully suing a company that failed to launch a product is unlikely, It's not like they had a manufacturing agreement with you. You are investing in a startup. Not investing in a full fledged product ready to go to market.

 

[Brendon Gaige]

I was a backer, and Ossic always phrased the funding as pre-orders, not as capitalistic investments. While, technically, you are correct, that was not the way Ossic publicized and marketed the project. They also never once uttered a word of concern about not being able to deliver the final product, until it was too late and they closed shop. They also spent over $2m of their funds on marketing and trade shows... THAT is why people are upset.

 

[daboogie]

They also spent over $2m of their funds on marketing and trade shows... THAT is why people are upset.

Incidentally, they said that they needed additional $2m funding to complete mass production of units.

 

[derekullo]

If you look closely at the person in the OSSIC X EXPERIENCE picture above you see they are actually crying and probably listening to Coldplay.

That sphere around them is actually a zone of negativity that makes other people that enter it even more sad.

 

[SkyBill40]

I smell a class action for breach of contract coming, not that it'll matter all that much seeing they're going belly up.

Kickstarter is a crown-sourced venture capitalist site. You are investing in products that are theoretical, prototypes, or in early production. You are taking a risk that the product may never come to market. Successfully suing a company that failed to launch a product is unlikely, It's not like they had a manufacturing agreement with you. You are investing in a startup. Not investing in a full fledged product ready to go to market.

While what you say is true, that doesn't absolve them from being outside the realm of litigation should they fail to honor their promise. It's right in the KS ToU agreement. You need to read a bit more in terms of contract law to get the more complete picture as this company definitely can be sued for whatever they've got left.

Edit:

From a site that took me two seconds to find:

Here are the top 5 things you need to know before you start your Kickstarter campaign:

"A contract is a legally binding agreement. In Kickstarter, you are agreeing to provide something to the backer in exchange for their money. For example, if a backer gives you $30.00, you will give them a mug with the name of your company on it. This forms an enforceable contract. Seems simple enough. However, you must have a contingency plan of what you will do if you cannot follow through with this promise. If you cannot deliver the mug, then you are in a breach of contract. Fortunately, Kickstarter states that you can also provide a full refund to the donor in satisfaction of your obligations. You have to consider what you will do if you cannot furnish the original promise or the refund. Also, you have to be aware of the fact that you can get sued if you breach this contract."

Any litigation wouldn't be against KS but against the company who acquired the funding and failed to produce the item. If you took my comment as to mean a lawsuit against KS, that's on you as that was not my intent. From KS's own ToU:

"The creator is solely responsible for fulfilling the promises made in their project. If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers."

I wholly understand there is inherent risk in backing a project; however, per the KS ToU, what Ossic has done is breach the agreements made with their backers and thus open themselves up to litigation. It's pretty clear cut if you ask me.

 

[Matt_550]

I fail to see the justification for a lawsuit based on this one little release from Kickstarter itself "Kickstarter does not guarantee projects or investigate a creator's ability to complete their project. On Kickstarter, backers ultimately decide the validity and worthiness of a project by whether they decide to fund it.". https://www.kickstarter.com/press?ref=global-footer

Also, other products have flopped without legal recourse. Best write up is as such for a company that declared bankruptcy on Kickstarter "The chance of backers getting their money back is slim. As investors, rather than creditors, they’ll be right at the bottom of the list for getting their money back—assuming there’s much left." https://gizmodo.com/kickstarted-drone-company-folds-along-with-3-4-millio-1743438482

Best of luck but as a "backer" or an investor you have very little legal recourse unless the company omitted or falsified something material. Welcome to the pitfalls of investing.

 

[SkyBill40]

Just because other companies have not been sued doesn't mean that they can't be and that's the point. As I said, there is always an inherent risk in something like this; however, when the company has products that have been produced using funds as provided by their backers and refuse to release them, that's a problem. That's a nice black or white fallacy you've got there. Though other products have flopped without legal action doesn't mean that others can't take said action and win.

I'm not a backer nor would I ever be. That said, your statement of lacking legal recourse is false; expecting to get blood from a dried turnip would be more accurate.

 

[Matt_550]

Just because other companies have not been sued doesn't mean that they can't be and that's the point. As I said, there is always an inherent risk in something like this; however, when the company has products that have been produced using funds as provided by their backers and refuse to release them, that's a problem. That's a nice black or white fallacy you've got there. Just because other products have flopped without legal action doesn't mean that others can't take said action and win.

I'm not a backer nor would I ever be. That said, your statement of lacking legal recourse is false; expecting to get blood from a dried turnip would be more accurate.

"when the company has products that have been produced using funds as provided by their backers and refuse to release them"

So they have inventory sitting idle that could be shipped? Or they have produced a product but have no way to make it? If it's the latter then than there is nothing that can be done without subsequent funding. If it is the former than the items should be shipped and if it takes legal action for it to happen then so be it.

Without the concealment, omission, or falsification of a material fact or some other malicious intent there is no chance of a lawsuit. Being a "backer" on Kickstarter is investing in an idea. Investing in an idea doesn't automatically make your investment a deposit, a pre-order or make you a creditor, It means you are interested in the idea that was marketed to you and you'd like to see it given a chance at being successful. Investments don't always yield something and are a gamble at their core. If these were pre-orders through the company's own website or in some other fashion not through an investing site you'd have a point. Think Tesla for example they have several hundred thousand pre-orders with a deposit. If they fail to deliver they could be responsible for the deposits depending on how they were marketed, the contract was drawn up and if it was non-refundable. Since Kickstarter is setup as a place where investors are matched with ideas that they like there is a hope of delivery but no reasonable expectation that delivery will happen or that the project will ever evolve beyond a pipe-dream. That lack of a reasonable expectation of a good being received means that a material fact has to be in question or a malicious plot needs to be present for legal recourse to be possible. The way it is listed neither appear to be present in this case. So no lawsuit.

 

[SkyBill40]

"when the company has products that have been produced using funds as provided by their backers and refuse to release them"

So they have inventory sitting idle that could be shipped? Or they have produced a product but have no way to make it? If it's the latter then than there is nothing that can be done without subsequent funding. If it is the former than the items should be shipped and if it takes legal action for it to happen then so be it.

The company has produced a decent amount of headsets from what I've read and has adamantly stated that they will not be provided to anyone. Therein lies the issue.

Without the concealment, omission, or falsification of a material fact or some other malicious intent there is no chance of a lawsuit. Being a "backer" on Kickstarter is investing in an idea. Investing in an idea doesn't automatically make your investment a deposit, a pre-order or make you a creditor, It means you are interested in the idea that was marketed to you and you'd like to see it given a chance at being successful. Investments don't always yield something and are a gamble at their core. If these were pre-orders through the company's own website or in some other fashion not through an investing site you'd have a point. Think Tesla for example they have several hundred thousand pre-orders with a deposit. If they fail to deliver they could be responsible for the deposits depending on how they were marketed, the contract was drawn up and if it was non-refundable. Since Kickstarter is setup as a place where investors are matched with ideas that they like there is a hope of delivery but no reasonable expectation that delivery will happen or that the project will ever evolve beyond a pipe-dream. That lack of a reasonable expectation of a good being received means that a material fact has to be in question or a malicious plot needs to be present for legal recourse to be possible. The way it is listed neither appear to be present in this case. So no lawsuit.

I suppose we'll see one way or another, won't we?

 

[Matt_550]

"when the company has products that have been produced using funds as provided by their backers and refuse to release them"

So they have inventory sitting idle that could be shipped? Or they have produced a product but have no way to make it? If it's the latter then than there is nothing that can be done without subsequent funding. If it is the former than the items should be shipped and if it takes legal action for it to happen then so be it.

The company has produced a decent amount of headsets from what I've read and has adamantly stated that they will not be provided to anyone. Therein lies the issue.

Without the concealment, omission, or falsification of a material fact or some other malicious intent there is no chance of a lawsuit. Being a "backer" on Kickstarter is investing in an idea. Investing in an idea doesn't automatically make your investment a deposit, a pre-order or make you a creditor, It means you are interested in the idea that was marketed to you and you'd like to see it given a chance at being successful. Investments don't always yield something and are a gamble at their core. If these were pre-orders through the company's own website or in some other fashion not through an investing site you'd have a point. Think Tesla for example they have several hundred thousand pre-orders with a deposit. If they fail to deliver they could be responsible for the deposits depending on how they were marketed, the contract was drawn up and if it was non-refundable. Since Kickstarter is setup as a place where investors are matched with ideas that they like there is a hope of delivery but no reasonable expectation that delivery will happen or that the project will ever evolve beyond a pipe-dream. That lack of a reasonable expectation of a good being received means that a material fact has to be in question or a malicious plot needs to be present for legal recourse to be possible. The way it is listed neither appear to be present in this case. So no lawsuit.

I suppose we'll see one way or another, won't we?

"The company has produced a decent amount of headsets from what I've read and has adamantly stated that they will not be provided to anyone. Therein lies the issue. "

If they are prototypes and not production models there is no legal way to compel the distribution of them unless a level of backing had explicitly stated that the donor would receive a prototype. Even then it gets hairy as the suppliers and other creditors could be higher in the pecking order meaning the prototype could still be sold to pay debt rather than give to the donor. That would be for a court to decide, but I doubt any level of funding listed that a person would receive a prototype. That being said any inventory that is on hand will most likely be forced to be sold to pay creditors. If they have all creditors satisfied and are only sitting on prototypes they most likely would be immune to any lawsuit because of the way kickstarter is setup with its disclaimers.

We will see one way or the other. But this seems more like a "buyer be
ware" issue. The good being sold was an idea and the hope that it would be viable. That's the way Kickstarter is setup and any attempt to pierce that ideal will only have a negative effect on future Kickstarter campaigns or force all future campaigns to have some form of standard legal text releasing the campaign from all claims for "failure to deliver". Without any material or malicious issues the only lawsuit here is to attempt to say that people thought they were buying something. The big hole in that thought process is that very few if anything on Kickstarter is fully developed to the point that someone would reasonably believe that they were placing an order,

 

[SkyBill40]

"The company has produced a decent amount of headsets from what I've read and has adamantly stated that they will not be provided to anyone. Therein lies the issue. "

If they are prototypes and not production models there is no legal way to compel the distribution of them unless a level of backing had explicitly stated that the donor would receive a prototype. Even then it gets hairy as the suppliers and other creditors could be higher in the pecking order meaning the prototype could still be sold to pay debt rather than give to the donor. That would be for a court to decide, but I doubt any level of funding listed that a person would receive a prototype. That being said any inventory that is on hand will most likely be forced to be sold to pay creditors. If they have all creditors satisfied and are only sitting on prototypes they most likely would be immune to any lawsuit because of the way kickstarter is setup with its disclaimers.

We will see one way or the other. But this seems more like a "buyer be ware" issue. The good being sold was an idea and the hope that it would be viable. That's the way Kickstarter is setup and any attempt to pierce that ideal will only have a negative effect on future Kickstarter campaigns or force all future campaigns to have some form of standard legal text releasing the campaign from all claims for "failure to deliver". Without any material or malicious issues the only lawsuit here is to attempt to say that people thought they were buying something. The big hole in that thought process is that very few if anything on Kickstarter is fully developed to the point that someone would reasonably believe that they were placing an order,

After reviewing a few other stories, they produced 250 fully functional units and delivered a small amount of them to the backers who committed $999+ though even that seems to be sketchy at best. The company has said that in order to ship out the units the do have and are complete would cost an additional $2M. Really? Do they come in a gold leafed box made from Unobtainium? As before, they're not sending out any others as they supposedly don't have the money.

Apparently there has already been a FB group thrown together of backers and a possible class action being filed or other legal actions considered. Given they had over 10k backers and burned through more than $6M combined across all sources, it sure leaves a lot to question. We certainly will see and I don't expect that Ossic is going to get away clean and just close up without some action being taken against them. The reputation of the founders is also damaged and I suspect they won't ever be trusted again.

Unless you're a lawyer, all of this is just our speculation based on what we're able to flimsily toss together off similar situations found online or elsewhere. I do understand your POV and give it merit for what it is while hoping you do the same in return. It's going to be interesting to see how this all plays out in the end.

 

[Brendon Gaige]

The real Crux of this is that Ossic used the funds to try to build and launch a full fledged business, pouring money into marketing campaign and trade show booths, yet they sold everyone a promise of a product with that money. No where in the crowd funding campaigns did they address the substantial allocation of the funds to anything other than R&D and production costs of the headsets. If they would have said 33% of the funds raised would have gone to marketing and trade shows, do you really think people would have backed?

Ossic tried to build a business off of a non-existent product, instead of building a product, and creating a business around said product. They put the cart before the horse.

 

[cryoburner]

After reviewing a few other stories, they produced 250 fully functional units and delivered a small amount of them to the backers who committed $999+ though even that seems to be sketchy at best. The company has said that in order to ship out the units the do have and are complete would cost an additional $2M. Really? Do they come in a gold leafed box made from Unobtainium? As before, they're not sending out any others as they supposedly don't have the money.

From what I read, their claim is that the $2 million is what they would need to mass-produce enough units to deliver to everyone who pre-ordered the headsets. The 250 or so that they built were likely hand-assembled. Looking at their campaign page, those in the $999+ bracket were actually supposed to receive two headsets, a hand-built development version as well as a mass-produced final product, both in 2016. >_>

You will receive an early, hand-built, OSSIC X development kit headphone with beta software [AUG 2016] and one of the first final production models [NOV 2016]. Your feedback will play a role in the development of the final product and you will have the ability to start creating amazing experiences using OSSIC technology as soon as possible.

As for the possibility of a lawsuit against Ossic, I agree that it's possible going by the terms they agreed to for their Kickstarter campaign. And I suspect it will likely happen, given that there were thousands of orders for hundreds of dollars each. The only issue would be actually getting any significant amount of money from them. If the company is out of funds, there won't be much to go around, and of course the lawyers handling the lawsuit will want their cut. Even if there is a successful lawsuit against them, people shouldn't expect to get much money back.

 

[martinch]

You are investing in products that are theoretical, prototypes, or in early production. You are taking a risk that the product may never come to market. Successfully suing a company that failed to launch a product is unlikely, It's not like they had a manufacturing agreement with you. You are investing in a startup. Not investing in a full fledged product ready to go to market.

Courts in England have ruled that as the text of any adverts overrides anything any terms may contain, if you use words like "buy" and "pre-order" in the "pitch", then it's a contract of sale, not an investment in a company, irrespective of what Kickstarter's terms may say on the matter. So in at least one jurisdiction it's possible, although, obviously, other jurisdictions may differ ...