Vidgo outage triggered by missed payments to vendors, company works to secure new funding

A technical disruption that has left thousands of Vidgo subscribers unable to access live channels from within the company's native streaming apps was the aftermath of a payment issue between the company and one of its vendors, StreamTV Insider has learned.

The disruption started in late September after Vidgo fell behind on its payments to Harmonic, a technology provider whose VOS 360 platform powers nearly all of the channels available through Vidgo's streaming apps for smart TVs, phones and tablets, according to sources familiar with the matter.

The outage was the first public sign that something was amiss at Vidgo, whose programming packages are designed to attract cord-cutters in the heartland of the country with channels like Newsmax, Great American Family and the Longhorn Network.

But Vidgo's problems actually started earlier this year, when the company effectively ran out of money and was unable to pay its vendors on time, numerous sources affirmed. No one at Vidgo would agree to speak on the record for this story, which is based on information offered by current and former Vidgo employees and vendors who agreed to provide STV Insider with information on background and on condition of anonymity.

Like other nascent technology firms, Vidgo primarily operates through venture capital, and an initial round of seed funding secured in early 2021 brought in $80 million in much-needed capital that Vidgo used to further build out its product, to include landing programming-related contracts with the Walt Disney Company, Fox Corporation, A+E Networks, Paramount Global and Warner Bros. Discovery (then Discovery Networks), among others.

Vidgo charges between $40 and $100 per month for access to its channels, with the least-expensive package consisting of around 35 Spanish-language channels and the most-expensive plan offering a robust selection of nearly 200 live news, sports and general entertainment networks. Current and former employees who spoke with STV Insider said nearly all of the income earned from subscription fees go to programmers who charge Vidgo for carriage of their channels.

For nearly two years, Vidgo's relied upon its initial round of seed funding to pay its employees and contractors. But around start of 2023, things were starting to look hazy for Vidgo, with the company ultimately accruing debt in the low millions of dollars and quickly falling behind on its payments, two sources said.

By April, executives were scrambling to turn the ship around. That month, an enterprise management company called Pythia International stepped in to help rescue the company, with the firm offering some of its own cash to help Vidgo catch up on its payments, according to four people with knowledge of the situation.

The deal with Pythia saw the departure of Vidgo's two top executives, CEO Derek Mattsson and Chief Operating Officer Bill Feiniger, who had been publicly named to their roles just eight months earlier. Both left on good terms, according to sources; earlier this month, Mattsson and Feininger were announced as the new executive pairing behind For The Win 360, a startup media platform focused on college sports. Neither could be reached for comment.

For several weeks, Pythia used some of its own money to help cover Vidgo's bills. While the move didn't help pull Vidgo out of its financial hole, it did help keep the service online while the company looked for a more-permanent source of funding. By the end of summer, though, the money Pythia had set aside for Vidgo ran out, and with no other source of capital, the company started falling behind on its bills once again.

Harmonic was one of the vendors whose invoices went unpaid. In mid-September, the company approached Vidgo about bringing their account current, something Vidgo was unable to do because it had no money to pay them, two sources said.

On September 29, Harmonic abruptly pulled their support from Vidgo, leaving subscribers unable to watch live channels or on-demand programming from within the company's own apps. That day, Vidgo sent a mass email to their customers, characterizing the issue as a "temporary service interruption" and directing subscribers to connect their Vidgo credentials to "TV Everywhere" apps supported by some of its programming partners.

Two days later, Vidgo issued another note to customers that offered more details about a "dispute with a vendor who changed the terms on Vidgo in the middle of a contract and forced the new terms on Vidgo after hours on a Friday night." Separately, in an email with this reporter on that same day, a spokesperson for Vidgo described the matter as a "legal dispute" and said a "demand letter has been filed."

It isn't clear if Vidgo ever escalated the matter to a court of law. A search of the federal court docket showed no pending civil cases between Vidgo and Harmonic. (The only legal matter involving Vidgo is a patent infringement lawsuit filed last month by Dish Network, which sources at the company say is unrelated to the outage.) An email sent to Harmonic seeking comment on the matter was intercepted last week by a public relations firm working on their behalf; the firm promised to follow up with Harmonic "to see what might be possible," but has yet to respond further. A spokesperson for Vidgo declined to confirm Harmonic as the vendor who pulled the plug on the company, citing confidentiality agreements.

Vidgo has offered occasional updates to customers since the outage began nearly two months ago. On October 11, the company sent an email to subscribers with an assurance that it was "working in good faith with the vendor involved and believe we are making solid progress," according to a copy of the email reviewed by STV Insider. Other messages promised discounts and bill credits to customers who were willing to keep their subscription active, and explained how customers could use their credentials to watch "Monday Night Football" and other live sports through TV Everywhere apps.

The company is hoping the discounts and access to TV Everywhere apps will convince some long-time Vidgo subscribers to stick out the outage, especially those who were grandfathered in at lower price points. But Vidgo only has agreements with around 30 TV Everywhere app providers, which means customers can't access around 70% of the channels they pay for.

No one at Vidgo thought the outage would last this long. Behind the scenes, senior executives have worked tirelessly to negotiate deals that would have provided Vidgo with much-needed cash to pay its bills and restart the service, people familiar with the situation said. Without a functioning app, executives have leveraged Vidgo's programming contracts with Fox, Disney and others, and affirmed those partners have supported the company through its most-recent turbulence.

Several times, Vidgo has come close to securing a new deal for funding, only for those deals to fall through at the last minute. But late Monday evening, as this story was being written, a source close to the company sent a text message that said Vidgo was "anticipating relaunching the service in early December, once programmers and vendors are paid."

The statement was the most-encouraging sign that the company was closing in on a new round of funding, and while specific details of a pending deal weren't immediately available, one likely outcome of an agreement would be additional programming that focuses on providing "the best overall value for consumers in a tough economic environment," the source said.

Still, there's no official word from Vidgo on when that might happen. And until that word comes down, customers will remain in limbo, wondering when their streaming TV service will come back online.