Netcaster plans to file for bankruptcy
It appears that DEN is done.
Digital Entertainment Network told its 150-person staff late Wednesday that the Santa Monica-based company has run out of funding and can no longer pay employees at the Gen-Y Netcaster.
Staffers, however, were also told that they could continue working on DEN’s Web site as volunteers, until the company managed to secure additional funding.
The company — backed by high-profile investors including Chase Capital Partners, Microsoft, Dell, NBC and former Warner Bros. co-chairman Terry Semel — said it plans to file for Chapter 11 bankruptcy protection as soon as possible. DEN had already laid off more than 100 staffers earlier this year to cut high production costs.
It was only last Friday that execs at the company, including prexy David Neuman, confidently renounced what they called false rumors of insufficient funding to operate into next month.
A new round of financing and merger possibility was close to being finalized with new investors and even Sony, but the deal fell through this week. DEN is looking to sell the biz for up to $11 million, sources say.
Since its launch in 1998, the site has been fiercely criticized for lavish spending on its two facilities and top execs, management shuffles and a sexual harassment lawsuit against co-founder Marc Collins-Rector by a 20-year-old, which industryites said tainted the company’s brand identity. Problems were said to have hurt its fund-raising capabilities.
“The people who really know this space are watching with interest,” Neuman told Daily Variety on Friday. “Anyone in this space has taken their slings and arrows. We’ve definitely taken ours. We just have to keep fighting.”
Trying to make a comeback, DEN made its second attempt on Monday to appeal to its young audience, industry naysayers and investors with a flashy new site and original content, but financiers declined to pump more money into the startup.
DEN had raised $60 million to date, and last month announced it had decided to halt production on its original slate of shows and to acquire content from outside production houses in order to cut rising costs. Shows, targeting niche audiences such as Christian teens and extreme-sports fanatics, were said to have cost as much as $100,000 for six-minute episodes.
An IPO filing, which would have sought out to raise $75 million, was canceled in February.
A new management shuffle, which made music player and former Capitol Records topper Gary Gersh DEN’s chairman while Greg Carpenter became CEO and chief information officer, was also seen as a last-ditch effort to turn things around.
Inside sources say the company isn’t plagued by a lot of debt and is likely to begin searching for a buyer, even another Netcaster. Credit Suisse First Boston has been retained to handle a sale.
DEN execs declined to comment, but sources said Gersh and partner and music exec John Silva will move back to G.A.S Entertainment, the music management outfit they founded that reps artists the Foo Fighters, Rage Against the Machine, Beck and the Beastie Boys.