New dot-coms hope local pedigree helps

This article was corrected on June 19, 2000.

HOLLYWOOD — Silicon Valley had its chance in the ring. Now it’s Hollywood’s turn.

While early entertainment Netcasters have been KO’d in attempts at original programming on the Internet, a clutch of new high-profile dot-coms are suiting up for round two.

The difference is that the new heavy-hitters are as Hollywood as they get, backed with slick self-confidence, talent and, most important, money to add muscle to the ventures.

Loudly sounding the opening bell this past week was the launch of Z.com — from Idealab (eToys), Brad Grey’s Basic Entertainment, 3 Arts Entertainment, Jerry Bruckheimer and Maverick Records co-founder Guy Oseary. The site has enough star-backed programming (by Ellen Degeneres, the Red Hot Chili Peppers, Bruckheimer and Oliver Stone) to almost certainly whet Netizens’ appetites.

Also skedded to bow before the end of the summer: eCompanies’ Icebox.com; Warner Bros. Online; DreamWorks and Imagine’s Pop.com; NBC’s NBCX.com; and EzFlix, a production venture from former DreamWorks and Columbia TriStar honcho Bob Cooper.

Additionally, new animated shows for Shockwave.com will be coming from Tim Burton, James Brooks, David Lynch, Chris Kattan, Harland Williams and “South Park” creators Trey Parker and Matt Stone.

They’re all confident they can succeed in drawing a mass audience, something the current crop of dot-coms — well over a year after their launch — have failed to do.

Despite hours of original video and animated films or TV-like Webisodes, iFilm, AtomFilms and Warner Bros.’ Entertaindom, among others, have yet to find a runaway hit online in the vein of a “South Park” or a “Blair Witch Project” that would put Web streaming on the map.

Recently, Webheads were underwhelmed by SightSound.com’s pay-per-view “Quantum Project,” a 32-minute, $3 million pic that bowed last month with an unbearable six-hour download time.

And many blamed the demise of youth-skewing Digital Entertainment Network, which last month shut its doors and laid off its 150 staffers after running out of funding, on what was called dull and obnoxious content.

The new round of players has had the time to absorb the bloody lessons from rivals before swooping in to take over:

  • Bad content doesn’t work. Much of what’s been launched online is either too low-budget, esoteric or plain weird for mass audiences, especially when it comes from unknowns. Many online shows cater to what Silicon Valley computer geeks want to watch.

  • It helps to understand the Web and know how Netizens use it. Many Hollywood execs who’ve made the transition to Netcasters don’t even have computers on their desks, let alone surf the Web. Some execs even get their assistants to videotape Web sites for them to view at home.

  • Major distractions don’t help. Dot-coms such as DEN have suffered financial woes, massive layoffs and management reshuffles, making it harder for them to concentrate on their programming than on their inhouse soap operas.

But how do you create a hit when no one’s watching?

High-speed Internet connections are still being rolled out across the U.S.; only 2 million are connected thus far. And with most people using far slower modems, downloading a 10-minute film or two-minute trailer two hours at a time (if you’re lucky) just isn’t attractive.

Lack of interest

The number of visitors to Web sites still proves that Netizens are interested in shopping and getting information, not watching entertainment.

Nearly 23% of U.S. households will have high-speed ‘Net access by 2003, according to analyst firm Jupiter Communications.

And if an online show hasn’t yet built a hit by drawing enough of the 8 million college students in the U.S. with free access to high-speed Web connections, who says less ‘Net-savvy users will ever embrace an online program en masse?

In other words, it may still be too early to jump into the Netcasting game.

Yet the leap is being made, and for good reason. Nowhere else is branding more important than on the Web. Look at Amazon.com or eBay.

The newly created Warner Bros. New Media arm recently said its Warner Bros. Online and Entertaindom.com divisions will ramp up online programming efforts, in a sense competing with each other (WB Online will feature studio-brands, while Entertaindom will have more edgy and original content).

“We’re not afraid of attracting the early adopter,” says Sean Burton, veep of business development for both Web sites. “We want to be leading the curve, not falling behind it. Right now, we compete with television, which spends so much money to get good production quality and good writing, but we want to be there when convergence happens.”

Figuring out what Netizens want to watch may be hard enough. Trying to stay afloat while you come up with the hits may be harder.

Investor fatigue

Failures like DEN’s are resulting in investor fatigue, making venture capitalist firms less interested in funding content distribs or creators, and going back to technology creators who are more likely to provide a return on investments.

“If you’ve got an idea for a show, pitch it to the Fox network,” says one exec at a venture capitalist firm, which itself is raising $300 million to fund startups in the entertainment biz. “Until you can show me there’s money to be made in content on the Web, we’ll be conservative in who we invest in in the entertainment space.”

DEN’s own investors, including heavyweights Chase Capital Partners, Microsoft, Dell, NBC and former Warner Bros. co-chairman Terry Semel, pulled the plug on the company in May, even after the Netcaster tried to make a comeback with a new site and new content.

DEN proved dot-coms are quickly discovering that without an audience, there’s simply no money (read: revenues) in them- thar virtual hills just yet.

And without financial rewards, there may not be a reason for venture capitalists to come calling.

IFilm quickly figured this out, transforming itself from a Netcaster of hundreds of short films into a portal for every short film shown on any Netcaster.

“This won’t get serious until there are 20 million people with high-speed Internet connections,” says Darren Chuckry, creative director and exec producer at Web design shop Dream Theater, which is beginning to dabble in creating original content for the Web.

“It’ll get serious when it’s seen as a business, when it makes money. Now it’s being seen as a gimmick,” Chuckry says.

There are some models, however, that run contrary to idea of content as gimmick.

With online video technologies from RealNetworks and Microsoft’s Windows Media Player improving, every Web site can soon feature viewable programming.

Not wanting to create it themselves, these sites will be looking for outside providers, namely Netcasters, with whom to ink distribution deals.

Take Michigan-based Joe Shields, who has been able to generate $1 million in revenues from interactive animated shorts on JoeCartoon.com — much of the revs coming from major advertisers and content licensing deals with other Netcasters, including AtomFilms and Shockwave.com.

Hollywood clout

The new crop of Netcasters think they have the clout to rake in the same kind of dough — they can, after all, trumpet their ties to Hollywood and proven hitmakers.

“Given the market, it’s absolutely a gamble to be in this space,” says Steve Stanford, CEO of animation site Icebox.com, which is producing up to 50 Web series created by producers of TV hits “Party of Five,” “The Simpsons” and “King of the Hill,” among others. “But we have as good a chance as anyone, because we’re working with the same talented content creators that are already on TV. It takes some of the risk away.

“A lot of companies are creating content that’s completely noncommercial. You might as well put free porn on your site; you’re going to get just as much revenue,” he adds.

Similarly, Pop.com is relying on the talents of DreamWorks toppers Steven Spielberg, Jeffrey Katzenberg and David Geffen and Imagine’s Ron Howard and Brian Grazer to pick what programming (mostly comedic) it launches with.

And Z.com’s backers know a thing or two about what audiences want to watch.

“Entertainment’s hard,” Z’s prexy-CEO Joe DiNunzio says. “Even the smartest, greatest minds don’t have a large hit ratio. I don’t think we’re going to be much better at getting a higher percentage of hits, but it is only now that the strongest branded talent is starting to look at this medium to do interesting things.”

Some of the early entries:

  • Six-month-old Media-Trip.com has paired with former Disney topper Joe Roth to create and distrib original programming. The big name could soon lead to bigger profits for the site, which easily reaped more than $80,000 from homevid sales for the short film “George Lucas in Love” — possibly the ‘Net’s most-watched short film.

  • SightSound.com has inked pacts to show pics from Miramax Films and Franchise Pictures before the year is out.

If at first…

Even if the new sites fail, their backers and clout will likely ensure that they’ll be able to fail over and over again, something DEN didn’t have the luxury to do.

With Time Warner and AOL on board, Entertaindom has room to fail, as do Pop.com and NBC’s new Netcasting venture NBCX — consisting primarily of original comedy-focused animated and live-action streaming video drawn from both NBC and other providers. The goal is to eventually find something that works and that can make the transition to traditional film screens or television.

“There’s no formula you have to follow for content on the Web — that it has to be 22 minutes long or has to be divided into three acts,” says Z’s DiNunzio. “And that’s the bad news, that there is no formula to follow.”

As their launches near, prospects for success are based on whether or not the new Netcasters understand what it takes to operate like an Internet company — understand it well enough to stay in business for as long as it takes to make money.

“We’re still in an experimental phase,” says David Card, director of content and programming at Jupiter Communications. “The guys coming in can certainly learn from the first wave’s mistakes, but I don’t think all the mistakes have been made yet.

“I can foresee terrifying things on the horizon. This is Hollywood, where buzz is really important and spending a lot of money is proxy for your manhood.”

But there is hope.

“It’s possible to demonstrate that there’s an audience online, but you have to have a rational business model that works,” says Icebox’s Stanford.

“We’re not paying talent big salaries. The talent is really betting on their own ability to be successful. We don’t make money if the talent doesn’t make money. In success, everyone does really well.”

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