The moribund online video and music companies piling up like bags of trash along the information superhighway stand as a grim reminder that the Internet doesn’t make it any easier to survive in the entertainment business.
In fact, the recent demise of Pop.com, an original entertainment site backed by Hollywood luminaries Steven Spielberg and David Geffen, shows that the Web is a tough venue even for those with the golden touch in Tinseltown.
This was the sobering backdrop for last week’s Digital Hollywood conference in Los Angeles, where more than 4,000 people involved in online music and video gathered to collectively lick their wounds. The attendees included dozens of the newly unemployed, including those who lost their jobs this month at Spielberg’s Pop.com, online TV site Pseudo Programs Inc., and Web music venture Atomic Pop.
But it’s not all bad news on the Web entertainment front. Instead, the dot-com shakeout is helping to forge a new breed of company and a new type of entertainment–one that treats a computer screen as more than just a TV set.
A good example of the latter is due from San Francisco’s Shockwave.com Inc., one of the online entertainment sites that trimmed its spending and laid off employees in September.
The company sponsored “The World of Stainboy,” an animated series created by Tim Burton, the filmmaker responsible for such otherworldly fare as “Edward Scissorhands” and “The Nightmare Before Christmas.” More than just a cartoon, the “Stainboy” project presents a whole family of online amusements tied to Burton’s characters.
The original idea was for a short animation starring Stainboy, a pint-size superhero whose sole power is a major-league ability to mottle. But the project expanded as Shockwave started incorporating the interactive and community-building tools of the Internet.
As a result, visitors to the World of Stainboy will not only be able to watch the poorly equipped hero battle such villains as Staregirl and Toxicboy, but they also can download electronic trading cards, send Stainboy postcards via e-mail, play games (outstare Staregirl!), and peek behind the scenes of the production.
Burton’s watercolor-style work is accompanied by the eerie music of Danny Elfman, a longtime Burton collaborator and former leader of the rock band Oingo Boingo. As with Burton’s movies, the effect is unsettling yet lovely, at least until the cartoon blood gushes. Then it’s time to wince.
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By surrounding the biweekly episodes with a slate of things to do and share, Shockwave hopes to get Burton fans to spend more time at the site and check in more often. That, in turn, should drive up the revenue from advertisers, whose checks rise or fall according to the volume of viewers.
But advertisers are paying less and less for space on the Internet, causing problems even for Web powerhouses like Yahoo!. So the approach that works for CBS and NBC–offer shows for free, but sell lots of commercials–hasn’t worked yet for their counterparts on the Web.
Alan Sternfeld of Eveo, an online site for grass-roots videos, said: “We concluded at the get-go that if your business model is about nothing more than attracting viewers to your site and selling advertising, you’ve got a big problem.”
The problem is exacerbated for sites specializing in video, whose audience is effectively limited to people with high-speed Internet connections. That translates into a few million homes and a lot of dormitories, which isn’t enough yet to support the typical online entertainment business, Sternfeld said.
“We are laying the foundation for a universe that’s still being built, but is not yet commercially viable,” he said. “It’s not clear … that a consumer-oriented company built around content has the capacity to turn a profit.”
It’s long been the accepted wisdom in the online entertainment business that audiences would remain small for several more years, as high-speed connections slowly spread to mainstream consumers.
At first, investors went along for the ride. But when the Nasdaq stock market tanked in April, the speculative money for entertainment on the Web dried up.
“Investors are very much in a show-me mode,” said Gene Hoffman, chief executive of eMusic.com Inc., a Redwood City, Calif.-based company that sells downloadable music.
To conserve cash, eMusic recently shut down one of its offices in Los Angeles and laid off almost 20 percent of its employees.