News Articles

Are two better than one?

AtomShockwave forecasts profitability by end of year 3/25/2001 07:00:00 PM Eastern

Online entertainment companies litter the crowded roadside of Internet failure, but, last week, one of the bigger players in the market claimed that it not only will survive but will profit by the end of the year. Such a claim might seem quixotic given current economic conditions, but Brian Burke, vice president of syndication for AtomShockwave, makes it clear the goal is serious.

The formation of AtomShockwave, a new entity that brings together online entertainment companies AtomFilms and Shockwave, began on Dec. 15, when Shockwave.com acquired AtomFilms in a stock-for-stock deal (with AtomFilms shareholders owning 30% of the consolidated company).

"We have built an entertainment company that sees every different platform as an exhibition possibility," he says. "What does online mean to us? It's primarily our feeder and where we showcase our content. But the diverse revenue streams that underlie our company are based on exhibiting content on a number of platforms. Multilevel distribution is very important for our making it to profitability."

Getting there, though, might be easier said than done.

"It would be an impressive achievement," says Jupiter Media Metrix analyst Robert Hertzberg. "I think they have a chance, but it would be impressive if they could get there, because they're reliant on Internet advertising, which is in a bad way."

The eventual goal of AtomShockwave, which numbers 150 employees, is to bring together short films, animation and games under one site, although for now the two sites remain distinct. Besides announcing its official launch, the company said that it had secured $22.9 million in its latest round of financing. Among its investors are Macromedia, Sequoia Capital, JPMorgan Entertainment Partners, Arts Alliance, Waterview Partners and affiliates, and Intel Capital. Given the lack of success many online entertainment companies have had, scoring such funds is no small feat, but a major reason for the support may be that the company views itself as an entertainment company first and a new-media company second.

Burke breaks down the revenue as 75% from advertising and 25% from syndication and other sources. "We have a significant off-line presence, with diverse platforms and, now, diverse content," he says. Outlets for the content range from television stations to airlines and new platforms like TiVo or cable video-on-demand.

More than 40 television stations and 20 airlines are signed on for syndicated content, and the company has more than 100 business-to-business partners, he says. "With the merger, one of the main components is going to be to continue to build the syndication business."

The desire to work with traditional media delivery may have been one of AtomFilms' keys to success. Its goal is to provide an outlet for short-form content that otherwise would not be seen by traditional media outlets. And probably most important, with the exception of a few programs, such as Tim Burton's Stain Boy
, the production costs are handled by the film's producer, not AtomFilms.

"We have a real low-cost model for acquisition and development of content," explains Burke. "For film and animation, it's purely acquisition, and we'll bring animators and directors on board, license it out and give them a revenue share."

It is that licensing out of the content that provides the most stable part of AtomShockwave's revenue stream, particularly as Internet advertising falls on hard times. Yahoo's recent downturn was the result of an over-reliance on advertising from other dotcom companies: When many of those companies hit the hard times, its revenue took a tumble. But, by offering an outlet on more-trusted mediums like television, AtomShockwave believes it can build its advertising relationships with advertisers like Skyy Vodka, Ford and Volkswagen. "We targeted major brands right off the bat. The idea was to be creative about how we placed them," says Burke.

"The march towards profitability, in part, is a matter of execution, but it's also a matter of the market's being there," says Hertzberg. "We've heard so many companies talk about reaching profitability; that's what investors require you to say. Getting there is another matter. But they have pretty good management and smart investors behind them, so I give them a shot."


TV-NEWS SITES: February 2001, Ranked by average minutes spent per usage month/Source: Media Metrix

Site Avg. minutes spent Chg.

1

CNBC.COM

31.7

up

2

CNN.COM

22.9

down

3

MSNBC.COM

22.6

up

4

ABC NEWS*

15.1

down

5

CNNFN.COM*

14.4

up

6

FOXNEWS.COM

14.3

up

7

BLOOMBERG.COM

6.7

down

8

WebFN.com

-

NA

All WWW679.8


CABLE-TV SITES

Site Avg. minutes spent Chg.

1

BET.COM

41.6

up

2

ESPN*

40.7

down

3

CNBC.COM

31.7

up

4

CARTOONNETWORK.COM

23.1

down

5

CNN.COM

22.9

down

6

MSNBC.COM

22.6

up

7

FOODTV.COM

19.0

down

8

HGTV.COM

18.8

up

9

COURTTV.COM

18.3

up

10

NBCI*

17.3

down

11

ABC*

17.2

up

12

FOXNEWS.COM

14.3

up

13

SCIFI.COM

12.5

up

14

CBS.COM SITES*

12.0

up

15

WEATHER.COM

11.6

up

16

TVLAND.COM

10.1

up

17

PBS.ORG

9.6

down

18

DISCOVERY.COM

9.0

down

19

LIFETIMETV.COM

8.6

down

20

HISTORYCHANNEL*

7.1

down


All WWW


679.8


Cable and Network Universe


36.4


up

Average minutes spent per usage month:
The average total number of minutes spent on the Web site/channel/application during the month per visiting person.

* Represents an aggregation of commonly owned/branded domain names.

** From January to February 2001.

-Statistically insignificant traffic.

Note: Sites categorized by BROADCASTING & CABLE.

NA: Comparison with previous month not available.

NC: No change from January to February 2001.

Sample Size: More than 60,000 nationwide.

September
October