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Geocast closes down

Datacasting company falls victim to a hesitant investment community 3/04/2001 07:00:00 PM Eastern

Datacasting company Geocast Network Systems suspended business operations last week, a little more than a month after laying off approximately 20% of its staff. The company, which employed 190 people at the time of its shutdown, is currently in discussions to sell off its assets.

"I think we were a little ahead of our time, and the markets today aren't going to give us a lot of freedom in that regard," says Chairman and CEO Joseph Horowitz. "The bottom line is that the markets were just not there for us in terms of additional capital, and in this climate, unfortunately, that's a familiar story."

The Menlo Park, Calif.-based company burst onto the scene a little over two years ago, proposing to send data through terrestrial DTV signals to $300 receivers that would be attached to a PC in the home. Partners included station groups Hearst-Argyle, Allbritton and Belo, which provided coverage of 37% of the country, as well as Liberty Media and Electronic Arts. The company also was expected to get into the DBS arena through a deal with EchoStar. Horowitz says that deal called for access to part of EchoStar's bandwidth, and the DBS company did come through with the bandwidth. In the end, however, getting bandwidth wasn't the problem.

"The companies that are germane to this space all see the value of what we built," Horowitz adds, "but they have to be prepared to make certain investments to have their viewers see the benefit of it."

Geocast's relatively small number of partners and investors with a vested interest in the technology's implementation, may have limited the company's ability to drum up money. Bear Stearns Managing Director Victor Miller says the problem Geocast faced was that its distribution base was not big enough. For example, he points out, datacast company iBlast has signed on stations offering 85% coverage of the U.S. "Geocast really had commitments from only a few groups. The advantage iBlast has is they have a number of partners who want to make money in the space so there could be a more logical source of funding to make sure the basic structure of the technology gets off the ground."

As for where this leaves Geocast's partners, Horowitz says he is unsure how they will proceed with datacasting plans.

IBlast CEO Michael Lambert says the problem for Geocast became a numbers game. "They signed up about 20 TV stations, and then, when we announced our business model, they pretty much were stopped in their tracks," he explains. "It's unfortunate because they're really smart engineers and very good technology people."

Lambert adds that Geocast's business model, which called for personnel to be deployed at stations inserting content, proved to be too much heavy lifting for the stations. "The business model didn't make sense, and, as a result, they burned through an enormous amount of cash."

With the loss of Geocast, doubts may begin to swirl concerning datacasting as a whole, but Lambert counters that. "We come at this because we're broadcasters ourselves, and we have an unfair advantage in that we have a lot of spectrum. The challenge is to create enhanced television services that ride alongside of our high-definition broadcasts to create value and help defer the costs of the business.

"We're not a bunch of engineers in search of a business," he continues. "We look at it from the point of view that our job is to create enhanced services and revenue opportunities while [broadcasters] build out transmission facilities."

Bear Stearns' Miller is optimistic about the future of datacasting companies like iBlast, Wavexpress and Dotcast. The key will be getting funding, he notes. "Those that access capital early are more fortunate, and people are going to have to realize that there are a lot of good ideas that are not going to be able to get access to funding right this minute. They'll have to be creative and, hopefully, have a lot of partners who will step in and support the ideas they want to be a part of."

Notes Lambert, "We recently had an additional funding commitment from our broadcast founders, so we have plenty of cash and we're not in tough financial straits."

 

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