DEAD SITES DOTTING THE WEB-SCAPE
11/17/0 12:14 (New York)
By PAUL BOND
the Hollywood Reporter
LOS ANGELES - Another day, another dot-com bites the dust.
That's true this month, at least, according to a study released
Thursday by the San Francisco-based research firm WebMergers.com.
The report says that more than one Internet company has gone belly
up for each day this month and that 130 have shut down so far this
year.
And as comprehensive as the WebMergers.com report is, it's not
complete. Perhaps no list is, considering how many under-the-radar
Internet companies surface and submerge every day.
The WebMergers list includes 17 online entertainment companies that
have ceased operations, are liquidating their assets, are seeking a
buyer or are attempting to reorganize through bankruptcy or other
means. But by those same criteria, research done by The Hollywood
Reporter indicates the list should be at least twice that long -
especially if it were to include Web companies that don't offer
entertainment themselves but were operated by an entertainment
concern, such as Disney's ToySmart.com.
Both Scour and iCast make the list, though Scour is in the midst of
auctioning off its assets and iCast still operates but has said it
will close by Jan. 31 if it can't find a buyer.
According to WebMergers' figures, 24 percent of the shutdowns this
year came in the e-content sector, whereas 57 percent were e-commerce
companies, 10 percent Internet services companies and 9 percent were
in Internet infrastructure.
And the death rate is accelerating, the study suggests. In the past
three months, 59 Internet companies have gone under. In the three
months prior to that, 45 shuttered, while during the three months
before that, 17 died. On the list are just two publicly traded
companies, Pets.com and Mortgage.com.
Thursday's casualties included the 21 of 30 employees laid off at
Audiohighway.com, an online media site, and the 40 staffers (20
percent of its work force) let go at financial news site
TheStreet.com, which also ceased its U.K. operations and ended its
joint venture with the New York Times.
The 130 closures this year are responsible for throwing some 8,000
people out of work, the study says.
Concerning the online media sector, the fallout affects more than
just the ill-fated pioneers - those who may have been just a bit
premature in their gusto to create whole new companies based on
cyber-entertainment.
Besides the entertainment executives who left lucrative careers to
join dot-com startups, there are the venture capitalists who haven't
done so well of late.
``But a lot of those who fled investment banking and established
media companies are being welcomed back,'' WebMergers president Tim
Miller said.
Then there are the public relations firms and artist management
firms that have Internet companies as clients. Some have traded equity
(in some cases now worthless) in the companies for whom they have
worked, and some others have done work for companies that never paid
their bills.
``Entertainment plays are too early. Broadband is not ready for
primetime,'' Miller said.
But, said entertainment mogul and venture capitalist Frank Biondi,
things will get better once the shakeout is complete, an event
probably still months away.
Biondi, through his Waterview Partners, has a stake in about 25
Internet companies; many are related to entertainment, and at least
two are considered pure content plays: AtomFilms and Broadband
Sports.
His confidence unshaken, Biondi recently plowed even more money
into those two companies.
``Both have a ways to go before breaking even, but we like their
management, and they've been building traffic nicely,'' Biondi said.
``Now they just have to monetize the traffic better.''
Some of Biondi's other investments include Creative Planet,
ReelPlay, SightSound.com, WhatsHotNow.com and Yack.com, as well as
public companies Hollywood.com and LoudEye Technologies.
``Markets do what markets do,'' he said. ``They overreact in bad
times and are overly optimistic in good times. A lot of companies were
just flawed ideas.''
Biondi said that although little new money is flowing to online
entertainment, venture capitalists are split about the way to handle
previous investments. Some are cutting off the money supply and paring
their losses, while others are keeping their investments afloat with
additional funding.
``If you raised 10 months worth of money at the beginning of the
year, you're running out of money today, and there's no market for new
capital,'' he said.
Biondi's theory is that for 10 investments he makes, ``four will go
bust, and hopefully two or three will be spectacular and pay for the
(others).''
Just last year, when the market was over-rewarding the Internet
sector, as many as seven in 10 investments might make healthy returns
in as little 10 months, Biondi said.
``But that's history now.''
Miller agrees. ``It's a natural cycle that's occurred in every
technology revolution,'' he said. ``Only now, the highs are higher and
the lows are lower. It's a marketplace on speed.
``Shutdowns will accelerate into the peak, then slow down. And by
the middle of next year we'll see signs of profits for Internet
companies.'' |
