IDT takes shot at showbiz with computer animation
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This is the the text of an article in yesterday's Bergen Record:
By MARTHA McKAY
STAFF WRITER
Sunday, May 9, 2004
The golden Emmy sits alone on a glass shelf in Morris Berger's office in downtown Newark.
Berger, a telecommunications executive now in charge of his company's foray into show business, admits he's sometimes surprised at the Hollywood turn his company has taken.
"I do pinch myself," said Berger, head of IDT Entertainment.
IDT, a Newark-based telecommunications company best known for selling calling cards and cut-rate phone service, headed for Tinseltown about a year ago to knock on doors, its pockets overstuffed with cash.
Armed with a method to produce computer animated movies at low cost - and motivated by IDT Chairman Howard Jonas' passion for more creative pursuits - the company shopped an 11-minute animated short to some West Coast power brokers.
They liked what they saw, Berger said, but they asked, "Can you do it on a large scale?"
So quickly and quietly, over the past 12 months, IDT has assembled a kind of dream team involved in the business of producing and distributing computer animated TV shows and feature films.
They bought the company that produces "The Simpsons" and "King of the Hill."
They lined up some well-known animation gurus, partnering with John Williams, producer of "Shrek," and Neil Braun, former CEO of Viacom.
They bought an established video distribution company and a large animation house in Canada.
Just last week, they announced purchase of a minority stake in POW! Entertainment run by comic book veteran Stan Lee, creator of The Hulk, Spider-Man, The Fantastic Four, and X-Men.
So far, IDT has sunk $100 million into the effort and has three feature-length, computer-animated films in production, including one being directed by Christopher Reeve based partly on a bedtime story Jonas used to tell his children.
Another film, "Starpoint Academy," is the brainchild of the late Gene Roddenberry, creator of "Star Trek."
It may come as a surprise to some people that IDT, whose building dominates the skyline of Newark with a huge logo and oversized American flag, says it already turns out more minutes of animation per year than any other company in the world. The company's three movies are all slated to be completed by the end of 2005.
And there are analysts who say IDT is making good moves.
"They are not just buying the flash, they are buying the grunt, the guys who can turn out the stuff," said Robi Roncarelli, a Toronto-based independent computer animation industry analyst.
Hollywood, however, is a fickle business.
Big hits can often be followed by big flops, and much will depend on whether the company can produce even a single winner.
"It's so easy to get caught up in the Hollywood mystique. Everybody wants to rub shoulders with the stars; everybody wants to go to Cannes," said Roncarelli. "I've seen companies come and go."
IDT's CEO Jim Courter, the former New Jersey congressman, says they know the risks and are prepared.
"We have $1 billion in cash and no debt; we're not going to bet the house here," he said.
But in the next breath, Courter declares, "In five years, I think [IDT Entertainment] will be the largest division at IDT and the most profitable."
He continues: "We plan to replace ["Finding Nemo" producer] Pixar as the animator of choice."
Bold talk, Mr. Courter.
"We're a bold company," he replies.
In fact, IDT has developed an entrepreneurial reputation, funding new ventures, buying distressed companies, and taking chances on some businesses outside its core.
Jonas' interest in content, for example, ranges from the syndicated Talk America Radio Networks to some small-scale publishing.
The gambit into animation was born several years ago when an IDT engineer came up with a system that would allow a film director and animators in different locations to see each other's work as it is being created.
Computer animation, by its nature, is a time-consuming, expensive, and difficult business.
IDT's idea solved several problems, said John Hyde, who met with Berger a year ago in Hollywood at the suggestion of a mutual acquaintance. A quick coffee lasted three hours, and several weeks later the two companies - Hyde's Film Roman Inc., producer of "The Simpsons," and IDT - struck a deal.
Wouldn't it be great, Hyde explained, to be able to hire independent animators, especially those in places such as Bulgaria, Israel, and India, who would be eager to work at lower rates, and who might have a particular specialty - backgrounds, for instance, or creating characters.
The next problem to solve was communications.
"If a director wants a certain kind of shot, that means the people animating the character and the people animating the background both have to know what the 'eye of the camera' wants and everything has to be coordinated," Hyde said.
IDT's system lets animators scattered all over the world see each other's work as it's being done. So instead of sending massive files back and forth via e-mail, a director can essentially look over the shoulders of all the animators.
"It's almost as if you are all in the same room," Hyde said.
And it runs over IDT's own telecommunications network.
The company then signed up a pool of about 2,500 animators that IDT can instantly draw upon, without the hassle of putting out bids or signing contracts. The entire arrangement saves time and money, the company says.
Hyde said the system can lop off a quarter of the time needed to make a movie or TV show.
Courter estimates a feature-length computer animated film that might cost a major studio between $60 million and $80 million would cost IDT between $20 million and $30 million to produce.
So far, the company's entertainment business isn't profitable, but is on track this year to deliver about $170 million in sales with a profit of between $15 million and $20 million.
The IDT team knows that to really make money in Hollywood, you not only need to create the content and produce it, but also distribute it - and give as little away as possible in deals you cut along the way.
To that end, IDT set up an in-house production company - Digital Production Solutions (DPS) - which is producing the Christopher Reeve film and other projects including "Monster Monster Trucks," an animated children's adventure aimed at TV or DVD.
"He who owns the content sets the rules," said Stephen Brown, IDT's chief financial officer.
But he acknowledges that getting their films onto 3,000 plus theater screens in a single weekend - the kind of exposure that gives a film at least a chance to become a big hit - will require the muscle of a big Hollywood studio.
"We have a strong feeling we'll be able to do a deal," said Brown. A major studio has told IDT "if we like the [Reeve] film, we'll do business with you," he said.
Brown grinned.
"Hollywood can be very seductive," he said. "But both Jim [Courter] and Howard [Jonas] won't let us be irresponsible with money."
That's one reason IDT plans to keep its entertainment division headquarters in Newark.
If the company's share price is any measure, investors seem to like IDT's steady revenue-generating calling-card business and its adventures on the Left Coast.
The stock price has climbed 32 percent over the past year.
Thomas W. Friedberg of Janco Partners Inc., believes that so far, IDT hasn't made any missteps in its moves into showbiz.
"I don't think it's going to be folly simply because this isn't like Sony buying Columbia Pictures. It looks like [IDT] didn't overpay for the assets, and we'll just have to see," Friedberg said. "Whether it works or doesn't work, it isn't going to break IDT."
But that glass shelf in Berger's office is long, and that single Emmy won for "The Simpsons" looks kind of lonely.
Could it be this telephone company harbors dreams of more gleaming statues?
Four floors below Berger, you might think you're down the street from Spago. Dark blue and orange walls, movie posters, halogen track lights, and Bart Simpson's voice piped in over recessed speakers.
Animators hunker down in cubicles decorated with tiny figures from the "Lord of the Rings" trilogy.
A few men with tanned faces look slightly out of place with pressed jeans and cowboy boots - animation executives flown in from some of IDT's recent acquisitions.
Can they all resist the lure of the red carpet?
When asked what Hollywood thinks of IDT these days, Brown, the CFO, doesn't hesitate.
Six months ago we were "just a speck," he says. "Now we are a gravitational force." |
