BDE in forbes...January 25, 2000
Brilliant moves
By Charles Dubow
On the morning of Jan. 10 many executives woke up to learn that the future of their companies had been radically changed. The announcement that morning of the blockbuster merger between America Online (nyse: AOL) and Time Warner (nyse: TWX) suddenly drew a sharp line between those who were in the AOL-Time Warner camp and those who weren't. For those who were, the world seemed like a rosy place with infinite possibilities. For those who weren't, it suddenly seemed much more uncertain.
Kevin Bermeister, cofounder and president of Brilliant Digital Entertainment (amex: BDE), was one of the lucky ones. His small, short-format animation company had been struggling, and his most meaningful client was Time Warner Digital Media's Web site, Entertaindom. It was a nice site, but Time Warner's notoriously leaden Internet touch made it seem almost inevitable that Entertaindom would have a rocky time getting off the ground.
But no more.
Now that BDE has aligned itself with the Dulles, Va.-based Internet powerhouse, it seems a foregone conclusion that Time Warner's online efforts will get an AOL-size lift. As part of its strategy to continue building its subscriber base and adding new features and services, AOL needed both content, which is (at least offline) Time Warner's forte, and its expertise at creating and distributing that content. Now with the chance to work with Time Warner's vast media properties, AOL will be able to use characters ranging from Bugs Bunny and Porky Pig to Buffy the Vampire Slayer in order to consolidate its presence on the Internet and television.
This is where a company like BDE comes in. The Los Angeles-based company develops technology and creates interactive programming for the converging Internet and TV markets. On the Entertaindom Web site, visitors can download and watch short, five- to eight-minute long animated interactive "Webisodes" featuring such popular characters as Superman, Xena the Warrior Princess and the members of the rock group Kiss--in full makeup, of course.
"The content we're creating is the closest thing to television on the Internet," says Bermeister, an Australian who is a 20-year veteran of the interactive entertainment business. "The AOL announcement is very important in the life of our company and offers the chance to extend our brand to a larger audience. The entertainment form we are creating is a new method for delivering interactive content. Our business is based on ad impressions and e-commerce integration with partners like Entertaindom. The possibilities for product placement are limitless. In the future, depending on which demographics the advertiser is targeting, because our content is all digital you could see Superman drinking from a Coke can or flying by a Ford Explorer."
BDE's Multipath movies are full screen, full motion, real-time 3-D interactive animation produced using the company's B3D Studio tool set and viewed by downloading its free Digital Projector software. Unlike conventional TV, which is linear in progression, interactivity allows users to change the actions in the characters and alter the ending of the episodes. So instead of seeing reruns of the same episode, a viewer can see a different story every time they visit the site.
"When we saw the quality of the animation Brilliant Digital delivered on 'Superman' and the show's popularity on our site, we realized that a new technology and storytelling benchmark had been established on the Internet,'' says Jim Moloshok, the chief executive at Warner Bros. responsible for Entertaindom. "'Superman' contains all of the excitement, pacing and special effects that until now had only been experienced in broadcast media or feature films. As a result of marketplace feedback, we are increasing our commitment to our own 'Superman' series and giving increased distribution and promotion to the BDE-produced 'KISS' and 'Xena' Internet series."
However, first-time visitors to the site shouldn't expect state-of-the-art animation. The programming BDE currently produces has, even with a high-speed connection, a crude, jerky quality reminiscent of the kind seen in computer games. But Bermeister expects that with time the sophistication of the animation will improve. "When we first conceived BDE our primary goal was to create compelling story lines," he says. "We didn't care what the property looked like. It could have been stick figures. The most important thing was that the story or the interactivity was never interrupted."
Bermeister says recent technological innovations such as the more powerful processors in products like Sony's (nyse: SNE) PlayStation2 are vast improvements over the PC-based processors now on the market that will allow them to create more realistic animation. "We're about evolution," he says. "We see one day when you won't be able to see a discernible difference between animation on a PC and on a TV."
Bermeister adds: "The Internet is a very forgiving space as far as content is concerned because what is out there is so dry."
That's why AOL might find BDE a good fit for its own content efforts. Because of BDE's relationship with Time Warner, migrating BDE to a wider platform on AOL would be a logical step. The question is whether AOL would opt for BDE or choose one of the other short format video companies such as Disney (nyse: DIS) and Pop.com, which is backed by Imagine Entertainment, Dreamworks SKG and Vulcan Ventures.
BDE clearly has the advantage in terms of proximity. But even though short-format programming is often described as being increasingly hot, there has been little enthusiasm about in the marketplace. The company came into being through a reverse initial public offering in 1996 when it acquired a shell company. But the company came out too soon and has wallowed ever since at the bottom of the market with its stock never rising above $8 a share.
Nevertheless, Bermeister claims that BDE's content generates more than 20 million impressions per month and says that he sees a point when that number could climb to 200 million. "We think that we have the potential to become another Disney," he says. "Like Disney, we will expand beyond animation to a range of products and services, offering everything from entertainment to sports, even education."
Would that be worth it to AOL? Why wouldn't it be? Having bought Time Warner, who would blame AOL for not wanting to also pick up a Disney in the bargain?
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