"The boob tube zombie television is dead. . . . Global entertainment will be delivered over the Internet. . . . Digital Entertainment Network will create the last network."
These were the visions of a Santa Monica company known as DEN, spelled out in a fiery 38-page manifesto written two years ago by its founder. And for a while, the venture was white-hot, pioneering the fusion of Hollywood and the Silicon Valley.
Executives from Disney and other major companies flocked to join the company. Digital Entertainment Network hired Hollywood directors and actors to create original programs for its Web site. Advertisers including Ford and Pepsi eagerly plastered their logos on the DEN.net home page, and industry giants such as Microsoft invested millions of dollars.
But after two years of trying to build an audience for TV-style entertainment over the Internet, DEN has yet to produce a program as compelling as the unraveling of the company itself.
Beset by business blunders and allegations of sexual misconduct against its founder, the company squandered an opportunity to define the intersection of California's two premier industries. Instead, as a rival executive said in a recent interview, "they have become poster boys for what not to do."
The founder, Marc Collins-Rector, was forced to leave the company after a lawsuit accused him of molesting a teenage boy, a charge he denies. A planned stock offering that could have netted him and his executives hundreds of millions of dollars was abandoned. More than a third of the company's 300 employees were recently laid off and sources say the company is scrambling to find new financing.
Production of shows has been halted, and the vast audience that DEN's founders promised is now so tiny it doesn't even register with top Internet ratings services.
The implosion raises questions about how carefully some of the most powerful backers of the Internet economy scrutinize the companies they support. Most seemed oblivious to flaws in the Digital Entertainment business model and the exorbitant salaries its executives were paying themselves. Investors also knew little about Collins-Rector, the entertainment novice they entrusted with their money.
"It is one of the leading cautionary tales that come up in Internet conversations," said an executive at another online entertainment company. "It comes up in terms of overpaying executives, oversetting expectations, burning too bright too soon."
