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Ifilm's Struggle Is a Real-World Survivor Story

March 12, 2001|MEG JAMES | TIMES STAFF WRITER

Ifilm, a heavily hyped online Hollywood venture, is hanging on by its fingernails these days.

A survivor amid the dot-com wreckage, the one-stop shop for aspiring filmmakers and film connoisseurs has thin revenue, wary investors and a sketchy business model.

For the Record
Los Angeles Times Tuesday March 13, 2001 Home Edition Business Part C Page 3 Financial Desk 1 inches; 22 words Type of Material: Correction
Sony Pictures--Yair Landau is president of Sony Pictures Digital Entertainment. He was inaccurately identified in a story in Monday's Business section.

But rather than give up and follow Pop.com and Icebox into the digital dustbin, the 2-year-old company has a dogged determination that maintaining a Hollywood address on the Internet will eventually pay huge dividends.

"We've got to be scrappy, frugal, and we've just got to be here," said Chief Executive Kevin Wendle, who has a chunk of his personal fortune riding on that theory. More important, he and Ifilm Chairman Skip Paul have convinced an A-list clutch of Hollywood insiders, from Sony Pictures to Eastman Kodak and Microsoft co-founder Paul Allen to also invest in their plan for a cyber concierge to cater to the production, location and back-room needs of industry professionals.

In January, when wringing money from investors for a dot-com was nearly impossible, Ifilm closed a $10-million deal with repeat contributions from Sony, Kodak, Allen's Vulcan Ventures, Axiom Ventures, GeoCities Founder David Bohnett's Baroda Ventures and a new partnership with Yahoo.

"The main thing Ifilm has going for it right now is Yahoo," said Robert Hertzberg, an analyst for Jupiter Media Metrix. "It's a very big deal to have Yahoo's backing because Yahoo is an ideal outlet for the distribution of short films."

But Yahoo has its own revenue crisis, and for Ifilm, the clock is ticking. It's not clear how long Wendle can keep the lights on.

"We've got enough money now to work for a long time--certainly through the end of the year," Paul said.

After an overall investment of $52 million, Ifilm realized a $2-million revenue trickle last year, according to a November report to shareholders obtained by The Times. The report states that Ifilm lost $17.5 million for the fiscal year that ended Sept. 30. Last summer, Ifilm had 145 employees. By last week, it was down to 96 and the company was advertising for college interns to bulk up its work force.

"They can do this for a while, but I don't think they can do it indefinitely. Maybe another year or two," said Craig Enenstein, senior vice president for business development for Liberty Digital Inc., which contributed $1.5 million to Ifilm 14 months ago but took a pass in January when Ifilm asked for more.

Ifilm has "potential" and lasted this long, Enenstein said, because it hasn't spent "umpteen millions" buying film rights or creating content as did other short-film Web sites that quickly crashed and burned.

"We did not want to be out there creating content or paying for content because at the end of the day, you are just competing with your checkbook and the other guy who has a bigger checkbook," Wendle said.

Instead of paying filmmakers, Ifilm is charging to post films on the Internet. Wendle said the fees, which start at $200, simply cover Ifilm's costs. But investors say that as Ifilm gains prominence it could rake in substantially more money through those fees.

A year ago, Ifilm bought the Hollywood Creative Directory, which lists names and numbers for agents, managers, studio and production executives as well as Lone Eagle Publishing, which publishes how-to manuals.

In July, Ifilm rolled out an online product-testing service, offering companies quick turn-around information gleaned from consumers who previewed advertisements on the Internet or sampled products.

"They have more experienced management, they raised more capital and they had a somewhat more conservative business models," said Yair Landau, executive vice president of Sony Pictures Entertainment. It has invested more than $5 million in Ifilm--the only short-film site Sony has invested in.

"Their traffic continues to grow and their film postings continue to grow," said Landau, a member of Ifilm's board of directors.

In the beginning, Ifilm was going to be a hip online community for budding filmmakers and the source for Hollywood insiders. The financial plan was to eke out enough revenue by providing services for the industry to support the short-film side of the business.

So far, that hasn't happened.

Ifilm bought, then abandoned several companies during the last year. With StudioXchange, it discovered that building and managing a database of location photos would cost too much money. Ifilm has severed ties with the Development Source and TVtrackers, which track studio production schedules. Then, two weeks ago, the company ended its union with Film Finders, a firm it acquired in August to research film rights. Even an industry online job posting board tanked.

Ifilm has had to keep reinventing itself. By the time the site debuted on the Internet in May, it was on its third logo and third CEO: Wendle, a multimillionaire former Fox producer and founder of CNet, a San Francisco-based Internet technology and services company.

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