Buoyed by an A-list of Hollywood investors and $15 million in new financing, the entity created from the merger of Hypnotic.com and Nibblebox.com is pushing a new business model that aims to change the way advertisers and producers connect with emerging talent.
Backers have more than doubled their stake in the combined company, which is made up of two firms known primarily for their Web sites featuring short films and animation that are cheap to produce.
Those backers include Vivendi Universal, which already owned 49 percent of Hypnotic, and German media group Dresdner Kleinwort Capital. Also on board are Yahoo Inc. chief Terry Semel’s Windsor Media, former Universal Studios executive Sandy Climan’s Media Entertainment Ventures and Knowledge Net Holdings, an Internet incubator founded by finan-cier Michael Mil-ken and Oracle Corp. Chief Executive Larry Ellison.
The company, which will be known as Hyp-notic, is expected to leverage its relationships with young filmmakers to develop, produce and distribute independent short films and episodic content. The idea is to create a low-cost talent pool for advertisers and brands targeting 18- to 34-year-olds.
The new company is headed by Nibblebox partner David Bartis, who formerly ran NBC Studios. Financial details were not released, but about half of the workers at both outfits are losing their jobs, leaving about 36 employees in the combined company.
Contrary to the flawed strategies of dot-coms that spent heavily on content and relied on advertising dollars that never materialized, Bartis said Hypnotic will get its revenues mainly from marketing and licensing deals. He expects to reach profitability in 18 to 24 months.
“The end goal is not to run an Web site. We’re really in the business of discovering and managing new talent,” Bartis said. “The bigger goal is to develop something that can be a platform for traditional film or television.”
Despite their similar orientations, Bartis said there was not much overlap between the companies. Nibblebox focused on cultivating irreverent animated fare made by college students, while Hypnotic concentrated on shorts made by professional and amateur filmmakers. Combining those efforts into a single entity was the impetus for the deal.
“It’s tough to raise money in the current climate, but to do it while you’re doing a merger is really tough,” Bartis said. “We’re definitely taking on a wider selection of talent.”
Besides Bartis, Hypnotic.com founder Jeremy Bernard will serve as president, and its chief operating officer, Daniel Gossels, will be executive vice president. From Nibblebox, Elizabeth Hamburg will be chairman and Doug Liman, director of the hit film “Swingers,” will be vice chairman.
“It’s a great strategic partnership, where all the parts add up to make a greater whole,” said David Cremin, a partner with Los Angeles-based Zone Ventures.
Criticism of concept
But not everyone is convinced.
“I have watched and tracked entertainment concepts over the past eight years and I find it odd that anyone would continue to pursue this.” said Celia Pearce, a visiting scholar at USC’s Annenberg Center for Communications and author of “The Interactive Book: A Guide to the Interactive Revolution.”
Pearce acknowledged that Hypnotic’s business plan appears to be on firmer ground than other Internet-based entertainment statups. But she contends that film and video is not good match for the Web, where the most successful entertainment ventures are found in the interactive realm of computer games.
“I’m skeptical because I’ve seen a lot of TV and film people get into the Internet and they’ve not been successful,” she said.
Robert Haymer, a partner at O’Melveny & Myers’ Century City practice and lead counsel for Nibblebox, insisted that Hypnotic’s collection of investors and managers gives it an edge, particularly with its efforts to mentor talent and pursue partnerships. Still, he admitted that Nibblebox would have had a tough time staying afloat without the new investment.
“Roll the film back two years and you’ve seen numerous big companies say ‘we’re going to be the next big thing in entertainment on the net,'” Haymer said. “Obviously that hasn’t happened. The strength of Hypnotic is (the companies) fit well together, they both bring different things to the table.”
Bartis, for one, bristles at the notion that Hypnotic is simply an entertainment Web site. Its acquisition team has a background based in traditional entertainment.
Aided by management’s contacts in the entertainment industry and the company’s partnership with Universal, Bartis said, Hypnotic will aggressively promote the young filmmakers and animators it discovers.
“There’s such a low appetite for risk taking that it’s easier to do a television pilot with someone who has failed ten times for $10 million than it is to do with a new talent for $1 million,” Bartis said.
