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Wednesday, May 25, 2022

STRATEGY—New-Media Studios Diversify to Survive

The new-media landscape has become a much less friendly place in recent months, with a number of companies folding and investors heading for the exits.

But two local new-media companies are adapting to that changed landscape, each by implementing a different strategic response.

Fusient Media Ventures is redirecting its focus into the slam-dunk area of wrestling programs, while minimizing its exposure to new-media risk. And KPE is leaning more heavily on its tried-and-true business of digital services (consulting client companies on ways to exploit cyberspace), and using that cash flow to help support its higher-risk content development activities.

Such “hedging” strategies are being applauded by many of the investors who have been backing such ventures.

“Hedging is definitely good,” said James Montgomery of Digital Coast Partners. “Broadband is not there yet. It’s a large fixed cost with a low subscriber base. Billing revenues are soft and there’s no way to really measure revenue streams. You need to have traditional content with multiple outlets to survive. There’s a lot of (exaggerated talk) right now in the digital media space.”

Responding to that reality, Fusient has switched horses. On Jan. 11, it announced its purchase of Atlanta-based World Championship Wrestling from Turner Broadcasting Systems Inc.

After all, Fusient’s co-founders Brian T. Bedol and Steven D. Greenberg are more comfortable in traditional media, having started the successful Classic Sports Network before selling it to ESPN in 1998.

And the West Coast president of Fusient (the company is based in both Los Angeles and New York) is Tom Lassally, a former Warner Bros. executive with 13 years experience in both film and television production and development.

Wrestling for success

The Fusient principals hope to apply their experience in programming, production and marketing from Classic Sports Network to the WCW’s franchise of “WCW Monday Nitro Live” on TNT, “WCW Thunder” on TBS, “WCW Worldwide” in syndication and 12 monthly pay-per-view specials.

The retreat from new media, at least temporarily, is also giving some comfort to Fusient’s big-name media venture capitalists including Redpoint Ventures, Allen & Co., and Frank Biondi’s WaterView LLC which were among the lead investors that ponied up $30 million.

“We’re looking to build a media company from scratch by buying undervalued assets,” said Lassally. “We’re on the lookout for media opportunities, and last year that was in the new-media space.”

As such, Fusient last year made a point of being both an incubator and a production studio. It funded four Internet sites The Threshold, Cyberpix, Wurly and Eyetide and through its Fusient Studios helped develop broadband content for two of them.

But now, Fusient is heading for less-risky waters, namely wrestling programs, while maintaining its pre-existing new-media investments.

“We’re operating on the premise of a lot of change (coming) in the industry, and we’re poised to take advantage of it and to adapt,” said Lassally.

KPE, meanwhile, has taken a somewhat different tack to remaining viable. It has moved steadily from its 1996 launch as a small digital services company with a handful of marquee clients to a 250-person international corporation. It now boasts a development arm run by a former Walt Disney Co. executive and a venture fund that’s been selectively involved in new media since 1998.

Profit engine

While Fusient is hoping that its newly acquired wrestling programs will be its cash cow, KPE has a pre-existing cash cow its digital services arm. And that arm is busily building Web sites and providing advice to clients ranging from Polo Ralph Lauren Corp. and P & O; Princess Cruises plc to Six Flags Theme Parks Inc. and Sony Corp.

The resultant revenue stream has allowed KPE to keep developing online content without becoming another bust in the broadband dustbin.

KPE remains convinced that, while Web development and consulting are its bread and butter today, the future lies in developing and owning the rights to original content.

“(Content) distribution companies have huge amounts of money that’s not available to any of us. We need to own the intellectual rights to what we develop,” said KPE’s Chief Executive Mark Patricof.

The ultimate hope, of course, is that some of that content developed for the Internet will get picked up by television, movies and other media. On tap at KPE for the new year are two animated series for the Gen Y demographic and the launching of BridgetJones.com, a site based on the character popularized in the best-selling novel “Bridget Jones’ Diary.”

As for its cash-cow activities, KPE has just completed a cyber-overhaul for Britain’s Channel Four creating the Channel Four Web site, advising the station on the site’s content, then pitching and creating broadband programs for the site, targeted to specific audiences.

But Patricof sees KPE’s business mix ultimately shifting increasingly into content development.

While their approaches to media investments are radically different, both KPE and Fusient have diversified their investments across traditional and new media and they’re developing content for a broad range of markets. And that has investors viewing them with a good deal more respect than today’s straight new-media plays.

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