Here come the megachannels
Have you ever toured a movie-studio back lot that looks exactly like a real city except for the lack of people? That's what the headquarters of Net animation channel Icebox felt like this January. A year ago, it was hiring so many animators that company officials needed a giant warehouse halfway between the heart of Hollywood and LAX to house the company. Walking around there this year, you could see the proverbial tumbleweeds rolling; row upon row of empty work spaces, the result of cutting back the staff to 25 from 103 between November and January. "We're thinking about setting up a homeless shelter here," said chief executive Steven Stanford, strolling around the emptiness.
Just one month later, Icebox had melted down completely, yet another Digital Hollywood pioneer with too many arrows in its hide. Darwinism has invaded the world of original broadband entertainment. Most of the current players will fold or get gobbled up; the strongest of the strong will survive, and maybe even thrive as part of the next phase of original Web streaming content: the megachannel. "At the end of the day, there will be three to four significant players," says Stanford, "each with an infinite amount of choice." Outside observers concur, predicting that the Internet will mimic fee-free television, which has dozens of choices but retains four dominant networks. The difference, of course, is that these television networks mint money and thus assure their existence--the root challenge for the megachannel. "They're still going to have to prove their business plan can work," says Amir Malin, CEO of Artisan Entertainment, which created perhaps the Net's biggest marketing coup to date, The Blair Witch Project.
History will be their guide. Sites like DEN and Pseudo died for two reasons: First, they were too ambitious too early, not enough people had the bandwidth to watch their offerings. Second, they were too diffuse, even those surfers with high-speed connections had too many places to find such content. Accordingly, not enough people came to any of them. No audience means no advertising. No ads means no money. No money means sayonara.
The first step toward a real megachannel came in January, when Shockwave.com and AtomFilms joined forces, creating an online network that draws about 9 million unique users a month, already larger than most cable channels. And the dealmaking is just beginning. "My task is to make sure we get bigger very fast," says Mika Salmi, the founder of AtomFilms and now the CEO of the merged company. He says that he gets callers almost every day inquiring whether he'd like to buy a smaller channel or sell his network to a larger company. By the end of the year, this Pac-Man-like process will provide users with a group of clear leaders for programming. MediaTrip.com, Ifilm, Hypnotic, and Yahoo! Video should prove major players. And don't be surprised to see another giant, like RealNetworks or AOL Time Warner, buy itself a seat at the table.
Unlike the major television networks, these megachannels won't need to offer only one program at a time. They'll be able to showcase a broader array of programming and become entire systems of their own, with an array of subchannels, in much the same way that Yahoo! and AOL currently offer a deep experience reading and chatting in dozens of subject areas.
But breadth will go only so far--the key to driving traffic is hits. Not the page-view kind, but the kind of addictive programming that hooks you in every day or week for a fix. The Fox network needed The Simpsons and NFL football to establish itself as a sustainable venture; the Internet networks will need similar must-see products.
The surest way to guarantee a hit is to stockpile storytellers and stars. For the former, AtomFilms/Shockwave has already signed up the likes of David Lynch, Tim Burton, Trey Parker, and James L. Brooks, all people with track records and a following. Getting the stars has proved trickier, but as broadband access proliferates, they'll come around. "I'd first have to understand the [union] politics, but yes, yes, why not?" says Jeff Goldblum, the star of several Hollywood blockbusters, looking decidedly un-Sundance as he sits in a black leather jacket amid the snow-capped peaks surrounding Park City's Yarrow Hotel.
While the long-term future of the Internet belongs to live action, in the near term most of the breakout shows and stars will probably be animated, both because of the slowly evolving interest from big-name actors and the advantage animation has streaming over a 56K modem. "The Web will be a breeding ground for characters," says Mondo Media's Evershed, "which will lead to spinoffs in TV and film."
With all this talk of hits and stars, ads and spinoffs, don't be surprised if the online networks evolve in the direction of their traditional television counterparts. Ifilm will shortly begin an Entertainment Tonight-type show on the Independent Film Channel. Adds AtomFilm's Salmi, "Long term, strike or no strike, we're going to be in the TV business." That said, sometimes even the old-media route isn't enough: Before tanking in February, Icebox had already sold a comedy, Starship Regulars, to Showtime Networks, and Fox had ordered a pilot script of Zombie College, one of Icebox's top series.
The visionaries of film, video, and animation have already set up shop online -- is Hollywood about to take the plunge? Our annual Hollywired report takes a look at where the industry is now and where it's headed.
