Hollywood’s Pop.com Showing Very Little Fizz

Nine months after five of Hollywood’s most powerful players combined to create an online entertainment site, Pop.com is foundering so badly that certain partners are seeking a graceful way out before it has aired a single show, according to sources familiar with the venture.

Announced with great fanfare last fall, Pop.com was supposed to fulfill the entertainment potential of the Internet by tapping the creativity and influence of some of mainstream Hollywood’s leading moguls, including Steven Spielberg, Jeffrey Katzenberg, Ron Howard and Brian Grazer.

Instead, the site--which consists of little more than the initial press release--has become a static example of how thoroughly the Internet continues to vex Hollywood. Sources said Pop.com, based in Glendale, has been plagued by problems ranging from indecision and infighting among top executives to Wall Street’s newfound scorn for “dot-com” companies.

As a result, even though Pop.com was initially slated to debut in spring, the site still remains weeks, if not months, away from launching. And if it does launch, it will face bleak odds in a field of entertainment sites already thinned by attrition.

At least four sources close to the company said Pop’s partners are scrambling to find a merger partner that would enable them to give up management control of the company but still be in position to provide creative input. “They would love for the crowd to look left and to be able to exit stage right,” one executive close to the company said.

One source said certain partners are so frustrated by the disarray at Pop.com that they favor turning the entire enterprise over to another company, and laying off most of Pop’s 90 employees, including Chief Executive Kenneth Wong.

Pop’s founders and executives all declined to comment.

Given the fact that online entertainment is still in its infancy, Pop.com has plenty of time to regroup. Still, the partners’ apparent search for an escape hatch is a sharp contrast to their enthusiasm when they announced the creation of Pop.com last October.

The company is a three-way venture involving film studio DreamWorks SKG, movie production company Imagine Entertainment--whose “Nutty Professor II” was the top box-office draw last weekend--and Vulcan Ventures, the investment group run by Microsoft billionaire Paul Allen, who agreed to invest $50 million in Pop.com.

When the site was announced, Katzenberg compared its potential to that of MTV. Spielberg and Howard both said they would contribute shows to Pop.com. The founders said they would show short films and animations submitted by amateurs, but also tap such stars as Eddie Murphy to do works for the site.

But Pop.com stumbled right out of the gate. Others in the industry were baffled that much of the task of setting up the company was handed to Dan Sullivan, a 28-year-old who had previously been Grazer’s office assistant.

In December, Pop raised eyebrows again by announcing it had hired as its CEO Wong, who had recently resigned as president of Imagineering, the theme park and real estate division of Walt Disney Co.

Wong was handpicked by Katzenberg, also a former top Disney executive. Wong is considered methodical and well-intentioned, but partners have come to see him as a something of a bust in a job that requires imagination and decisiveness. Others in the industry say that in recent months, Wong has sought their advice on what to do with Pop.com, and that he appeared to be at a total loss. One Internet executive who met with Wong said, “It’s almost a situation of grasping at straws.”

But Pop’s founders don’t appear to have any answers, either. From the beginning, said one Hollywood executive, Pop was “a company in search of an idea.”

The company’s strategy still centers on creating its own shows, and relying heavily on the star power of its founders and their Hollywood associates to deliver an audience. Howard has already finished a short about dreams of celebrities that includes performances from Drew Barrymore, Matthew McConaughey and other movie actors.

But one source inside the company said deals with major stars have been put on hold, largely because partners don’t want to strain their movie industry relationships for the sake of an Internet company whose future remains uncertain.

Even aside from the star vehicles, the economics of creating shows for the Internet remains problematic. Based on current advertising rates, a show that costs $10,000 to produce--the standard rate among online entertainment sites--needs to be viewed at least 100,000 times just to break even. Only six of the thousands of short films shown on Ifilm, one of the Web’s most popular film sites, have attracted more than 100,000 views.

“The economics just don’t work,” said Mark Mooradian, senior analyst at Jupiter in New York.

Given these pressures, Pop’s partners are said to be pursuing a deal before the site launches, signaling that the company would rather rely on its star-studded aura than the actual content it has assembled, for leverage in negotiations.

Pop has pursued talks with numerous companies since its inception, dating back to overtures to AtomFilms.com last fall.

But Pop’s discussions have tended to snag on questions of management control. The Imagine partners are said to favor turning over control of the company to another site, but Katzenberg, who is one of the most active overseers of Pop, has so far been reluctant.

There is also the issue of price. Allen, who controls roughly 45% of Pop.com through his investment, “has agreed to value the [entire] company at $250 million,” according to one source. But that is more than twice what other leading sites in the industry are valued at.

In the meantime, rival company executives said they continue to check Pop.com’s still-static site periodically, looking for signs of life. One Internet executive said, “I look at it and go, ‘Wow. $50 million. 10 months later. And there’s nothing there.’ ”