There’s No Business Like Show Business for Web Entertainment Start-Up

Who watches this stuff called “Internet entertainment?”

The picture can be as small as a postage stamp. The sound stops and starts as if it’s being broadcast from atop a galloping horse. And for those with a slow modem--well, just forget about getting anything productive done while the show loads onto the computer.

That aside, the comedy, animation, game shows, movies and other entertainment now available online can be fun--more edgy and creative than the fare on network TV. And the choices, like everything else on the Web, are endless. No sooner does one online entertainment venture go belly-up, it seems, than two more emerge to take its place.

Burbank-based Z.com is one of the newest entrants, and it may have a better chance than most--it was founded by ex-Disney Imagineering executive Joe DiNunzio and Bill Gross of Idealab, the Pasadena-based Internet business incubator.

The company, which employs 90 people in a vast warehouse-type space on a no-frills street near Burbank Airport, began last October and launched a full-fledged Web site on Memorial Day.

Its programs include a wacky game show called “Dare For Dollars” and dozens of other viewer options, from Daily Dose, featuring a “Joke of the Day,” to Web-toons such as “Rotten Fruit,” about a rock band composed of degenerate produce.

It’s also home base for Web sites for movie moguls Oliver Stone (“JFK”) and Jerry Bruckheimer (“Gone in 60 Seconds,” “Coyote Ugly”) and a window for fans into the recent tours of the rock band Red Hot Chili Peppers and comedian Ellen DeGeneres.

Virtual graveyards bristle with the headstones of once-ambitious, online entertainment ventures that fizzled and died from lack of interest. But Z.com says it’s got a simple formula to pull that feat off: eschew the costly promotion that’s become standard for e-businesses and focus on quality programming and revenue generation from advertising and offline marketing.

“We are a tiny little company in a wonderful place--of being at the birth of this medium,” said DiNunzio, the company’s CEO. “We’re being pioneers. And that’s a very energizing thing.”

Z.com began with almost instant clout because of the involvement of Idealab, which also launched eToys and holds major ownership stakes in GoTo.com, CarsDirect.com and CitySearch, in addition to dozens of other companies.

Gross and DiNunzio decided last fall to make a go at creating an Internet entertainment site. That prompted DiNunzio to quit his job as senior vice president of new product development for Walt Disney Imagineering, in charge of overseeing the company’s interactive indoor theme parks called DisneyQuest.

“I had been friends with Bill Gross for a very long time--and Bill and I had been plotting things on and off for awhile, but nothing ever felt right,” DiNunzio said.

But last October, “It became clear to both of us that the time was right to do a really strong, significant Internet play in the entertainment business,” he said.

For one thing, they felt technology had finally gotten sophisticated enough to deliver reasonably viewable live action and animation to personal computers.

Secondly, they looked at industry statistics that showed that for the first time 100 million Americans had regular Internet access. “That’s a really, really big number,” DiNunzio said.

They became convinced that a dynamic management team could persuade top creative talent to lend at least some of their energies to an Internet venture. They soon persuaded producer Bruckheimer to come on board as a founding investor, as well as Guy Oseary, a principal of Maverick Records.

DiNunzio said the Web site had 630,000 “unique visitors” in July, its second full month in operation. Not bad, but no one paid admission--and lack of revenues have bedeviled other entertainment Web sites.

Digital Entertainment Network, a teen-oriented entertainment Web site, ran out of money this spring after having raised $60 million in venture capital. Oxygen Media, a women-oriented Internet and cable company founded in part by Oprah Winfrey, announced in June it would shelve two new shows for lack of funds.

“Preaching entertainment to the Internet audience hasn’t had a lot of success to date,” said Anya Sacharow, an analyst with Jupiter Communications in New York, referring to the kind of programs produced by professionals for online broadcast.

Concurred Naj Allana, a senior manager at Deloitte & Touche in Los Angeles: “There have been big names that have come before and just died. You couldn’t get bigger names.”

Sacharow wonders if the very idea of entertainment is different on the Web.

“For many people, Ebay [the popular online auction site] is entertainment,” she said. “Buying something online is entertainment. It’s not just consuming a show created by someone in Hollywood.”

Ultimately, though, DiNunzio feels certain kinds of Internet entertainment can succeed.

“It’s awfully early in the process to be declaring the game over,” he said. “The basic [technological] tools weren’t even there a few years ago--and the top creative talent, whether it’s Hollywood or otherwise, has not been focused on this space until recently.”

He says the spoils will go to the site that styles itself not as an Internet entertainment business but as an entertainment business. And the company, he says, is focused on making a profit in two years.

In practical terms, that means Z.com has set its sights in two directions: creating programming and generating revenue.

To accomplish the first goal, the company wants to build what DiNunzio describes as a “library” of shows, which eventually can emerge into the bricks-and-mortar entertainment world to earn money in television, movies and other venues.

To build revenue, Z.com looks to broaden the definition of Internet advertising. In addition to the usual point and click ads, Z.com also wants to bring advertisers in with promotional sponsorships--similar, say, to Coca-Cola paying for Tom Hanks to drink a Coke in his latest movie.

It also wants to earn money by “co-creating content,” with advertisers. DiNunzio insists Z.com can create programs based on a commercial product without sacrificing artistic integrity or triggering viewer cynicism.

“People are more willing to accept relevant product advertising if it’s entertaining,” he said.

Through it all, the company tries to keep its eye on the ball: to remember that its rivals are not just the other online sites but the myriad entertainment options available to potential viewers.

“This is show business. It’s a business,” DiNunzio said. “We have to demonstrate this is a profitable business.”