Icebox.com, Fox Sign TV Deal

Internet entertainment site Icebox.com said Tuesday that it has sold one of its online series to Fox Broadcasting Co., marking the first time a show created for the Net has been purchased by a major television network.

But even as Icebox announced the deal, the company laid off about 50 of its 100 employees Tuesday, underscoring the ongoing financial pressures in the online entertainment space.

“We consider [the Fox deal] a big victory because it reinforces everything that we’re doing,” said Steve Stanford, chief executive of Icebox. But he added that the company is also striving to cut costs amid mounting pressure on online companies to show profits.

“We built the business in the free-spending days of the Internet,” said Stanford, who founded the company a year ago. “We’re going to sustain it in a climate that doesn’t allow that at all.”

Given that environment, the deal with Fox is a breakthrough for Icebox, a Los Angeles-based company founded last year by TV indusry veterans who saw an opportunity to use the Web as an incubator for TV programming.

Under terms of the deal, Fox has commissioned a script for a sitcom pilot based on “Zombie College,” which debuted on the Icebox Web site in March. The show is animated online, but Fox’s plans would develop a live-action series.

Icebox, a privately held company, won’t see any significant revenue unless the show beats significant odds and is picked up as a series. If that happens, Icebox could collect millions of dollars in production fees and revenue-sharing.

Neither party would discuss financial terms, but Icebox would probably be paid about $20,000 per episode to co-produce the show, and would own 10% to 15% of any ancillary revenue from syndication and other sources.

Earlier this year, Icebox licensed another show idea, “Starship Regulars,” to the Showtime network, but that deal happened before the show had ever aired online. “Zombie College” was developed exclusively for the Net, Stanford said, and its loyal online following helped cement the deal with Fox. Stanford said his firm is close to signing television and feature-film deals on four other shows.

Analysts saw the Fox deal as an optimistic sign, but also said it reinforces the view that Internet entertainment companies have to continue to search for other sources of revenue beyond online advertising.

“Icebox realized early on that television is where the money is right now and will be for a long time,” said Mark Mooradian, a senior analyst at Jupiter Research. “Getting a TV pilot is not tantamount to financial salvation. But if a pilot gets picked up and goes into syndication, you can finance Internet ventures from now until the next millennium.”

“Zombie College” is aimed at the heart of Icebox’s audience: college students with high-speed Internet connections and copious leisure time. The 3-minute episodes center on the adventures of Scott, a stubble-chinned freshman struggling to adapt to the peculiar social life at a college where most students are partially decomposed zombies.

The series was conceived by Eric Kaplan, a 33-year-old TV writer who also writes and produces for the Fox animated series “Futurama.” “Zombie College” has been one of the most popular of the 22 shows on the Icebox.com site, with more than 4 million viewings to date.

The deal comes at a time of significant turmoil for online entertainment companies, which were darlings of the investment community a year ago, but for whom funding has evaporated in recent months amid doubts about their prospects for profitability.

Pop.com, a company started by Steven Spielberg and Ron Howard, among others, was scrapped in September before the site even launched. Digital Entertainment Network, a company that once filed for a rich stock offering, was forced into bankruptcy this summer.

“All the investors we talk to have read about Pop and DEN and the others and are terrified about investing,” said Stanford, who acknowledged his company needs to find new funding if it is to continue past March. “The question we’re asked over and over is, ‘How is the company going to become profitable?’ ”

Stanford said Icebox plans to cut costs by turning to outside firms for production work. The layoffs announced Tuesday involved about 50 staff members who used to do much of that work in-house. Stanford said the company does not plan to curtail the number of shows it is developing.

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Graduating to Prime-Time

“Zombie College” could be the first show to make the leap from the Internet to network television. The animated series created by Eric Kaplan centers on the social life of a freshman on a campus full of corpses. It debuted on Icebox.com in March and is now in development as a live-action sitcom pilot for Fox. Above, Zelda, at left, talks to Graham, a new character.