Icebox Chief Executive Steve Stanford said that the company's remaining 27 employees will be laid off Friday. At its height, the company had had 106 staffers.
A representative said the company is negotiating "with a number of people" to sell parts or all of the company but declined to name them. The company has been unsuccessfully trying to find financing for several months, the representative said.
Icebox is the latest Web entertainment company to feel the pinch of a sharp market downturn, which has made once-plentiful capital scarce and has sparked layoffs and shutdowns across the industry.
The list of failed Web entertainment properties continues to grow. Some of the casualties include CMGI-owned iCast, Time Warner's Entertaindom, Steven Spielberg- and Ron Howard-funded Pop.com, the Digital Entertainment Network and Pseudo Programs.
Icebox has stood apart from the pack because it has several high-profile distribution deals for its Web animations. The company has bragged that its roster of writers, artists and animators include many of the top names in the field.
But analysts say Icebox may be the victim of bad timing. Despite its ability to bridge the online and offline entertainment worlds, the reality of the souring Internet market among investors has made it difficult for the company to stay afloat.
"They had the right business model," said David Card, an analyst at Jupiter Research. "They were smart enough to do the right things on the cheap and target the right audience. But man, the market wasn't forgiving, and maybe they weren't doing things cheap enough."
Icebox's Stanford agreed that the company's problems stem from outside forces.
"Other than macroeconomic factors that everyone has been victim to, there's not a lot that went wrong," he said.
In the end, Stanford said, it was not the business that brought Icebox down; it was the cost of running an online entertainment company that hurt the most.
"We have deals with companies like Akamai to optimize our content distribution," Stanford said. "Just to pay for that you'd have to generate fairly significant revenue--revenue beyond what banner ads would pay--for just the streaming costs."
Backed by Internet incubator eCompanies, Icebox launched in January 2000 with the goal of creating original animated entertainment programming on the Web.
Icebox cartoons such as "Hard Drinkin' Lincoln," "Queer Duck," "Zombie College" and "Mr. Wong," have been popular treats on the Web. In August, the company announced a deal with cable channel Showtime Networks to broadcast "Starship Regulars," one of its planned made-for-the-Web animated series. It also has a marketing deal with the creators of "Monkeybone," which will be released as a feature film starring Brendan Fraser.