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Web firm goes to Hollywood with B2B marketplace

Can the Internet rein in Hollywood's blockbuster production costs? Creative Planet's chief executive is betting the company on it.

Can the Internet rein in Hollywood's blockbuster production costs?

Creative Planet chief executive Allen DeBevoise is betting the company on it.

Founded about two years ago as a Web portal featuring online news for entertainment industry insiders, Creative Planet has since set its sights on transforming itself into a business-to-business exchange for movie, TV and music production management.

It's not exactly a novel idea. Disappointed by the performance of pure-play Internet media companies, companies casting around for new business models quickly lighted on business-to-business e-commerce as the next sure thing.

"Internet exchanges for different industries are popping up every day," said Jupiter Communications analyst Patricia O'Shea.

Identifying a market for a business-to-business Internet makeover has proved easier than selling the concept to customers and making it work, however, and investors have tempered their early enthusiasm for such companies.

Analysts say Hollywood could prove as tough as any industry to crack.

"The obstacle is changing the mind-set of Hollywood and how things are produced, and really using the Internet as a productivity tool," said CyberDialogue analyst Ed Lopez.

Creative Planet believes it has several aces up its sleeve on that front, including a star-studded board of directors with Jack Valenti of the Motion Picture Association of America and former Viacom and Universal Studios chief executive Frank Biondi Jr.

The company has so far attracted $65 million in venture financing, including a third-round $38 million infusion this week led by TMCT Ventures.

"I don't think it's an issue of the entertainment companies (asking) 'Will I do this?'" said Biondi, now senior managing director of investment fund Waterview Advisors. "It's a question of, 'When will I do this, and how powerful will it be for me when I make that decision?'"

Waterview participated in a $25 million financing round in Creative Planet late last year, its largest investment in an Internet start-up to date, Biondi said. Waterview is also backing AppleSoup, a start-up that hopes to bring the Net file-swapping revolution to Hollywood.

New direction
Creative Planet declined to disclose revenues but said 85 percent of its income comes from subscriptions and the rest from advertising.

It hopes to change that with a much bigger reliance on e-commerce revenues.

Creative Planet took a major step in that direction last month, teaming with e-commerce software maker Commerce One to create the "Movie Magic Marketplace." The company says the service will provide entertainment industry professionals with a Web-based environment for purchasing and renting production goods and services. It also promises to streamline the information flow between buyers and sellers.

The course to success, however, has contained bumps. Staff adjustments led the company to lay off 30 employees. Creative Planet said the cuts were because of redundancies in some areas, including content positions. The company added that with the latest round of funding, it hopes to hire 80 to 90 people for technology positions.

Reid Shane, senior vice president of production at Paramount Television, said he believes exchanges such as the one being developed by Creative Planet will almost certainly gain acceptance.

"I think it's going to become instrumental as well as mandatory to production in the future, especially for companies that produce (in) volume," said Shane, who supervises 15 TV series, including "Frasier," "Nash Bridges" and "JAG." "There's absolutely no question in my mind that this is the only way to track production costs, reduce paper, and get information immediately."

Creating a blockbuster
Analysts said the success of any business-to-business venture depends upon its ability to bring in many small buyers and sellers, as well as on the absence of competition from a single dominant supplier. Also, analysts say an exchange can flourish by offering services beyond transactions, such as information-sharing and collaboration.

In that regard, Creative Planet appears to be in a high-potential market. Filmmakers, producers and other creative professionals in the film and TV industry have a lot of independence, with crews frequently coming together on the fly to produce a single project and disbanding when the shoot is over. Creative Planet offers Internet resources and network technologies to assist in getting a project staffed and financed, providing software that budgets and schedules movie productions, as well as databases of vendors, artists, actors, directors, makeup artists and other creative professionals.

Creative Planet's DeBevoise said the latest round of funding will be used to help the company deliver resources for the film and TV industry.

"We will be continuing the development of our production-management systems and databases as well as rolling out our procurement system," DeBevoise said, adding that the funding will also be used to hire more staff members, especially high-tech and customer-relations specialists.

Although analysts say Creative Planet's strengths lie in obtaining capital from high-quality partners and building alliances, the company's attempts to move the filmmaking process online and convince the entertainment industry to see it as a resource will be a challenge.

"At the end of the day, these marketplaces or exchanges will live or die depending on their ability to attract a significant volume of buyers and sellers, so there's certainly no guarantee of success," said Giga Information Group analyst Andrew Bartels.