By Indiewire | Indiewire March 20, 2000 at 2:00AM
BIZ PROFILE: An Insider's Look at the Sputnik 7 Experience
By Tim LaTorre/EB Insider
While some next-generation entertainment companies have been focused on acquiring or producing as much content as they can to stream online, New York-based network Sputnik7 has been quietly cultivating an intense and unique entertainment experience. Experimenting . . . tinkering . . .honing the vision, the company has been obsessed with creating the right environment for entertainment - integrating technology, attitude, and genre-specific programming such as electronica, anime, and extreme sports.
Sputnik7 hasn't received the attention (or gigantic venture capital rounds) that next-gen darlings IFILM and Atom Films have, but that's all about to change. With a marketing plan on the horizon, everyone in the space (and in traditional mediums) will soon have to make sure their own online 'experience' measures up. The recent merger/partnership with RES Media Group has also given Sputnik a real-world presence in the form of RES's popular digital film festivals and magazine (RES - The Magazine of Digital Filmmaking).
Behind all of these machinations sits CEO David Beal, a former music producer and DVD developer who was tapped by ex-Island Records owner (and Sputnik 7 chairman) Chris Blackwell to run the company. Recently, Beal sat down with EB Insider in their crowded Manhattan to give us a demonstration of the Sputnik 7 experience and talk about the past, present and future of the company.
EB INSIDER: How would you differentiate Sputnik7 from other online entertainment networks?
DAVID BEAL: We're probably a lot more technology intensive than most of the other entertainment sites. If you look in the music space, MP3.com, and if you look at the film space, IFILM and Atom Films, to me (not in a negative way, but in a positive way) those are what I would call 'flea market' sites. And the reason being is that's it's sort of a flea market model in that anybody can go there, put their wares - not Atom, Atom has a little bit of an editorial point of view - but with the other two, anybody can go there and put up their wares. You might wander around there for hours to find something cool that you want.
I think that's an exciting thing, but also when you look at the ways that business models are changing in the space (based on all this growth that everyone talks about in entertainment), it's based on disposable income being spent by people who have very little time to spend it. So I think that the tough part is that the people who have disposable income and know exactly what they want are most likely to go to an Amazon or somewhere like that and [say] 'this is what I want, boom, send it to me, done'.
People who don't know what they want are going to go to someplace that has a point of view - 'I'm going to go to Sputnik, I'm going to find some cool stuff, I'm not sure what it is'. And so in that model I believe that you put the entertainment content out front. And now hopefully you don't have to do anything, you can just sit there and watch it. It's going to start giving you the opportunity to interact.
EBI: What has been the public's reaction so far?
BEAL: The reaction has been fantastic. I don't know if you saw the Webbys - we're nominated for a Webby for best music site right now. We won the Invision Award for Excellence in Entertainment. We just won the ASCAP Award - the first one they ever gave in the Internet for a music site. Most of those are driven by word-of-mouth - we've never marketed the site.
EBI: How was the seed planted for Sputnik7?
BEAL: The seed was originally planted by Chris Blackwell, the Chairman [of the company]. I don't know if you know his background at all - Island Records, Island Pictures, Bob Marley, U2, Cat Stevens, Melissa Etheridge, The Cranberries, on and on and on. Chris wanted to do something in this space. He believed that the whole business had changed to become an audio-visual entertainment business, no longer film and music and all that - audio and visual entertainment, which is why he was such a firm believer that DVD was going to happen. He wanted to get into audio-visual entertainment on the Web.
So he set out with Les Garland, who was one of the original MTV founders, Morris Wheeler (who is basically a VC) and Tom Gruskin. Basically, Chris, Les, and Morris set out to have a meeting with Ted Waitt, Chairman of Gateway, to talk about potentially doing this as a Gateway project. Remember, a couple of years ago in this space, nobody was broadcasting movies on the Internet. So they basically offered up Tom Gruskin, who was one of his right hand men - Tom was at Gateway a little over 10 years - and said, 'Hey, he can help you figure it out. I'll contribute him to the mix'. Eventually, Tom left Gateway and founded this with Les and Morris, and Chris funded it. At that stage, Morris and Les stepped out of the picture and I came in to run it with Tom.
EBI: When was that?
BEAL: That was about a year ago . . . seems about 20 years in this space. So we launched the site . . . the first module the actual video broadcasting module, which is our 24/7 Video Stations, was the only part of the site when we soft launched it. We played with that for a little bit through the beginning of last year. And then we brought in the On Demand and Digital Downloads sometime in May.
EBI: So is Chris all that involved?
BEAL: Chris is now very involved, daily. He sits over there [motions outside his office].
He's Web obsessed. He's on the Web every day, probably for hours. He sends me emails at 3 o'clock in the morning saying 'check out this site'. He's really into it. He put in DSL lines into his home and surfs all the time.
EBI: Is he more interested in helping to develop programming?
BEAL: He's interested in figuring out the whole thing. He's a fantastic reality check. So many people in this space are wooed by the technology. He's not wooed by the technology, he's wooed by the entertainment experience you deliver. You either deliver something that either delivers a new ability to somebody or you deliver an amazing entertainment experience.
EBI: So what is your background?
I was originally a record producer, years ago. I had my first encounter with Chris, or with any of Chris's companies, through the Island days. I did the "Mission: Impossible" record with Adam Clayton and Larry Mullen for the movie. I co-produced the theme song. I used to do a lot of movie theme songs.
I was doing that and I became surround sound obsessed. Once you get used to mixing in surround, you're like 'Wow!'. I put a surround system in my house, there were some laser disks you could play, but there wasn't really the platform out there that was practical for consumers. This was a little pre-DVD. So I started working and thinking 'I hope this DVD thing is going to happen' - nobody knew at the time whether it was going to be DTS audio discs or DVD or whatever. So I got into all of those formats.
Eventually, I pitched Chris who felt exactly the same. We just connected, saying 'DVD is huge, it's audio-visual entertainment, let's do this'. Just at about that time, the Web thing was starting to take off. I was pretty much obsessed - I wanted every DVD connected and really wanted to see how we could expand those experiences. DVD was more immediate, because you could just make that disc. People talk about interactivity and the Web, which obviously is the strength now. But back then you could do high quality visual content on DVD, audio and visual, and have all the interactivity and everything. We were constantly working with [figuring out] what people really want, where do they really stand. They want to see a whole list of interactive things they could do, and they would get so excited about these disks. Yet in the end, they would go "it's a great movie" or "it's a lousy movie", and you would think , "well, what did you think of the director's commentary?". They like it to be there, they like to know that it's in. It's supplemental content, it's not required content.
So, I started working with a lot of interfaces, motion menus and default plays and all those things, to really figure out what all the tools were that we had to deliver for a entertainment experience, really a fulfilling experience. And from that I rolled back to the Web side.
The evolution of CDs in the audio business was fascinating because supposedly your quality gets better and better and better and better. Though a lot of people would argue that vinyl was still better, including myself. (laughs) You understood that the platform became superior and also the nonlinear aspect of it. But, once you hit a certain point - and DVD takes that to another level - there comes a fork in the road in the audio business and the visual business. There's a lot of content that you don't really need to see on a big screen.
I was watching a RES movie the other day that was kind of funny, it was called "Searching for Carrie Fischer". It's hysterical, these guys are trying to find Carrie Fischer to play her their love songs they sang when they were kids. It's not cinematic, you don't really need the huge surround sound systems and a screen. It would work fine my Casio [he pulls out a little color Windows CE palm device and plays a few video clips]. You see what I'm saying, this kind of viewing is much better . . . [for when] you're sitting in a cab or something. I don't need this on my big screen at home. So I think that there has been a fork in the road - low res viewing and hi res viewing.
EBI: So, what would you say is Sputnik7's mission?
BEAL: We're basically here to develop a community that really understands our brand and to deliver fulfilling audio-visual content. We're much more lifestyle oriented. Somebody who likes electronica may like japanese anime may like urban may like extreme sports. We want to succeed in building the mechanism to deliver that to you, which I think we're doing, and develop a point -of-view. We want that point-of-view to be on the Web and off the Web. We want that point of view in as many places as possible. We can also re-skin the mechanism to deliver other types of content.
EBI: So Sputnik7 could be the first community channel but you might launch something else with the technology you have developed here.
BEAL: Exactly. And you want to keep it very core. I think there's a point where you want the infrastructure to the community to grow too large. When things get too big, they cease to little creative environments. The reason we partnered with RES was to offer a platform for content creators to get their stuff out.
When Chris started Manga, the japanese side of video, it took years and years and years to build that small little niche into a commercial product. I think you can do that now in much more of a compressed timeline. It used to be that you had take a niche and you had to blow it up huge so that it [became] economically viable for somebody with real distribution clout to put it out. I don't think you have to do that anymore, which is kind of cooler for the art. If we find a cool product and we can effectively hit the people who would like that product, it doesn't need to grow mass and lose its integrity.
EBI: It's about defining niches and then getting all those niches together.
BEAL: To sell 40,000 or 100,000 DVDs right now, you need real distribution out there, really go after it. To do that you have to have some consumer demand for it. We don't need that anymore. We can target the audience and we have a small fulfillment company, so we can fulfill the stuff directly. We can build the momentum for it. Then if there is some huge consumer demand for it, we have a platform theatrical release deal, we have a DVD-CD-VHS home video release deal for the street. So we can put this stuff out in the street.
EBI: Typical journalists question: so what is your revenue model?
BEAL: When I was at Silicon Alley 2000 and listening to Bill Gross, he said everyone that there's only one model in the attention business. It used to be that investment bankers would say 'what is the significant revenue stream'. It's no longer that model anymore. The space moves so fast that you take revenue from as many different places as you can get it.
So you have your advertising models, we're going to be launching affiliates all of the Net. You got your rich media opportunities for advertising to get away from the banner models. You've got your ecommerce - digital download sales or hard goods sold. You've got all these digital rights you've amassed to sell. We use them as a beacon to attract other content that comes in that we then exploit offline. So, you'll be seeing the brand theatrically and on DVDs and all kinds of things. To me, it's much better to market the brand through the content than it is to take out an ad that says 'Sputnik7 music, film and anime'. It makes much more sense to explain to people what it is by the association with the content. So it's all of those. And I love making money, so I try to engineer all of those in ways that they're positive revenue streams.
EBI: What are the things that we need to look out for from Sputnik7 in the near future?
BEAL: I think you're going to see a big leap forward in the site. We're going to have all the film content up. We're adding stations. We're adding film to the On Demand side. We're also going into the handheld market a little bit.
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