In the not-so-distant past, dot-coms and broadcasters proclaimed all manner of Web and interactive innovations that would usher in the home computer as a broadcast delivery device to enhance and even challenge traditional forms. In recent months, however, pie in the sky has fallen to earth with a splat.

The struggle of Internet-based companies, be they content or service providers, has been well documented. Toronto’s ExtendMedia seemed to represent the convergence vanguard, helping to develop the interactive programs Drop the Beat and Dish It Out, produced by Alliance Atlantis Communications (the former with Back Alley Film Productions). But the iTV company recently slashed staff to 55 from 160 in a four-month span, closing its New York and Los Angeles offices.

‘The interactive entertainment sector hasn’t emerged as quickly as we thought it would,’ ExtendMedia PR manager Caroline Verboon explained at the time of the cuts.

Then there is the case of Toronto’s Nikolai.com, an Internet community for children, whose flagship website offered interactive stories, games and an animated series. At one time company president and CEO Isabel Hoffman could boast of partnerships with CBS, Apple Computer and America Online, but the April 14, 2000 dot-com stock crash set Nikolai.com on a financial spiral from which it did not recover, and its doors are now closed.

All that remains at www.Nikolai.com is a message from Hoffman explaining that independent dot-coms cannot compete with media giants that both create content and control the outlets for programming. She adds that government agencies, in their efforts to safeguard ‘Canadian content,’ are out of touch with the digital landscape and unable to help new media content providers.

What’s become clear, as the dust from the interactive whirlwind settles, is that Internet companies connected to brands established in traditional media – or those that can successfully extend into those platforms – will be the last ones standing. Whereas months ago everyone was swept up in a tidal wave of cyber-hype, it is now stigmatizing to be known as a ‘dot-com.’ Instead, you must promote yourself as proficient in a variety of platforms.

In the mad rush to launch an online presence, many traditional media companies perhaps invested too much trust – not to mention funds – in some dot-com startups.

‘There was a real herd mentality where nobody wanted to be left out, and you see a lot of the fallout from that now – people who didn’t think things through,’ says Nathon Gunn, president of Bitcasters, a Toronto Web, interactive and broadcast development firm whose clients include ChumCity and Miramax Films. ‘They brought in youthful visionary types who were just self-proclaimed experts whose energy was much desired, but maybe over-application of that was detrimental.’

One industry insider who left the world of TV production for the greener-looking pastures of an online brand extension company observes that many dot-coms are built on a shaky foundation:

‘They talk the big talk but there’s no business plan and no financial accountability. I think that if anyone did due diligence they would have a heart attack. [Web companies] know a lot about the technology, but they don’t have any business experience – and they want you to [invest] $20 million. Eighteen months to two years ago you might have gotten it, but these days, forget it.’

Then there are webcasters, bold companies that try to seduce couch potatoes into believing they would rather watch video on their computer screens. A prime example is Toronto’s BlackholeTV.com, which launched July 20, 2000, with a splashy party and pervasive billboard campaign. The company says it has film crews in more than 17 countries producing original content for channels entitled Lifestyles, Street Stories, Music and European Odyssey.

Currently the site is ‘upgrading’ and the only channel surfers can access is the Animation Channel, essentially a link to BlabStudios.com, an animation enterprise of Toronto’s Blab Media.

‘Right now we’re madly working away on some technology,’ explains Jay Litkey, president and CEO of BlackholeTV.com, who adds that the revised site will be up and running in a couple of months. ‘It will still be BlackholeTV, [and] it will have a lot of new added stuff.’

Litkey is a self-described techie, having cut his teeth during a four-year stay with Nortel Networks before cofounding BlackholeTV.com with Jon Martin. Although BlackholeTV seems Web-exclusive on the surface, Litkey acknowledges that such a narrow approach has led to the premature demise of some of his competitors.

‘I won’t speak for our specific case, but for an Internet broadcaster in general, many people relied on advertising alone,’ he notes. ‘I think there’s a real future in being well-rounded. We have partners in [offline media], and they may become more apparent in our next phase, but we’ve always had them in the background.’

For an exec whose company offers video on demand at no subscription cost, Litkey remains vague about how BlackholeTV.com can make a buck.

‘You definitely need to find other revenue streams, and that’s the Holy Grail everybody’s shooting for right now,’ he says.

Until the quality of video streaming improves with the massive broadband rollout Litkey projects for 2003/04, animation produced with Flash technology is better positioned to make an online impact. But in the case of BlabStudios.com, eyes remain on the prize of good old reliable TV. President and CEO Vince Commisso explains that while the company generates revenue from the sale of electronic greeting cards and some banner ads, the Internet functions primarily as a ‘low-cost enabler for licensing opportunities.’

‘We fostered relationships with developers around the world and culled from our library of 8,000 [electronic] cards the most compelling characters, one of which is Mr. Futz,’ says Commisso. ‘We make it worthwhile [for developers] by giving them real back end as long as they assign the underlying rights to us. Our objective is to create webisodes around these characters, license them on the Net and actually make a little money doing it.’

He adds: ‘Really we’re using the Internet to launch the branded content, and then we’re going to try to commercialize it across other media.’

Will it really eat TV?

It remains to be seen what kind of live-action video streaming BlackholeTV.com will relaunch with, but unless it has a major broadcaster as a silent partner, it’s difficult to see how it can compete with the likes of AAC, which has a firm production infrastructure already in place.

AAC made a major convergence commitment in January with the launch of U8TV, an Internet network that throws eight disparate young people together in a Toronto loft for one year, all under the endlessly watchful eye of three webcams. The lofters host three hours of online programming daily, and what’s different about U8TV is that the content is repurposed for TV broadcast on AAC’s Life Network six times a week in half-hour installments.

The U8TV site has a few banner ads, but its apparent raison d’etre is to promote and enhance the show’s TV entity. U8TV was awarded a Category 2 digital licence by the CRTC [meaning it must find carriage on its own], so obviously the push behind it in the TV platform is strong.

Some in the industry have not embraced U8TV, for reasons both of content and the experience of watching video on a computer.

‘Five minutes into it I thought, ‘When is this going to be over? I’m tired of sitting here watching,’ ‘ notes one TV producer. ‘It still uses the same old paradigm where you’re sitting there watching a bunch of talking heads. I’m not seeing any interesting use of the medium.’

Bill Sweetman, partner and VP interactivity of Toronto strategic interactive brand solutions company Delvinia, is more receptive. (Delvinia’s clients include CBC and AAC, although Sweetman says its involvement with U8TV is minimal.)

‘We think it’s an extremely exciting project,’ he counters. ‘It’s closer to what we think of as convergence, whereas Dish It Out, for example, is a TV show with an interactive component really about e-commerce. U8TV is more of an interactive property moving to TV than the other way around. It’s a little more interesting from a media point of view.’

He attributes the woes of companies such as ExtendMedia to growing too quickly.

‘They had been around about seven years and nobody really understood which direction they were heading in,’ he says. ‘To their credit, two years ago they laid a stake in the ground and said, ‘We’re going after iTV.’ They went after a market that wasn’t big enough to support a company of that size, but I still support the direction they’re heading in.’

Sweetman says revenue models are more important than technology in the success of iTV, supported by the fact that the notion of interactivity predates the Internet.

‘Interactive television was tried in the 1950s – early primitive forms of interactive shows where you could phone in and comment and change the outcome of the event,’ he explains. ‘It was a flop then, it was a flop again about seven years ago and it’s still a flop because there’s no business model here. But it doesn’t mean the end of interactive television. We’re just not there yet.’

For iTV to succeed, broadcasters must adopt multi-platform thinking, says Sweetman, whose company partnered with the Canadian Association of Broadcasters for its November convention in Calgary, which focused on new media.

‘What was quite shocking to us is that CAB laid out this beautiful interactive ‘buffet’ for the broadcast industry and they barely nibbled,’ he laments. ‘It made us realize just how far ahead the innovators are and how far behind the rest of the broadcasting industry is.’

The key, he says, is not for broadcasters to concentrate on any one medium, but on brand identity.

‘Let’s say you have the Sewing Network,’ he begins. ‘They would say, ‘We’re all about delivering sewing content to TV viewers.’ Our argument is, ‘You’re all about creating a community and serving up information to people interested in sewing, whether that’s on a wireless device, kiosk or CD-ROM.’ But many of them couldn’t get out of their [mindset] of, ‘We do television.’ ‘

After the dot-com gold rush went bust, it would seem the broadcasters’ policy of wait and see is now in effect. *

-www.extendmedia.com

-www.bitcasters.com

-www.blackholetv.com

-www.blabstudios.com

-www.u8tv.com

-www.delvinia.com