Hollywood Media Corporation - Company Profile, Information, Business Description, History, Background Information on Hollywood Media Corporation

2255 Glades Road, Suite 221A
Boca Raton, Florida 33431

Company Perspectives:

Hollywood Media Corp. is a leading provider of news, information, and ticketing covering the entertainment and media industries. The company's network of consumer and B2B businesses has a proven track record of developing comprehensive entertainment industry databases, as well as unique and useful content for consumers. The company's network includes: Hollywood.com, a premier movie and entertainment destination on the Internet; CinemaSource, the nation's largest provider of movie show times listings on the Internet; EventSource, which licenses to Web sites and wireless providers the first and only nationwide online database of general events information, including live theater data; Baseline, one of the largest and most comprehensive movie and entertainment information databases; and Broadway.com, which offers the Web's most comprehensive coverage of live theater worldwide.

History of Hollywood Media Corporation

Hollywood Media Corporation is a diversified company offering news, information, and ticketing services related to the film and theater industries. It derives revenue from several related properties that deliver content electronically and through other media to businesses as well as consumers. Its data syndication business provides content to leading newspapers and their Web sites, highly trafficked Web sites and portals, wireless networks, voice technology companies, and entertainment industry professionals through CinemaSource, EventSource, AdSource, and Baseline/FilmTracker. The company's online ticketing operations, Hollywood.com, Broadway.com, and its minority-owned subsidiary MovieTickets.com, allow consumers to purchase tickets to movie theaters and live theater, while Theatre Direct International provides live theater tickets for travel professionals and consumers. The company is also active in book development through its intellectual property division, which includes Tekno Books and NetCo Partners.

Big Entertainment and Hollywood Online: 1993-99

Two companies were begun in 1993 that, six years later, would result in Hollywood.com, Inc., the predecessor to Hollywood Media Corporation. Hollywood Online was founded in 1993 by Stuart Halperin and Steven Kaminsky in their apartment in Santa Monica, California. That same year, Sci-Fi Channel co-founders Mitchell Rubenstein and Laurie Silvers, who were husband and wife, launched Big Entertainment, Inc. in Boca Raton, Florida, after selling the Sci-Fi Channel to USA Networks, Inc.

Hollywood Online began in 1993 with financing from friends and family of its two founders, Stuart Halperin and Steven Kaminsky. Their concept was to create a multimedia Web site devoted to movie news and information. It worked so well that Hollywood Online was acquired by Times-Mirror Company in 1996 and continued to operate as a division of that company until 1999, when it was sold to Big Entertainment.

Big Entertainment began in 1993 with an unusual concept: the company planned to use top-name writers to create comic book characters that could be published, sold, or licensed in a variety of media, from paperback books to CD-ROMs. The company created a new imprint, Tekno Comix, to publish comic books; the imprint later evolved into Tekno Books and became a leading book developer. The first character that was created for Big Entertainment was Mike Danger, a 1950s-style private detective who worked in the year 2045. Created for Big Entertainment by noted detective writer Mickey Spillane, Mike Danger made his debut in February 1994 in a video comic made by Disney-MGM Studios in Orlando, Florida. Mike Danger comic books debuted in fall 1994. In addition to contracting with Disney-MGM Studios and Disney Animation Florida, Big Entertainment signed an agreement with IBM Corporation that allowed IBM to use its characters in CD-ROMs.

Financing for Big Entertainment came from an initial public offering in November 1993 that raised about $10.5 million. Another $1.25 million came from a private placement with Asbury Park Press, a New Jersey newspaper that owned 10 percent of Big Entertainment. Laurie Silvers served as Big Entertainment's president and secretary, running the company's daily operations. Rubenstein was its chief executive and handled financial matters. Rubenstein and Silvers met in high school and later got married. She graduated from the University of Miami School of Law in 1977, while Rubenstein graduated from the University of Virginia School of Law in 1977. Rubenstein subsequently earned a Masters degree in tax law from New York University School of Law in 1979. During the 1980s, they set up a law firm, Rubenstein & Silvers. As a sideline they bought up local cable systems, and in 1989 they sold their $60 million cable business to other cable operators. After that, they created the forerunner of the Sci-Fi Channel by leasing satellite space from General Electric, licensing old TV series, and signing up large cable operators. Just before its 1992 launch, they sold the channel to USA Networks for an estimated $75 million to $100 million.

By 1995, Big Entertainment had sales of $7 million and published a growing line of comic books that featured Gene Roddenberry's Xander and Neil Gaiman's Mr. Hero. In April 1995, the company signed a deal with Miramax Films to turn the comics into movies, and Warner Books contracted to publish Xander and Leonard Nimoy's Primortals as books. In June 1995, Big Entertainment signed author Tom Clancy and established a joint venture with Clancy called NetCo Partners for his Net Force series, which was subsequently licensed to various publishers. Books in the Net Force series were consistently in the top ten on The New York Times Bestseller List. In mid-1996, HarperCollins agreed to publish hardcover novels and illustrated novels of properties developed by three well-known science fiction and fantasy authors for Big Entertainment. They were Ann McCaffrey's Acorna: Queen of the Unicorns; the estate of Isaac Asimov's I-BOTS; and Margaret Weiss's Testament of the Dragon.

At the suggestion of board member Harry Hoffman, former CEO of Waldenbooks, Big Entertainment began offering entertainment products based on its intellectual properties. In October 1994, the company opened a 560-square-foot retail store in the Mall of America in Bloomington, Minnesota. The company also sold its entertainment products through kiosks in malls. The high-tech kiosks were positioned near food courts in malls and measured 166 square feet. They included a bank of 16 TV monitors that showcased movie trailers and promoted merchandise. The kiosks also included racks that displayed 700 different items, including 100 comic books and collectibles. For 1996, entertainment products contributed about half of Big Entertainment's $8 million in revenue.

With 29 kiosks and one retail store in operation, Big Entertainment established the Big Entertainment Franchise Corporation and planned to use franchising to open 200 units over the next four years, starting in 1997. Executives with franchise experience were hired, and leading mall developer Simon/DeBartolo Group Inc. invested in the company. By the end of 1998, however, Big Entertainment decided to sell its entertainment products exclusively over the Internet. It put its mall-based operations up for sale, including about ten retail kiosks and five stores. In November 1998, the company launched an e-commerce Web site, bige.com, and in December added an Auction Gallery on its Web site to offer collectible entertainment products.

Big Entertainment Expands: 1999-2003

At the beginning of 1999, it was announced that Times-Mirror would sell Hollywood Online Inc. to Big Entertainment for $31 million in stock. Hollywood Online owned and operated the Web site Hollywood.com, which offered movie and celebrity information as well as the show times for some 75 percent of all movie screens in the United States. As a result of the acquisition, which was completed in May 1999, Big Entertainment planned to expand its e-commerce activities from offering entertainment products to selling movie tickets, DVDs, and videos. According to one analyst, the merger of bige.com and Hollywood.com would make it the leading Internet destination for movie information and collectibles with 50 million visitors a month. Big Entertainment subsequently acquired CinemaSource, the largest provider of movie listings to the Internet, and in August it acquired Baseline, the largest movie and television database, for about $10 million from media analyst Paul Kagan.

Around this time, Big Entertainment and CBS, Inc. entered into an agreement whereby CBS would trade $100 million in promotions on all its media properties over seven years in exchange for a 35 percent interest in the joint venture that would run Hollywood.com, with Big Entertainment owning 65 percent of the venture. Later in the year, however, this agreement was superseded by another agreement, in which CBS took a 30 percent equity interest in Big Entertainment in exchange for $105 million worth of advertising and promotion on CBS media properties over the next seven years. The agreement was approved by Big Entertainment's shareholders at the company's end-of-the year meeting. Shareholders also approved changing the name of the company from Big Entertainment to Hollywood.com, Inc. and its stock symbol from BIGE to HOLL. For 1999, Big Entertainment reported revenue of $10.1 million and a net loss of $24.7 million.

The year 2000 was a very eventful one for the newly named Hollywood.com. Promotional efforts designed to boost traffic at the company's Web site included the launch of M&M's Eye Candy Theatre, a new section of Hollywood.com that featured multimedia movie trailers and was sponsored by candy-maker, Mars, Inc. Hollywood.com also launched its Red Carpet Sweepstakes in January 2000. Hollywood.com subsequently hired Los Angeles-based Friedland Jacobs Communications, the agency that developed the sweepstakes, to create a multimedia branding campaign.

In the first half of 2000, Hollywood.com launched two new ventures, MovieTickets.com and Broadway.com. MovieTickets.com was a joint venture established to sell movie tickets online. The founding partners of MovieTickets.com included the movie theater chain AMC Entertainment, Inc.; National Amusements, the parent company of Viacom and the owner of Showcase Cinemas and Multiplex Cinemas; Canada's Famous Players, Inc.; and Hollywood.com. Hollywood.com owned about 30 percent of MovieTickets.com. CBS, Inc. took a 5 percent interest in MovieTickets.com in exchange for $25 million in advertising on CBS media properties. During the year, other exhibitors signed on to participate in MovieTickets.com, including Florida's Muvico Theaters and Marcus Theatres. In October 2000, MovieTickets.com began offering online ticketing for about 1,000 movie screens in Canada.

Broadway.com was launched in May 2000 to sell live theater tickets online. When it launched, Broadway.com offered theater listings and show times for more than 1,900 venues. It also included theater news and reviews. In July 2000, Broadway.com began offering online ticketing for theaters in London's West End. Other new sites launched by Hollywood.com in 2000 included Spanish-language sites in Mexico and Argentina and a Chinese-language version of its site in China.

Building on the Baseline movie and television database, Hollywood.com created an enterprise-wide database to support every movie and TV show listed on Hollywood.com. The database included extensive details about each production, including credits, background, budget, and financial information. Hollywood.com developed Baseline into a research service with information on more than 130,000 films and television programs. It also included biographies of entertainment professionals. By 2003, the service had more than 1,500 subscribers, including major movie studios, investment banks, news agencies, and other entertainment professionals.

During 2000, Hollywood.com entered into several agreements to distribute its content, including a strategic partnership with British Telecommunications PLC to distribute its content over BT's multiple Internet platforms. Hollywood.com entered into agreements with wireless carriers Sprint PCS, Verizon Wireless, and OracleMobile.com to provide content on their wireless networks. Hollywood.com also signed a multi-year agreement with America Online's local content network, Digital City, to provide an event listings database. Hollywood.com also added content through an agreement with CinemaNow.com, which agreed to make its library of more than 800 movie shorts and full-length feature films available for free on Hollywood.com's Web sites.

In September 2000, Hollywood.com acquired Theatre Direct International (TDI) from producer Cameron Mackintosh for about $2 million in stock. Founded in 1990, TDI was a ticketing wholesaler to the travel industry for live theater productions running on Broadway, Off-Broadway, and in London. TDI also represented 11 producers and 16 Broadway shows to the travel industry. TDI had about $22.5 million in annual revenue for the year ending July 31, 2000.

At the end of September 2000, Hollywood.com consolidated its two principal offices in Santa Monica and Boca Raton. It relocated the technology and hosting functions for the Hollywood.com Web site from Santa Monica to Boca Raton, where technology for Broadway.com and MovieTickets.com were already located. The Santa Monica office remained open as a news bureau for Hollywood.com. The consolidation resulted in the layoff of 35 of the Santa Monica's office staff of 50 workers.

Toward the end of 2000, Hollywood.com announced it would change its name to Hollywood Media Corporation, reflecting recent acquisitions and the launch of new sites that expanded the firm's activities beyond those suggested by its current name. For 2000, the company reported revenue of $29.5 million and a net loss of $51.8 million.

Hollywood Media further consolidated its operations at the beginning of 2001 by laying off eight of 15 workers at its Santa Monica office. During the year, the company entered into strategic alliances involving MovieTickets.com and Broadway.com. Early in the year, Broadway.com and Stagebill, the largest custom publisher for performing arts performances in the United States, formed an agreement to host a Stagebill channel on the Broadway.com Web site. In addition, Broadway.com would be promoted in Stagebill's program magazines. Later in the year Broadway.com and Travelocity.com announced a three-year marketing agreement, with Broadway.com becoming the primary theater ticketing service for Travelocity.com for performances in New York, London, Las Vegas, and Toronto. In November 2001, Hollywood Media expanded its theater ticket operations by launching 1-800-Broadway, which allowed consumers to purchase live theater tickets over the telephone. The new service received an overwhelming response, and by March 2002 its ticket sales rivaled the online sales of Broadway.com.

MovieTickets.com and America Online entered into an alliance in August 2001 in which AOL invested $8.5 million in MovieTickets.com for a 3 percent equity interest in the joint venture. Under the alliance, AOL's Moviefone unit and MovieTickets.com created a national network that covered more than 85 percent of North America's movie screens, making it easier for consumers to purchase movie tickets online. Around this time, MovieTickets.com announced that it had sold more than 2 million online movie tickets since it began.

Toward the end of 2001, Hollywood Media entered into a joint venture with Vegas.com, an Internet site owned by Greenspun Media Group that provided services for travelers to Las Vegas. The new venture offered consumers offline and online access to tickets for Las Vegas shows.

For the year 2001, Hollywood Media reported revenue of $50.2 million and a net loss of $41.8 million. The company noted that its revenue had increased by 70 percent, while expenses for sales, marketing, and general administration decreased by 45 percent. EBITDA (earnings before interest, taxes, depreciation, and amortization) improved by 82 percent. In spite of the company's inability to turn a profit, at least one analyst rated its stock a buy based on the value of its interest in MovieTickets.com, its business-to-business and business-to-consumer operations, and its intellectual property, according to Business Week.

In early 2002, Hollywood Media expanded Baseline, its database and research service unit, by acquiring FilmTracker from Fountainhead Media Services, Inc. FilmTracker provided information services to the feature film and television industry, including the tracking of productions in progress. Under the terms of the deal, Fountainhead Media acquired a 20 percent equity interest in Baseline, Inc. in exchange for $4 million, which consisted of $2 million payable over five years and the contribution of the FilmTracker database and existing contracts valued at $2 million.

In August 2002, Hollywood Media introduced two digital cable television channels, Totally Hollywood TV and Totally Broadway TV. The channels were initially offered to Cablevision System Corporation's Interactive Optimum subscribers in Long Island, Warwick Valley, New York, and Morris County, New Jersey. The channels provided on-demand video content and showtimes for movies and Broadway shows. Both channels offered ticketing services. The on-demand video clips included premiers, movie trailers, reviews, behind-the-scenes footage, interviews, and more. Hollywood Media planned a national rollout of the two channels, and in February 2003 Cox Communications added Totally Hollywood TV to its video-on-demand service in San Diego.

For 2002, Hollywood Media's revenue increased 16 percent to $58.2 million. The company reduced the amount of cash it used in operating activities from $5.4 million during 2001 to $3.9 million in 2002. The company's net loss of $81.6 million included a $57.3 million non-cash charge related to its exchange agreement with Viacom, which had acquired CBS, Inc.'s interest in Hollywood Media when it acquired CBS in 2000. Under the terms of the exchange, which was completed in the third quarter of 2002, Viacom gave up its interest in Hollywood Media and returned some 8.6 million shares of the company's stock. Viacom also made a payment of $2 million in cash to Hollywood Media as part the exchange, with Hollywood Media giving up some $49 million worth of non-cash advertising on CBS's media properties. Hollywood Media retained about $5 million of non-cash advertising to be used on CBS's media properties in 2003.

Hollywood Media expected the effect of the exchange with Viacom to accelerate its timetable for reaching profitability, for it would eliminate about $17 million in annual amortization expenses. Another effect was to reduce the number of outstanding shares and increase the company's remaining shareholders' percentage of interest in the company. The transaction did not affect either company's holdings in MovieTickets.com.

Hollywood Media began to see improved financial results in the first half of 2003. For the first quarter, the company reported revenue of $14.6 million, an increase of 14.6 percent over the previous year's first quarter. The company reduced its net loss to $2.9 million from $7.5 million in the previous year's first quarter. For the second quarter, revenue increased 5.3 percent to $17.0 million. The company's net loss was reduced by 73.3 percent, from $6.9 million in the second quarter of 2002 to $1.9 million in 2003. For the first six months of 2003, the company reduced its net loss by 67.2 percent to $4.7 million. In other developments in the first half of 2003, the company hired investment banking firm Jefferies & Company, Inc. to explore strategic opportunities to improve the value of the company to its shareholders. Chairman and CEO Michael Rubenstein said, "We believe the current share price does not reflect the value of our businesses." While Hollywood Media may not report a profit in 2003, the company has successfully improved the financial results from its several revenue sources.

Principal Subsidiaries: MovieTickets.com (26.4%); NetCo Partners (50%).

Principal Divisions: Data Syndication; Broadway Ticketing; Internet; Intellectual Properties.

Principal Operating Units: CinemaSource; EventSource; AdSource; Baseline; Theatre Direct International; Hollywood.com; Broadway.com; Tekno Books.

Principal Competitors: American Online; Fandango; Ticketmaster; Tickets.com, Inc.; Walt Disney Internet Group.


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