Starwave began in 1993 as a funky little games company producing celebrity-driven CD-ROMs for Peter Gabriel, Sting, Clint Eastwood and the Muppets. Three years later, it had become one of the biggest names in online content -- producing a number of acclaimed Web sites like Mr. Showbiz, Family Planet, Outside Online and ESPN SportsZone. With a professional editorial staff, Starwave was the rare company at which writers and editors got the chance to be creative online.
Today, that Starwave is gone. In its place is a new Starwave that -- though it still builds Web sites that draw 57 million visitors a month -- is essentially a technology company, deploying geek talent to engineer gargantuan Web sites. Starwave's technology is so good, in fact, that Disney bought the entire company last month, folding it into Disney's fast-growing Internet division, the Buena Vista Internet Group.
Starwave's evolution is not all that unusual in itself; what Internet company hasn't constantly revised its goals in the face of ever-changing Web business plans? But it's also a cautionary tale for anyone hoping to build an empire of independent Web sites featuring original content, as Starwave did. If Starwave's fate is any indication, Internet content companies may have a tough time surviving on their own in a market where big-media behemoths are carving up the Net.
Starwave's original conception as an offbeat Paul Allen project investigating the potential of interactive TV was very brief. The company's second plan, to build creative interactive games, was almost as brief: The CD-ROM industry was already choking when Starwave was formed in 1993, and by 1995 the company realized that spending 80 percent of its budget on those expensive disks was a big mistake.
Meanwhile, the Internet was budding, and Starwave turned its attention to the fledgling online division, which had only just begun building Web sites under brand-new deals with ESPN and Outside magazine. Starwave envisioned itself as a "content house" and staffed its entertainment-news site (Mr. Showbiz) and sports site (ESPN SportsZone) with publishing industry characters: Tom Phillips, former publisher of Spy; Pulitzer Prize-winning journalist Mitch Gelman; New York Post gossip columnist Susan Mulcahy.
"There were a lot of conceptual discussions going on back then -- or we'd have daily sports trivia sessions for about half an hour," says Scott Roesch, a four-year veteran of Starwave and producer for Mr. Showbiz. "That doesn't happen anymore, that's for sure. It was a unity bonding type of thing -- they no longer have time for that."
ESPN SportsZone soon taught Starwave -- and most of the rest of the Web, for that matter -- that information sells. The sports site proved immensely popular (today it gets 24 million visitors a month, placing it among the top 10 most-visited sites on the Web) and by 1997, Starwave had produced a clutch of similar sports sites: NFL.com, NBA.com, NASCAR online and WNBA.com. The formula was simple: Get a great license with the authority in a sports field, build a powerful technology backbone that can grab and post up-to-the-minute sports scores and statistics and fill it in with news generated by your own staff of reporters.
Starwave had always been a sporty kind of place. Wired, the New York Times and the Red Herring all published Starwave profiles that gushed over the foosball tables in the front office, the basketball games at Allen's house, the execs who went jogging together in the morning. That hasn't changed much over the years (though the days of basketball games at Paul's are over, thanks to the sale), but the enormous success of ESPN SportsZone changed the company's direction dramatically. Starwave began to be far more about the perfect code than the well-written story.
"A lot of people went there thinking they were going to do noncorporate creative work online, and there were two periods of fallout," explains one former staffer. "The first was when they discovered this was not about writing feature pieces, this was about information architectures. Some got jazzed -- people with a logical or mathematical bent really got into it. If you didn't make that transition, you either left or were fired. That was a fundamental shift in direction -- asking, what is the Internet business all about?"
"The second switch," the former staffer says, "was when Starwave changed from being a place where you thought, 'I've got a playground in which to experiment with this stuff.' There was a point at which we realized that Starwave was becoming a corporation, a Disney subsidiary."
That second change started to kick in early in 1997. In 1996, Disney bought ABC/Capital Cities (which owns ESPN) and suddenly found itself in a relationship with Starwave. Disney was impressed by how well the ESPN SportsZone Web site had performed, and proceeded to give Starwave the coveted ABCNEWS.com contract.
Says Jake Winebaum, chairman of the Buena Vista Internet Group, "It just became very clear that as we moved into the news space, that what had already been built at Starwave would make the evolution into news quick and simple. The technology and their ability to work with data feeds and production systems for SportsZone were relevant to what they could do with ABC News."
Apparently, Disney also realized that this technology could be applied to a lot more than just sports and news. A month before the ABC News site launched, in April 1997, Disney announced that it had bought a third of Starwave, with the option to buy the rest sometime in the next five years. A year later, it exercised that option.
Kate Delhagen, an online analyst with Forrester Research and a former Starwave marketing coordinator, explains: "The media partners, the ESPN and ABC crowd, and ultimately the Disney crowd, realized that Starwave was developing the expertise and sophistication on the Internet that they did not have. They wanted to continue to invest in that and ultimately acquire it. It's really a case of Disney wanting to refocus Starwave's efforts. While there was any chance for Starwave to look elsewhere and pursue other opportunities, Disney couldn't tell them not to do that. They can now."
Disney's current online plans, according to statements made by chairman Michael Eisner just days before the Starwave buyout, are ambitious: Disney "will be aggressively competing on the Internet, and we will be aggressively competing as you enter the Internet." In other words, Disney plans to build a "portal": Like Microsoft, Excite, Yahoo, Infoseek, Snap, AOL and a hundred other companies, it wants its site to be the first place surfers go when they log on -- and, if possible, the only place they go.
Winebaum is vague about how, exactly, the newly formed Buena Vista Internet Group will be pursuing Eisner's portal plan. Upcoming Disney sites, he says, will be brought together by the Starwave production tools and consist of different nodes: sports, news, entertainment, family, e-commerce. The main differences, he says, will be "under the hood."
The old Starwave offices in Bellevue, Wash., will remain home to the core production systems and services, hosting and engineering, as well as some of the content staff for the sports sites, Mr. Showbiz and ABC News. The focus of the Los Angeles office will be Disney-branded kids and family content initiatives and e-commerce projects. The rest of the news and sports content teams will be housed in New York with their network partners.
The Starwave staff, meanwhile, is nervous about what all this might mean for them. With the deal only a few weeks old, it's hard to know exactly what will happen: Some are thrilled to be raking in Disney-sized salaries and stock options, others are paranoid that the end of Starwave proper means an end to all editorial roles. Why would Disney need Starwave's content, when it's got a mountain of its own media already?
Starwave has already had to cede content to its bigger partner: Family Planet, a cozy site for parents, was folded into Disney's Family.com when the two became partners. Starwave officials say that the two sites had complementary content and made more sense as one; disgruntled staffers complain that Disney didn't want Starwave's site competing with theirs.
"For the most part [the de-emphasis of editorial creativity] happened a long time ago -- way back when it became clear that Starwave was not a place where you write the great article, it's where you build the great Web page or the applet with the score ticker," says one former editorial staffer. "There's a complacency that is sort of depressing to see -- you don't see them doing anything really new. I don't think anyone has drive or vision to play with this or that. It's just cranking out reviews every week."
But Mike Slade, the Starwave CEO who has become president of Buena Vista Internet Group, is quick to assure the press that there won't be any changes in Starwave under Disney. As he breezily assured me from a cell phone in L.A., "It shouldn't be a very big change, because we've been working so closely with them in the last year anyway. Ever since we've moved to ESPN, in the spaces we're in online, the way to win is to partner. It's been kind of a gradual process of integrating a big company and another big company for mutual benefit."
Starwave may be a big company online, but next to the Mighty Mouse it's a small rodent indeed. Despite ESPN SportsZone's enormous success, Starwave still isn't profitable, and press estimates have put Starwave's total losses at around $60 million over the life of the company.
In fact, even the largest of the Web companies -- like Yahoo, Excite or Amazon.com -- can't even remotely compete with the assets of the offline world's media companies and conglomerates. As Goliaths like Disney finally start getting online and amassing their megasites, their portals to all that is online, independent Web companies may find themselves outgunned -- and face a choice of sink or sell out.
For the legions of writers and editors who came online a few years ago thinking that the Internet offered a glorious future for thoughtful writing, the "portal" trend is pretty grim. The new Web, the Web of the portals and conglomerates and partnerships and do-it-all sites, is a boon for companies like Starwave that have reinvented themselves as software powerhouses. That, after all, is what the mainstream media doesn't have.
"Everyone is going to be bought out or shut out -- there's market consolidation going on already. You only need to look around at the portal activity. We keep seeing weird, strange bedfellows, partners in the market," says online analyst Delhagen. "What happened with the overnight bloom of the Internet, and all of these flowers and plants and weeds, is that some of the weeds have been weeded out, some of the flowers have been picked and some of the other flowers are thriving on their own. There's an opportunity for some folks to thrive on their own, but it will take a lot of resources, and many others will thrive under other people's care."
Despite the pessimism of departed Starwave editorial staffers and the trepidation of those who are left, some are still optimistic that Disney's pockets will revive the editorial visions that the company neglected as it concentrated on technology.
"Starwave started out as an R&D company -- at that time there was lots of talk about the direction things could go in, what we could do," says one long-term staffer. "As the bandwidth increases and the tools become more proficient, hopefully we'll be able to go back to some of the visions we had in the CD-ROM days."
But is she still happy working for the new, Disney-fied Starwave? She answers, "Happier. It's the happiest place on earth."