Canadians like Mike Myers and Jim Carrey have presided over the entertainment world of the 1990s. Born and raised near Toronto, Rob Burgess, 42, may well carry that tradition into the 2000s -- at least in the nascent world of online entertainment. Unlike his show biz counterparts, Burgess is a software exec -- the CEO of Macromedia, a 3-D graphics company he is credited with transforming from a moribund, money-losing victim of the collapsing CD-ROM market into a profitable producer of animation tools for an increasing lively Web.
Last July, Burgess' company launched Shockwave.com, a Web entertainment hub featuring animated games and cartoons like Comedy Central's "South Park," Showtime's "WhirlGirl," and -- in an exclusive deal signed last week -- Spiderman creator Stan Lee's Seventh Portal. Shockwave.com has quickly become one of the most popular game and animation sites around; it averages 2.1 million page views per day and registered over 5 million visitors in its first three months.
Burgess took on the CEO role at Macromedia in late 1996, after a stint as a senior executive at Silicon Graphics. He quickly laid off 10 percent of the workforce, revamped Macromedia Director for the Web, and introduced new Web products like Flash, a vector-graphics based tool that delivers high quality animation over slow Web connections. Flash and the company's popular Shockwave plug-in are key to the current explosion in online entertainment of which Shockwave.com is a part.
Burgess races through long work days as if he were born with an extra set of adrenal glands. A star track and field athlete (he ran a 5-minute, 30-second mile at age 11) and life-long hockey fanatic, he wooed his wife by offering to take her to the Galapagos islands -- on their second date. He once stole the show at Silicon Graphics' annual lip-sync contest by dressing like Annie Lennox in black leather pants, red bra and a spikey blonde wig -- belting out "Would I Lie To You" to much applause. Shockwave.com's interim CEO, Burgess may have a bit of Hollywood in his blood after all.
Hollywood and Silicon Valley have had a terrible track record for working together, suffering one "convergence collision" after another. Why?
Silicon Valley and Hollywood are totally different in the ways that their businesses are structured, deals put together, language, values -- everything. In Silicon Valley, the venture capitalists are creating this new economy. Down in Hollywood, it's the lawyers and the [talent] managers. In Silicon Valley, the talent is the engineers, while in Hollywood it's the actors. In the valley, if you have an idea for a business, you put a business plan together. In Hollywood, you put together scripts, actors and combinations of people for a show, then see how much you can sell the package for. I think that's the reason why there are so few deals between Silicon Valley and Hollywood. Both sides come together, and each side knows they are making sense in their respective worlds. But they aren't making sense to each other.
Brad Grey of [the Hollywood management/production company] Brillstein/Grey said something very interesting to me recently. We were talking about the huge differences in culture and language between Silicon Valley and Hollywood. Toward the end of the meeting he looked at me with a big smile on his face and in good humor said, "You know Rob, you can't imagine the rage among the members of the Hollywood community." "Why?" I asked. "Because," he said, "we [in Hollywood] are used to being the overpaid guys. Now you Silicon Valley types are the ones who are ridiculously overpaid."
We are in the midst of the Web's second great flirtation with entertainment. The first involved industry players like AOL and Microsoft, who were unable to aggregate large enough audiences or make enough money to make their Web entertainment efforts worthwhile for them. Why has entertainment been such a tough business on the Web? What's different this time?
The Internet has not had the kind of playback capabilities needed to create a rich entertainment experience. Everybody wants music, but nobody wants shitty sounding music. Everyone wants to see cartoons or games, but nobody wants to wait a week to get them. Nobody wants video that looks like a cheesy little security video. What's different now is that new technologies like Flash and MP3 can deliver a broadband experience over today's Web. The fidelity of a Flash cartoon now rivals cartoons you might see on television. Add the fact that -- according to NPD, the parent company of Media Metrix -- there are now 190 million Flash players and 100 million Shockwave players out there.
So now we've got the reach in terms of audience. The technology allows artists to express themselves effectively. Now we're galvanizing the writing -- getting the best storytellers of our day to focus on this new medium. We've just done a huge deal with StanLee Media. Seventh Portal and a bunch of other Stan Lee series are going to be coming out exclusively on Shockwave.com. We've made an investment in StanLee Media as well. There'll be a lot more deals like that happening.
The main selling point for Flash is that it allows you to download richer animation through slow Internet connections. But isn't Flash just an interim technology? What happens to Flash when broadband is more ubiquitous?
Oh, Flash can use as much bandwidth as becomes available. What we can do today with current slow connections is more simple animation -- the kind of stuff you see on Saturday morning cartoons on television. But we can't do "The Lion King." That requires so much more fidelity and bandwidth. I often say there are just two uses of broadband: Transferring big files and multimedia. So with greater bandwidth the programming will get richer and richer.
What is Macromedia's broadband strategy? What kind of tools will we need in a broadband environment?
We're always looking two or three years out, speculating about what kinds of connections people will have, and building tools in anticipation of that. There'll be much more video, much better audio, and you won't have to be so concerned about the initial download time. When you watch Ted Koppel, you don't want to download ABC. There'll be passive delivery techniques so that you won't be so burdened by the weight of a piece of software. It'll all happen silently, so you'll only be concerned about the programming instead of doing back flips to see it.
Last month Steven Spielberg's DreamWorks, Ron Howard's Imagine Media and Paul Allen's Vulcan Ventures announced formation of Pop.com, a Web entertainment company that will offer short films, animation, games and other interactive fare. What are the implications for the online entertainment space -- and Shockwave.com?
I was down in L.A. when Pop.com happened. Everybody is looking for a dance partner. I think there's going to be a whole bunch of companies like Pop.com. Anyone who is doing animation and games will be using our products -- Shockwave and Flash. It's been building and building. Pop.com was one of those announcements where people say, "Jesus, online entertainment is not going to happen -- it is happening!"
What will be the role of the Hollywood studios in the online entertainment space? Are they your main competitors?
The studios are masters at figuring out how to entertain people. It'll be "co-opetition" with those folks. I see a lot of things we're doing technologically as being of a lot of value to the studios. They're going to want to harness some of the technology we're building. There are lots of opportunities for both collaboration and lots of places where we'll be competing -- for the artists and the audiences.
It used to be that the networks and studios were the only companies with the capital and the eyeballs. That's not true anymore. What we're creating here at Shockwave.com is the United Artists of the Web. We provide artists with eyeballs, capital, promotion and an e-commerce infrastructure. We have a business model that allows them to keep creative control and have long term financial participation in their creations.
Why did you set up Shockwave.com as a separate company apart from Macromedia?
Macromedia and Shockwave.com are completely different businesses that have different cultures and customers, and require staffs with different skill sets. A software company like Macromedia sells software to developers, while an entertainment company like Shockwave.com tries to entertain consumers. The two are also at different stages in their respective development. Macromedia is a functioning, public company that is on a steep growth curve and spitting out lots of profits. Shockwave.com is an Internet entertainment startup, so we anticipate several quarters of losses as we invest for the future. Macromedia's operating income last quarter was 19 percent, but if you separate the two businesses, operating income for Macromedia rises to 27 percent. Separating the businesses makes the performance of each company clearer. Macromedia is even more profitable than people think, and the split gives more visibility to Shockwave.com's business model, which is more like that of MP3.com.
Spinning off Internet businesses seems to be a popular strategy these days. We've heard about the advantages -- Internet-style valuations, using equity to attract and keep talent. What are the pitfalls?
It's very difficult for companies to actually spin off their Web sites if those Web sites are fundamentally in the same business as the parent company. If you look at a brick-and-mortar company that sells toys and the Web business that is spinning off also sells toys, it's really hard. There are channel conflicts and both businesses are chasing after the same customers. With media companies you've got cannibalization issues, cultural issues -- a lot of issues. Hats off to them for trying, but it's a much more difficult corporate re-engineering.
In our case, the spin-off is easy and natural. Macromedia sells software. Our objective was to populate all the browsers with Shockwave and Flash content so we could sell more software. Those products just happened to really take off. Shockwave.com became an outstanding business opportunity that could not be overlooked. We're an accidental entertainment company.
Macromedia's Director still commands market share as a Web animation suite. But Director was originally designed for CD-ROM and video games, not for the Web. Some believe that Director may be vulnerable to a competitor coming in with a better product and that Macromedia needs to come up with a new high-end multi-media studio for the Web. What do you say to that?
While Director wasn't originally designed for the Web, it has been substantially updated. Usually when you ship a new version of software, sales are large in the first and second quarters. By the third quarter a lot of people have the product and sales start to drop off. The third quarter for the current version of Director, on the other hand, has been the biggest quarter in the whole cycle. Director has been the market leader for many years. The barriers to entry for a competitor are very high. There are 100 million copies of Shockwave running out there on Windows, Apple, I/E, Netscape, all these different environments -- and getting them all to run is no small feat. Our developer community is now over a million strong. There may be some product that comes along to compete with Director, but there are none now.
Have you ever visited Tom Winkler's scatological Flash animated cult site, Doodie.com?
I haven't really ... [turns to his PC and types in the URL] ... At a Macromedia/Shockwave.com all-hands meeting recently one of the engineers asked where we would draw the line on content. I asked people to put up their hands if they had seen the "South Park" movie. Almost every hand went up. "We're not going to do porno," I said, "and we're not going to do gambling. But we are probably going to do filthy humor." The place erupted into applause. [A Flash cartoon called "Shit n' Spin" downloads on Burgess' screen. A defecating naked man wearing ice skates spins like a top, poop flying in all directions.] Holy Mackerel! ... Well, you know, people love Joe Cartoon's "Frog In A Blender"!