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Brilliant Digital Tries One More New Business Plan

Brilliant Digital Tries One More New Business Plan Corporate Focus By JACQUELINE FOX Staff Reporter After what seems like a never-ending series of consecutive quarterly losses, Woodland Hills-based Brilliant Digital Entertainment Inc. is dumping its 3-D animation movie and music video operation to focus on rich media ad banner technology and supporting products, hoping to steer itself into a profit mode. Brilliant, a spin-off from game maker Sega Corp., went public in 1996 with a plan to provide multi-path animated movies and music videos on the Web. But the business model, said President Kevin Bermeister, never took hold, partly because of the competition in and subsequent decline of the tech market, and partly because of the ever-nebulous, and ultimately, unsuccessful push to get paying customers on board. Although Brilliant’s $1.4 million in revenues for the nine months of 2001 was an 89-percent increase over the $762,000 in sales for the same period in 2000, expenses continued to eat away at profits, said Bermeister. Brilliant reported a net loss of $4.6 million for the first nine months of 2001, compared to a net loss of $13.1 million for the same period in 2000. It had a net loss of $21.9 million for the year 2000 ending Dec. 31 on revenues of $1 million compared to a loss of $10.6 million on revenues of $0.7 million in 1999. The company’s stock has slid into de-listing territory and Brilliant has been forced to sell licensing rights for its music videos and “webisodes” such as “Superman,” “Ace Ventura” and its own “Cyberswine.” Trading at 25 cents a share on Jan. 18, it has had a 52-week high of $2.18 a share and a 52-week low of 11 cents. “I think struggling is probably the right word (to describe Brilliant),” said Bermeister. “We invested in about four or five of the same business models over the last few years, first a hybrid pay-per-view model, then a subscription model, and back to a content release model, but there were definitely shortcomings.” That’s not all there is to this classic tale of dot-com-frenzy-gone-bad either. In 1999, Brilliant tried to get into the online auction industry with the $7.3 million purchase of the London-based Auction House. But the competition there proved equally formidable, and costly: Brilliant found itself up against eBay Inc.’s Butterfield and Butterfield and Amazon.com’s partnership with Sotheby’s, and was forced to sell off Auction House, at a substantial loss, in late 2000. To cut costs, Brilliant laid off 35 workers in December, stripping its staff down to 15. But the company has secured $750,000 in a recent round of financing and is banking on its rich media Brilliant Banner technology to break into the mainstream online advertising market. For Brilliant, the immediate goal is plugging the hole on production costs and beefing up sales. And, said Bermeister, shifting to ad banner technologies represents the company’s best chance of doing so. “Yes, the ad market is tough,” Bermeister said, “but we deliver a very high-resolution format and several campaigns have been ordered, albeit it’s in its early days.” And, because Brilliant Banner also supports an audio track, which targets users with speakers, said Bermeister, the technology is “closer to TV than anything we have seen before.” Flash and imagination, however, may not be enough to turn things around, according to Dave Joachim, senior managing editor of the “webzine” InternetWeek.com. He said Brilliant’s move to the ad side of the Web could be profitable, but only if the core products also include options for businesses to track visitors to their sites and banners. “I don’t blame a company like that for trying to get closer to the money, not that there’s that much more than in online entertainment products,” said Joachim. “But this is a meat-and-potatoes year for technology.”

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