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Brilliant

Brilliant/19″/CW1st/dp2nd By JENNIFER NETHERBY Staff Reporter Brilliant Digital Entertainment bought a London-based auction channel with plans to launch it as a cable network in the U.S., only with a twist: customers will watch auctions on television and make their bids over the Internet. Kevin Berneister, president of Woodland Hills-based Brilliant, believes the $7.3 million purchase of the London-based Auction Channel will put Brilliant Digital in a category apart from online auction firms like eBay and Amazon.com. “We’re differentiated by two factors: We’ll only offer real-time auctions, and Brilliant has 3-D animation to bring images into personal computers via narrow-band,” he said. If Berneister is right, the company could be in a position to take advantage of a huge market. Forrester Research estimates that the online auction market will grow to $19 billion by 2003, up dramatically from $1.4 billion in 1998. But while the number of Internet auctioneers is exploding, just 12 percent of the new sites report profits in their first year of operation. However, that number grows to nearly 50 percent by the second year of operation, according to Forrester. Berneister said his company is looking to partner with an established auction company in the U.S. to get a foothold in the market. Jupiter Communications analyst Fiona Swerdlow, who is not familiar with Brilliant, believes it is possible to compete against Internet auction giants but the competition will be formidable. Swerdlow said finding a partner would be a good move for Brilliant, given eBay’s purchase of Butterfield and Butterfield and Amazon’s partnership with Sotheby’s. “What Amazon and eBay are able to do is today have large, established customer bases,” Swerdlow said. “By partnering with large brand names that are so stellar, they’re setting themselves up for long-term, more than short-term. Today people aren’t going to buy a $50,000 item online. Over time, as people become more comfortable buying online, they might.” The Auction Channel is now offered on television in Europe, and Brilliant is pushing to launch it the United States in the coming months. Berneister said the auction events will start as nightly events and eventually expand to a 24-hour format. Because of that, Berneister said the company will be competing with other television channels as much as Internet sites. Brilliant Digital grew out of Sega Corp., the game maker, with the original goal of providing multi-path movies over the Internet, which allow viewers to pick plot twists. Their first “webisodes” began airing in December, and by June, an estimated 350,000 people had ordered the films. Animated versions of “Superman,” “Popeye,” “Ace Ventura” and their own creation, “Cyberswine,” can be downloaded for free or by pay-per-view, depending on the episode, on the Web site and viewed in the company’s format, which allows continuous 3-D streaming on narrow-band systems over the Internet. So how does Internet auction fit in? Berneister said the goal is to create interactive content that uses various media, in particular television and the Internet. “Auction seemed like a popular content type,” he said. The Auction Channel has a broadcast deal with Sky TV, Fox’s European broadcast arm, and Brilliant is looking for a cable television partner to bring the show to this country. Brilliant Digital Entertainment is setting its sights on other interactive content companies and partnerships to expand from solely producing and distributing multi-path movies into other forms of interactive entertainment. The Auction Channel was the first step. “Our business model is focused on the convergence of television and the Internet,” Berneister said. Still relatively new, the company went public in 1997 after relocating to Los Angeles from Australia. Its production and animation studio is still located in Australia. The company has struggled along, losing $10 million in 1998 on revenues of $700,000. But it’s also been boosted by noteworthy investors such as Prince Ahmad Bin Khalid Al Saud and Barry Baeres, president of the German media group Intertainment AG, and others who have pumped $4.3 million into Brilliant since spring. Last year, it partnered with Intel to co-produce a multi-path video for Kiss, the rock group. Company officials come from Sega, Virgin, and other notable media giants. Berneister said the next step for the company is to venture into online games and game shows.

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