On a hot Friday afternoon in July, Heavy.com chief
executives Simon Assaad and David Carson were sitting in a booth in a crowded
diner in the West 30′s, eating a lunch of cod and talking over old times.
Mr. Assaad, dressed as usual in a stiff- collared shirt and
tie, was remembering the $12 million deal the two partners had set up with a
satellite company; the company went belly-up the very day he received the
signed contract. Mr. Assaad and Mr. Carson shared stories about the various
venture capitalists who’d called from the Chateau Marmont and hollered into the
phone, “We’re in Belushi’s room!” The two men considered which of the V.C.’s
they knew have left the country and are now in hiding in Thailand or Scotland.
“Who’s your favorite mogul-head over the past three years?”
asked Mr. Carson, dressed in an untucked blue shirt, as he leaned back in the
booth.
“You know who I like,” Mr. Assaad said. “The guy that
started the tech company, raised $21 million and threw that party where he
spent $14 million. It was in Las Vegas and they had, like, Aerosmith and Leanne
Rimes there, and the guy was walking around handing out stock options.”
“Didn’t he turn out to be a felon?” Mr. Carson said.
“God,” Mr. Assaad said.
“I miss those days.”
All around the city, 31-year-olds are killing idle time,
sitting in diners and bars and rehashing the days when tech ruled and everyone
could make money-and, at least on paper, did.
Mr. Carson and Mr. Assaad are not those guys. They are still
in business and could be for a long time. They have a Web site, and with it
they have opened the door to the post-tech economy.
If you’ve never heard of their site, Heavy.com, then you’re
probably not a guy. You don’t get your news from Comedy Central’s The Daily Show and you don’t subscribe
to Maxim .
The site, at last internal count, drew more than one million
people a month (one teenager who frequents it described Heavy.com as “this
year’s big time-waster”) and records 700,000 to 800,000 hits a day. It has
games and a radio where labels like Universal, BMG and Columbia pay for songs
and albums by bands like Radiohead to be played using MediaPlayer. But the bulk
of its content is devoted to animated shows-shows that parody VH1′s Behind the Music called “Behind the
Music That Sucks,” where Kid Rock lands on the Planet of the Apes and the boys
from Hanson meet up with Donny Osmond in heaven. Or a show that details “Six
Degrees of Tom Selleck,” which finds the connection between Mr. Selleck and,
say, Jesus or R2D2 in six steps.
The shows are crass but almost embarrassingly funny,
blatantly relying on a nonstop stream of pop culture that is as hilarious as it
is familiar. The experience of watching an animated Ted Turner talk about the
history of the mustache, from the Bible to Magnum
P.I. (Mr. Selleck is huge on Heavy.com), is both affirming and
unsettling-reminding viewers that, in the long run, they might have been better
off had they spent more time reading, say, Proust.
In other words, it’s silly little programming on a Web site
requiring no heavy lifting. As a business, it’s never going to rival General
Motors or even AOL.
But here’s the beauty of it: The Web site is almost
incidental to Mr. Carson and Mr. Assaad’s success. It’s merely a vehicle, a
means to an end. Which explains why the two young business partners are still
around, able to hang out in diners among the recently unemployed during the
middle of the day-or, in Mr. Assaad’s case, spend a June day on a panel at an
economic conference, expounding knowingly about the future of the Web.
Mr. Carson and Mr.
Assaad have figured out something that all the sock puppets and would-be
mogul-heads could not and did not. They’ve used their Web site to make money.
And that has caught people’s attention.
Indeed, there was a real energy apparent in Mr. Carson and
Mr. Assaad’s Chelsea loft-office on that July morning. They sat at the long,
stainless steel desk that the two partners share. In a week, the Web site would
move to a subscription model, with 90 percent of its content available only to
those putting up $50 a year. Nearby, Web designers were squinting at iMacs and
techies were conversing about “digital space.”
More important, perhaps, was what was going on in the
converted warehouse two floors below, where employees were working on the four
television shows that Heavy.com produces for cable’s Much- Music USA.
MuchMusic, Canada’s version of MTV, has only been available in the United
States for six years, but recently it has made a strong American push,
premiering on Time Warner Cable in New York and available at Time Warner cable
outlets in major cities around the country. If MuchMusic’s programming catches
on, Heavy.com will be closely aligned with its expansion.
That’s not all. Only the night before, Mr. Carson and Mr.
Assaad had toured an old theater in Chinatown they were interested in buying to
host concerts and live events.
“That’s where the future is at,” Mr. Assaad said. “Live
events. That and plastics.”
“Right,” Mr. Carson said. “You can’t forget about the
plastics.”
The jocularity and optimism. The pieces of kitsch. The
doorless offices. The TV with a remote that no one quite knew how to use. All
these were parts of a scene that for the latter half of the 1990′s played
itself out in the pages of Fast Company
and Red Herring , but now was finis,
kaput. Two spunky guys-the 30-year-old with the shaved head and the suit (Mr.
Assaad) and the 31-year-old guy with the beard and sneakers (Mr. Carson)-using
their chutzpah to form some online company that maybe would revolutionize the
way we ordered our groceries or Saturday-night videos-or that maybe would
simply streamline the way we got news or entertainment. Mr. Carson was the guy
you’d want to hang out with, watching Star
Wars on a Saturday afternoon. The other was the charismatic suit who, after
five minutes of conversation, made you want to hand over your life savings.
But Mr. Assaad and Mr. Carson have survived when most others
have not. And in the process, they have carved out a path to the post-dot-com
world.
Emerging on the other side of the meltdown, they have one
movie deal with Warner Brothers and another with Scott Free-run by Gladiator director Ridley Scott. Some
12,000 videos of their online parody “Behind the Music That Sucks” were shipped
to stores in April. MuchMusic is part of their lives. And their Web site is
still alive.
“How many companies like this are not only still around but
are actually cash-flow positive?” says their backer, Lawrence Goldfarb, a
managing partner of BayStar Capital, the San Francisco–based venture-capital
firm that has backed the likes of pharmaceutical firms Triangle and Abgenix. “I
can’t think of any.”
Good Tips
All of this comes eight years after Mr. Assaad arrived in
New York with a few hundred dollars in his pocket. Egyptian by birth, Mr.
Assaad was born and raised in Australia and was just a year away from finishing
law school when he decided to come for a visit. He told himself he’d stay just
the year, then go back to school-the kind of promise made all the time by
legions of young people from Wichita and London and Des Moines.
Of course, he never went back. He didn’t become a barrister
of Australian law, with a house in the suburbs of Melbourne. What he did
instead was get a job waiting tables at Yaffa Cafe and Lucky Strike, working
from midnight to 8 a.m. every night for three and a half years. He was making,
though, $50,000 a year (“It’s a cash business,” he said), his rent was cheap,
and he was eating for free at the restaurant-so, by the end of it, he had
enough saved to finance an independent film.
It was one of those deals where Mr. Assaad was a production
assistant on Friday “and by Sunday I was the producer,” he said. He invested
his $100,000 savings and set off to sell the film.
But in San Francisco, he happened upon a book that would
ultimately turn into something big.
According to Mr. Assaad, he was in a used bookstore when he
discovered a “ratty paperback version” of Ken Follett’s 1991 novel Under the Streets of Nice . Deeming it to
be movie material, Mr. Assaad tracked down the man who owned its rights (not
Mr. Follett)-a German baron living in an old hotel in Munich. He raised money
from an investor and found another producer and bought the rights to it. Now,
four years and numerous legal entanglements later, Mr. Assaad will be
co–executive producer of the Warner Brothers project, with Joel Silver
producing. It’s still in script stage, and its release date unknown.
It was during this time-1997-that Mr. Assaad first met Mr.
Carson, a Nebraska-raised Army brat. Mr. Carson had trained at the Oberlin
Conservatory and had come to New York to score musicals, then commercials and
specials for National Geographic .
Meeting through a mutual friend, they tried (and failed) to develop a
television show that Mr. Assaad described as ” Fat Albert meets School House
Rock .” But soon they began hooking up with advertising agencies, which
started calling them in to pitch ideas.
One of the agencies was Ogilvy & Mather. With the
agency’s online unit, OgilvyInteractive, they developed an Internet campaign
for I.B.M. e-business. The 15 spots each ran only 30 to 60 seconds long, but
they captured every major advertising award, including the CyberLion Grand Prix
at Cannes and a Cleo.
“We made a lot of
money,” Mr. Assaad said. “It launched our business.”
That business, Heavy Compound Industries, was an
Internet-service provider for others. From a loft space just around the corner
from their current office, they put together Web sites for the likes of Whoopi
Goldberg and Christina Aguilera. They were, said Mr. Assaad, “nickel-and-dime
jobs”-$40,000 to $50,000 worth of work, using a group of Web designers and
techies to satisfy a client’s online needs. But each job had profit margins of
50 to 60 percent, and the workload grew. Between May and September 1999, Mr.
Carson and Mr. Assaad grew a staff of 42.
But for two creative guys, ultimately the work wasn’t
satisfying. And that’s how Heavy.com came about.
Mr. Carson and Mr. Assaad used the $500,000 they’d made from
their service business to produce the content that launched the site. Creating
the first seven shows themselves (they now work with outside creators), they
received, within the first month of the site’s operation, $1.7 million from
UGO-another young-men’s site-to license 104 episodes of “Behind the Music That
Sucks” for video and DVD. Then, last year, they received an additional $2.2
million from Mr. Goldfarb and BayStar.
Meanwhile, they kept their service business going-against
the advice of every banker they consulted. (“I can’t tell you how many of those
guys were like, ‘You have to get rid of that business that’s making money. You
have to have a pure play,’” Mr. Carson said.) And they kept their costs low: no
valet parking, digital beta discs or advertising at sporting events. So while
other Web companies were auctioning off their pool tables, they were growing.
Why? They understood
something that neither the bankers nor the other Web entrepreneurs had: The Web
site alone meant nothing.
“When they first met me,” Mr. Goldfarb, the venture
capitalist, remembered, “they had a business plan that had nothing to do with
online revenue. If I had heard the words ‘online’ and ‘advertising,’ I would
have run.”
The same goes for UGO and its $1.7 million-and for Warner
Brothers, which now licenses two of Heavy.com’s shows for its own Web site in
what Mr. Assaad described as a “six-figure deal.”
But the site was the showcase-it was what attracted Norman
Schoenfeld, former head of regional programming at VH1 and vice president of
MuchMusic USA last year. Mr. Schoenfeld made a cold call to Mr. Carson and Mr.
Assaad because, he said, he “had been aware of some very compelling concepts
they’d been working on. They had their own voice, their own style.
“We wanted to pursue a
similar audience with similar directions,” Mr. Schoenfeld said.
The MuchMusic contract, Mr. Assaad said, is “a very
substantial piece of revenue for us. It’s a 12-month contract, and it’s close
to what we made last year for the whole company.” He would not provide more
precise figures.
Of course, in addition to its Web showcase, Heavy.com boasts
another attractive feature: Mr. Assaad. At that Silicon Alley conference at
Fordham University in June, Mr. Assaad was a riveting figure. Sitting on a
panel about how to make money on the Web, he dominated the talk, fighting with
fellow speakers (“They were talking about banners and all this dumb shit,” Mr.
Assaad said. “One guy had the-I don’t know if you call it stupidity or
naïveté-to say that all the V.C.’s were going to come back and the market was
going to go back up. I was like, ‘I don’t know where their head is, but it’s
not in the market’”) and attracting virtually all of the audience’s questions.
Clearly, the dot-com
survivors who had gathered in the conference room for words of wisdom had found
their guru in Mr. Assaad.
NikeTown.com
Mr. Assaad, Mr. Carson and their investors are making a
deceptively simple statement: It’s not about making money on the Web; it’s all about making money after the Web.
“The Web site is absolutely irrelevant,” Mr. Goldfarb said.
“It costs us nothing to keep up, considering how little it costs to make. All
it does is give places for potential buyers to look. It’s like NikeTown or the
Sony Store.”
Mr. Carson puts it this way: “The Web site is only important
as far as giving us an asset library from which to build our business.”
It’s hard to think of Heavy having an asset library in the
way of, say, MGM Studios, but that’s exactly the parallel. You’re only as good
as the content you can sell elsewhere. Sitting in his office, Mr.
Assaad-dressed neatly in his suit and tie, the hubbub all around him-picked up
a hot-pink package containing a video of “Behind the Music That Sucks.”
“Here’s why I love this business,” he said, waving the box.
“Because you can make something like this. You can deficit-finance it and, six
months later, I’m in a profit because I’m selling it to like 20 other places
using different ways to distribute it. It’s DVD. It’s VHS. In August, you’ll be
able to get ‘Behind the Music That Sucks’ on pay-per-view.”
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