Heavy Traffic: Two Web Guys Figure It Out: The Future Is TV

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.”