Tinseltown Titans Caught in a Web

By Chris Taylor with Jeffrey Ressner/Los Angeles

The last hours of Pop.com were laced with irony worthy of a movie by Steven Spielberg and Ron Howard--who, as it happens, were co-founders of the ill-fated website. Every Friday afternoon for the past few months, Pop's 85 employees had gathered in their Glendale, Calif., warehouse to sip beers and slap backs for the films they already had in the can: shorts starring Rene Russo, Steve Martin, Claudia Schiffer. Last Friday, just two weeks before the planned launch, they were chugging beers to drown their sorrows and being eyed by security guards to make sure they didn't steal the computers as they left the premises for the last time.

Conspicuously absent from the bitter end were Pop's architects: Spielberg, Howard, DreamWorks pals Jeffrey Katzenberg and David Geffen and Howard's partner Brian Grazer. Pulling the plug and skipping the farewell party were among the few things in Pop's short and troubled history that found all five in agreement. "Thank God I've got another occupation," says Grazer. "I love going from foxhole to foxhole in movies and television, but the Internet space is Vietnam."

Indeed, the more Hollywood and cyberspace engage each other, the more body bags come back. Shockwave.com an entertainment site that forged pricey pacts with Tim Burton, David Lynch and the two creators of South Park, laid off 20 last week from its staff of 170. A copyright lawsuit filed by the movie and recording industries has scared investors away from the Michael Ovitz-backed content-search engine Scour, which laid off 52 of its 70 employees two weeks ago. The Digital Entertainment Network imploded in May, and even the critically lauded short-films site Atom Films is in need of another round of financing.

What's going wrong? Part of the problem is that the audience just isn't there yet. Even brief online movies require hefty broadband connections such as a cable modem or a DSL. Most of us are still chugging along on 56-K modems, and would rather watch TV than wait half an hour for a jerky postage stamp-size short to load. So until broadband goes mainstream, online entertainment networks have the near impossible task of building a brand in a near vacuum while burning as little cash as possible. "It's like Survivor," says Kevin Wendle, co-founder and CEO of independent-filmmaker site iFilm.com "It's tough being able to hang in there for the long haul."

If anyone was going to be the Richard Hatch of this cyber-movie island, you'd expect it to be the DreamWorks-Howard ticket. But Pop fizzled as if it didn't have the will to live: the site issued only three press releases in its brief life and delayed the launch so often it became an industry joke. Out of the $50 million purse promised them by Microsoft co-founder Paul Allen, it spent a paltry $7 million--barely a long liquid lunch by Silicon Valley standards.

Pressures from within also helped bring down Pop--a catalog of cluelessness that would make a classic how-not-to business book. Kenneth Wong, who had no Internet experience but oversaw cruise-ship attractions and theme-park rides as Imagineering head for Disney, was put in charge of the site by Katzenberg. Other executives were plucked from the world of multimillion-dollar budgets and told to produce shorts for $10,000. Personal favors were rife: one staff member says Steve Martin got a budget-busting $100,000 for projects, including Gwyneth and Me, a comedy short about his attempts to have a baby with Gwyneth Paltrow, because the moguls didn't want to jeopardize their relations with him.

Spielberg, it seems, gave up much earlier than Howard. Even his suggestions were halfhearted: one was an animated short called From Hair to Eternity about a man who seeks an unblocked view of a movie (Jurassic Park it ain't); the other was to place a webcam on the set of his film A.I. and broadcast live images of the crew on lunch breaks. None of the principals could decide on Pop's overall style, or even which ideas to pursue, "We'd go through the slate of projects and Steven would like this, Ron would like this, Jeffrey liked this, and Brian liked this," says a harried executive.

Keenly aware of the critical roasting they would get, the fathers of Pop decided to bail out before drowning in red ink. Says Katzenberg: "Everyone in this space is blindfolded and trying to pin the tail on the donkey." The final ignominy came when indie start-ups iFilm and Atom Films negotiated to buy Pop, but no deal materialized. And so Pop was laid to rest, its tombstone a warning to all those in Tinseltown who would jump on the Internet without first understanding it. If Spielberg and Howard own the story rights to Pop's internal wranglings, however, they might yet have a winner.