SAM TROUT
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AND THE WINNER IS . . . Sitting somewhere in the hall at this Sunday's Academy Awards ceremonies—although probably not in the celebrity-packed front rows—will be AtomFilms founder Mika Salmi, crossing his fingers for The Periwig-Maker, nominated in the animated short film category. Since Atom shows shorts on the Web, then sells their distribution rights to other outlets, Salmi naturally also attended the Y2K Oscars, back when his Seattle company was flush with private capital and glowing publicity.
What a difference a year makes. His tux may still fit, but high-tech and dot-com businesses have been on a starvation diet since the April 2000 Nasdaq crash. Last week's big drop provides a harsh note of punctuation to Atom's changed circumstances. As a result, after the last envelope is opened and the last high-school drama teacher is tearfully thanked, Salmi will fly home—to San Francisco, his new home.
We read plenty about virtual companies during the period between Atom's August '98 founding as on online source of short films and its January stock-swap merger with shockwave.com. Dot-coms can be located anywhere, we were told; money and information will move with frictionless speed. Maybe so, but when the moving trucks empty out Atom's Western Avenue offices next month, we'll regret such enthusiastic claims.
Atom probably has a few regrets, too, after spending an estimated $27 million in initial private financing. Sure, it built its site and brand into industry leadership, but those marketing costs ironically forced the merger. (Atom gets 30 percent of the new concern.) Today, Atom's publicists now eagerly proclaim: "It's never been a Web company."
Funny how no one was saying that a year ago.
Meanwhile, Salmi advances upward to head the much larger, just officially named AtomShockwave Corp., which announced $22.9 million in new capital investment on Tuesday—a pretty strong endorsement of its new CEO.
What about those left behind? Beyond the pink slips, has our city lost its last, best hope to become a center for the elusive digital entertainment industry? What went wrong?
SPEAKING BY PHONE from San Francisco in his first local interview since his move (a Seattle Weekly exclusive), Salmi says, "It wasn't like our revenues didn't hit where we wanted or our business wasn't going well. We didn't fail in our business; we failed to raise money."
But wasn't the merger caused by Atom's emptying its pockets on marketing? "That was the one area where we probably spent too much money," Salmi admits. "We had plenty of revenue coming in from business clients. Our Web site had pretty good traffic that was growing and growing. But we really wanted to blow it through the roof. That was the environment when everyone was saying, 'You gotta get an audience.' But the return from that wasn't nearly as great as expected.
"We did have two sides to our business model," he continues. "In the beginning we said we were a business-to-business. We were going to sell film and animation to alternative distribution channels. We were going to use the Internet to help people see them. Then, after about nine months, we said, 'Let's actually have a consumer Web site.' That was the only shift we really did. Whether that was dumb or not . . ." Salmi lets the thought trail off unfinished.
Nobody contacted by SW says Mika Salmi is dumb. In fact, everyone sings his praises—even his ex-employees, many of whom were axed shortly before Christmas. (Total layoffs may exceed 50 of some 90 Seattle employees.)
Says one former employee, "The grim reality of the dot-com world is that, on a certain level, we were treated pretty well. There isn't a huge amount of resentment." Most of those laid off actually continued to work through a transition period (lasting months in some cases), then received an exit bonus. This ex-employee estimates some Atomites were thus able to squirrel away $6,000-$12,000 for their employment hiatus.
But how did anyone actually expect to make any money showing short flicks on the Internet?
THE ORIGINAL PLAN was to sell and syndicate short film rights both online and off-line. The latter markets include cable, broadcast TV, airplane seat-back displays, and now even cell phone and other handheld devices. That's the business-to-business side.
Meanwhile, the Web site brings in eyeballs. It's a marketing engine, a way to show the product—which we watch for free. And clearly we like to watch. Atom averages around one million unique users per month, while in February some 70,000 viewers saw The Periwig-Maker, narrated by Kenneth Branagh, an affectingly somber treatment of London's 1665 plague year based on Daniel Defoe's account. (Atom doesn't actually produce such titles, but syndicates the right to show them—not unlike a movie studio acquiring indie product at a film festival.)
On the consumer-oriented side, Atom earns advertising and sponsorship dollars from corporate clients like Coke, Ford, Altoids, Volkswagen, and Skyy vodka—all eager to link their brand to Atom and to reach its young, tech-savvy users. The site, which launched in March '99, also briefly sold VHS and DVD compilations of its movies, but found few buyers.
