Fool.com: On the Radar Screen: shockwave.com (Fool on the Hill) March 20, 2000

FOOL ON THE HILL
An Investment Opinion

On the Radar Screen: shockwave.com

By Yi-Hsin Chang (TMF Puck)
March 20, 2000

A very interesting company I've been eyeing is shockwave.com, an Internet entertainment website owned by Web publishing software developer Macromedia (Nasdaq: MACR) that may soon go public. Just take a quick look at shockwave's snazzy website, and you'll get a sense of why I'm impressed.

The cool thing about shockwave is that its technology is taking the Internet to a much higher level as an entertainment medium. shockwave's website just looks good. It offers a sharp contrast to so many sites out there that are way too busy and cluttered, and downright un-user-friendly. shockwave's animation and graphics are simply awesome.

Some background on Macromedia and shockwave: Macromedia specializes in Web publishing and "Web learning" solutions. Its best-known products include Shockwave Player, which enables the playing of animation and related entertainment content on the Web (by Macromedia's estimates, there's been more than 78 million successful installations), as well as multimedia design tools such as Director, FreeHand, Dreamweaver, and Flash.

Macromedia established shockwave.com last year as a stand-alone, independently capitalized company. However, the two remain closely tied and share the same leadership -- Macromedia CEO Rob Burgess also heads up shockwave.com. Clearly, the success of the two companies is inextricably intertwined.

shockwave is dedicated to providing online entertainment, a "gateway to the most amusing, most involving experiences on the Web," or in short, "fun online." Unlike other entertainment websites, shockwave seeks to differentiate itself from traditional forms of media. On shockwave, content can be personalized and created, and entertainment is made truly interactive. The website now boasts 12 million registered users.

Today shockwave announced it has signed a deal with award-winning director, producer, and screenwriter James L. Brooks to create original animated content exclusively for the Internet and, more importantly, for shockwave.com. Brooks is the executive producer of The Simpsons and the mastermind behind such films as As Good As It Gets and Terms of Endearment.

The deal comes on the heels of equally impressive agreements with director Tim Burton (Batman, Beetlejuice, Edward Scissorhands), South Park creators Trey Parker and Matt Stone, not to mention comic book guru Stan Lee (creator of Spider-Man, X-Men, and the Incredible Hulk). Clearly, shockwave is partnering with proven talent to create ground-breaking, multi-media content especially designed for the Internet using Macromedia's Flash technology.

I heard (blue jeans-clad) shockwave CEO Rob Burgess speak in January when New York University Stern School of Business' Technology And New Media Group (TANG) -- of which I'm an officer -- visited Macromedia as part of the student club's four-day trip to Silicon Valley, California. Burgess struck a cord with most of the students, as he enthusiastically showed us clips on the Shockmachine. He was obviously passionate about the business and therefore a convincing salesman of the products -- of the 50-odd students in the group, just about everyone interested in working for a dotcom left wanting to work for shockwave.

What is so exciting about shockwave is that it is truly stretching the limits of online entertainment technology. Especially attractive features of a shockwave deal to artists are that artists retain creative control over their work and they also get an equity stake in the online entertainment company, which aligns artists' interests with those of the company. shockwave even shares advertising revenue with artists. No wonder the company's been able to nab some of hottest names out there in animation.

shockwave has also succeeded in raising money to fund its rapid growth and expansion. In December, the company announced it had obtained $44 million in funding from leading venture capital firm Sequoia Capital and Internet visionary Jim Clark, founder of myCFO, Healtheon (Nasdaq: HLTH), Netscape -- now part of America Online (NYSE: AOL) -- and Silicon Graphics (NYSE: SGI). If you've had a chance to read Michael Lewis' The New New Thing or know anything about Jim Clark, you'd know that this is a strong endorsement from a man who has played a central role in shaping the evolution of the Internet.

There's no question that entertainment on the Internet will continue to grow leaps and bounds. shockwave.com has the right tools and people in place to lead the way.