<SPECIAL FEATURE>
June 15, 1999
Big Entertainment for Dad
Trading at $14 3/8 as of June 14, 1999
Well, Dad, you have always expected "big" things of me. In honor of your lofty expectations, I want to give you some Big Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIGE)") else Response.Write("(Nasdaq: BIGE)") end if %> this year. As a sci-fi buff you might be familiar with the company's pedigree. Laurie Silvers and Mitchell Rubenstein, creators of the Sci-Fi Channel, cashed out on the cable station to USA Networks and needed something to do. Next -- Knight/Trimark from TMFDotCom
* A Stock for Dad represents the opinion of one Fool and in no way should be taken as the opinion of either The Motley Fool, Inc., the company in question, or representative of anyone or anything else other than that specific Fool's thoughts.
by Rick Munarriz ([email protected])
So they started where they left off -- hooking up with space-tweaked notables. They teamed up with Leonard Nimoy, Tom Clancy, Isaac Asimov, and even Mickey Spillane, and produced everything from comic books to online paperbacks. They canvassed the larger malls with Tekno Comix kiosks selling everything from Star Wars trading cards to Trekkie T-shirts. The Tekno Comix stores were high energy and low maintenance. They were savvy enough to sell advertising space on video monitors that played atop the kiosks.
Outer space. Retail space. Lost in Space. Despite the galactic associations, the stock got zapped -- thankfully those lasers were set to stun and not kill. But Big didn't get mad, it got online.
It was a natural move for a company that was supposed to be in-tune with the future. The online novels were already there but it was an idea that seemed to run rough on the eyes. However, e-tail was hot. The company took its BigE.com website and transformed it into a Furby-fueled frenzy with its Thanksgiving 1998 debut. The company was also running the online entertainment store for Gannet's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCI)") else Response.Write("(NYSE: GCI)") end if %> USA TODAY Online. The stock was finally in demand. The company had realized that if it was going to lose money, which it consistently did, it might as well lose it online where that's the generally accepted practice.
But wait Dad, I'm not getting you some sky-high sci-fi wired stock. Big Entertainment comes with a little share price. How so? Read on. Earlier this year the company bought Hollywood Online for a paltry $50 million. The popular content site had much untapped potential and Big mined well. Its master plan is brilliant. It is incorporating its movie studio cyberstore into the celluloid content megasite. It is also adding local movie times that could eventually include online ticketing. It's a souped-up business model like what MovieFone is trying to do -- and America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> just scooped that company up for $388 million in stock.
Is Hollywood.com worth that much? Maybe. Two months ago CBS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> announced that it would put up $100 million worth of content and promotion for a 35% stake in the online venture. That values the site alone at $285 million -- not bad for a hot spot that Big had picked up for just $50 million a few months earlier.
Whether you think the company's movie site is worth $285 million or $388 million -- or more -- the clincher here is that the enterprise value of the debt-free Big Entertainment is just $200 million. That's for the 65% stake in Hollywood.com as well as the BigE.com and CinemaSource websites that are about to come into a $100 million marketing infusion. Big Entertainment is still a publishing heavyweight with titles by the Spocks and Spillanes of the world. It owns half of the NetCo partnership with Tom Clancy, which released the successful Net Force mini-series on ABC earlier this year.
I'm not saying that just because the company is now offering online auctions that it deserves an eBay <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %> multibillion dollar valuation. All I ask, Dad, is that you don't just sit on this gift. Keep up with what the company is doing. Silvers and Rubenstein are worth watching, and you now own a piece of their harvest.
The company is doing the right things. Just this month, Hollywood.com began offering a free weekly e-mail service. The personalized mailings will include new release information and showtimes at your favorite local multiplex. While Tekno Comix is being shed, the new e-mail service rings of the high-tech kiosk in the sense that the company is taking a common practice and enhancing it by selling advertising space.
It's true that Big Entertainment won't become a profitable bonanza anytime soon. However, it did trim its losses last quarter. I think the synergies of Hollywood.com may make it one of the few online ventures to turn a profit in a year or two. I don't feel that way about many of the billion-dollar Internet plays out there. Then again, that's why I got you something Big this year.
Happy Father's Day, Dad -- I love you.
Big Entertainment Information:
Trades on Nasdaq under symbol BIGE
Big Entertainment's website: www.bige.com
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