The Los Angeles Times from Los Angeles, California • Page 194

C8 FRIDAY, JULY 23, 1999 LOS ANGELES TIMES Company Town THE BIZ: 'Street' Gang at a Crossroads Jim Henson Co. Estimated annual revenue (from outside sources): About $200 million Ownership: Privately held by five Menson children-Brian, 35, co-president; Lisa, 39; Cheryl, 38; John, 34; and Heather, 28. All sit on the board, along with co-President Charles Rivkin, 37; Bill Haber; director Frank Or, and attorney Jonathan Kaufelt Library: More than 400 hours of TV programming Various Business Sectors Television: Currently producing five shows: "Bear in the Big Blue House" (Disney Channel); "Farscape" (Sci-Fi Channel); "Donna's Day" (Odyssey); and two for foreign markets. Upcoming movies: "The Adventures of Elmo in Grouchland" (Sony's Columbia Pictures, debuts Oct 1); "Neverwhere" (Miramax's Dimension Films); "Astroboy" (Columbia); "Rat" (an Irish comedy for Universal Pictures International) Cable network ownership: Odyssey (U.S.)-22.5, currently in 30 million households. Kermit Channel (international)-50, in 4 million households in 12 Pacific Rim countries.

Noggin (U.S.)-Passive interest of 16.67 in the Nickelodeon educational channel. Interactive: Among the eight projects In production are: Muppet Millennium Racing (Sony PlayStation) Muppet Haunted House (Sony PlayStation) "Bear in the Big Blue House Sense of Adventure" (PC-based multimedia) (plus a handful of online sites including http.mw.henson.com) Jim Henson's Creature Shop (headquartered in London and Burbank): Upcoming films include "The Flintstones II Viva Rock Vegas" (Warner Bros.) and upcomingTV projects include "Animal Farm" (TNT) and "Arabian Nights (ABC) Consumer products (includes licensing, publishing and Muppet Press): More than 5,000 licensed Muppet products have been introduced in the last 10 years. Best-selling products: plush toys, T-shirts, greeting cards, posters, disposable diapers. More than 1,500 book titles published. More than 30 million books sold during the 1990s in about 45 countries and 16 languages.

More than 1.5 million "Bear in the Big Blue House" books are being shipped to stores nationwide. Theme park attractions: Muppet Vision 3D (DisneyMGM Studios, Orlando, and planned for Disney California Adventure, Anaheim, in 2001) Disney Posts a Scant 0.7 Risein Profit From Bloomberg News Walt Disney the world's! second-largest entertainment com-, pany, said fiscal third-quarter profit rose less than a percent because of lower merchandise sales and mar- ginal growth at its broadcasting business. Profit rose 0.7 to $418 million, or 20 cents a share, from $415 million, or 20 cents a share, a year earlier. The results matched the average estimate of analysts surveyed by First Call Corp. The results underscore the continued struggle of Disney, once a star performer on Wall Street, under Chairman Michael Eisner's I leadership.

Fewer top-selling home videos, sluggish sales at its Disney Stores, and declining ratings at ABC, mixed with an ambitious expansion program that has resulted in higher costs, have led to a 26 drop in Disney stock over the last 12 months and restlessness among its shareholders. "Home video had been the growth engine for the 1990s. Now, not only has it stopped growing, but it's declining," said Alan Gould, analyst at Gerard Klauer Mattison Revenue rose 5 to $5.52 billion from $5.24 billion, while operating income rose 3 to $951 million from $923 million. To reverse Disney's weak earnings, Eisner has been cutting costs and streamlining divisions, such as television and home video. The company also hopes to take tage of the high valuations of Internet stocks by creating a separately traded stock that tracks the performance of its Internet assets, including Infoseek Corp.

Continued from C2 fii the arrangement as the previous -regime. Rivkin says the company has been profitable since 1995, following financial turmoil after Henson's death and a failed merger with -Disney. But he readily acknowledges this as "a watershed said management is exploring private or public financing and strategic partnerships. I 'We do not have a shortage of people interested in investing in -our company," Rivkin said. JJisney was once a suitor.

Disney chief Michael Eisner said he's "airways been interested in expanding tour relationship" with Henson. Although he has never reconsidered I buying the company, he allowed, certainly wouldn't be the last -thing I'd think about. I wanted to buy it once." i Disney agreed to buy the for $150 million nine months before Henson's death in May 1990. 'But the deal unraveled after Hen- son died, prompting the Hensons to tsue Disney for exploiting the Mup-tpets characters before owning them. Disney counter-sued, but it I reached a settlement in May 1991, 'agreeing to pay $10 million for limited theme park rights to the i Muppets.

The resulting "Muppet Vision 3D" attraction at DisneyMGM Stu-; dios in Florida will be replicated in 1 2001 as part of the planned Disney California Adventure in Anaheim. And despite an ABC partnership that Eisner said "did not particu- larly work," Disney and Henson I have also forged a strong relationship in cable TV. In its third season on Disney' Channel, "Bear in the Big Blue House" is one of the network's most popular shows among pre-schoolers. Disney Channel Presi- dent Anne Sweeney said that par-l ents and kids sit down together to watch the Emmy-award-winning program, created by Mitchell Kreigman, in much the same way "Sesame Street" audiences did. "The genius of 'Sesame Street' is it works on two levels," she said, "and that's what I love about Yet the Henson clan has had difficulty inventing new characters with sticking power and in evolving the Muppets.

No incarnation of "The Muppet Show" which ran in first-run syndication from 1976 to 1981 has resonated with new generations of kids as the original episodes did about 30 years ago. Nelvana's Taylor can recall rushing home at age 5 from the bus stop and plopping onto the living room carpet in front of the TV to watch the first episode of "Sesame Street," which aired Nov. 11, 1969. "Sesame Street" is produced by Children's Television Workshop using Henson puppetry and characters. "I have the brand loyalty, but they now need the loyalty of my kids," Taylor said.

"My 4-year-old daughter can't sing the 'Sesame Street' theme song and my 7-year-old son had no interest in seeing 'Muppets From The film business has also changed significantly since "The Muppet Movie" premiered in 1979, with children gravitating' toward edgier programming today. "Everyone in the traditional 'G' market has had to take note that there have been many PG-13-rated mega-hits such as 'Big Daddy' and 'Dr. Dolittle' that have sucked up what used to be the 'Muppet' i audience," said one studio distribution chief. 1 Rivkin conceded that while the Muppets are "timeless and ageless," the company is reinvigorat-ing the characters, which made 'their network TV debut in 1956 on Steve Allen Show," by "portraying them in a way much more Los Angeles Times connected and relevant to the audience, or do you insist they accept you as you were 20 or 40 years ago?" iINTERNET: Web Firms I Village, Women.com Have Their Sites Set on Gender Networking relevant to the '90s." Henson, who like his late father is a puppeteer and movie director in his own right, said that takes finesse. "We're never about fads," he said.

"We have to be careful." He said the trick is to "maintain their irreverence, that sarcastic sense of humor they have that comes across as smart nonsense, without getting mean, cynical or trendy. We don't want our characters to be hip or trendy; that would kill them." Casually dressed in a long-sleeved T-shirt and baggy khakis as contrasted with his more button-down partner's dark suit and tie, Henson said: "We grew out of the '70s, and the message and themes of the Muppets is always bringing people together by celebrating their differences and not their similarities." Henson, whose directorial credits include "Muppet Treasure Island" and "The Muppet Christmas i Carol," said he plans to direct another Muppets movie, after which "we'll have another go at a Muppet series with a totally differ-jent take, mixed with lots of new characters." i Rivkin insisted that the Muppets ihave not lost their appeal, pointing to the popularity of the theme park i attraction and the Muppet business that is five times bigger than it was i in 1995. He estimates that 25 to 30 of the company's total revenue is Muppet-related. But one industry source suggests that perhaps Henson relied too heavily on "Sesame Street" to continue the Muppets' relationship with its audience, "forgetting every year they had lost a generation of kids and they didn't have anything to bridge the gap." Disney's Sweeney compares the task of managing an evergreen I brand to maintaining a lasting 1 friendship: "You have to ask your-i self, how current are you with your Inc. and Advance Publications parent of Conde Nast Publications, announced plans to create a women's television network and Web site by early next year.

By combining Time Warner's Turner Broadcasting System; Time which publishes People and In-Style; and a slew of Conde Nast titles such as Vogue, Mademoiselle and Glamour, the partners believe they'll have the editorial power and resources to capture a good share of the market. Meanwhile, America Online, the leading Internet portal, continues to expand its lifestyles channel, targeting women. And analysts say other media giants are likely to be planning their own attack into the market. "The landscape six months from now should look very different, but it's unclear how it's all going to play out," said Kate Delhagen, who analyzes the Internet for Forrester Research in Cambridge, Mass. "There's room for two players, but I'm not so sure about four.

It's a critical time for all of them to establish their presence and figure out how to build multiple streams of revenue." Women.com and IVillage both say advertisers and sponsors are most enticed by their core audiences: well-educated women of prime spending age. An average Women.com user, for instance, is 36, college-educated, with a household income of $53,000, similar to IVillage's typical user. Ford Motor Co. sponsors IVil Capellas was named chief operat-. ing officer in June after Pfeiffer's ouster.

He was put in command of reorganizing the company into three global divisions: business sys-; terns, personal computers and consumer products. Rosen said the board had origi-' nally decided to look inside and outside Compaq to replace Pfeiffer, but Capellas' work during the transition launched him to the top of the candidate list. Meanwhile, it had become clear that finding a top-name outside candidate would not be easy. Continental Airlines President Greg Brenneman was one possibility who withdrew his name from consideration, saying only that he is happy with his current position. The job of leading Compaq had taken on the aura of being a bigger headache than it was worth.

Compaq has been struggling over the last year with declining computer prices and the transformation of the business brought about by the Internet. It has alsd lost market How does (ilmk llnur nUMt friends and how relevant are you to I their lives? It's no different with Disney or Henson and their audi- ence. How hard do you work to stay lage's auto center because it "recognized that we need to be where our online consumers are," said Wendy Johnston, Internet project manager at Ford. The auto maker has seen increased traffic to its buyer site via IVillage, she said. Still, some advertisers are skeptical about the benefits of Internet advertising.

So finding a successful formula to attract women and boost revenue presents a big challenge. For IVillage and Women.com, the plan includes e-commerce. IVillage recently acquired online retailer IBaby, which sells maternity clothing, and arranged a revenue-sharing deal to sell Ralston Purina pet products. About 28 of IVillage's revenue now comes from e-commerce. Women.com Chief Executive Marleen McDaniel said its health area is an example of how it is expanding its retailing base.

At that location, women can find out what remedies are recommended for colds. They then can visit the company's store and purchase products such as echinacea from a company that advertises on Women.com. However, in order to boost revenue in the long run, women's online companies must draw larger audiences. Anya Sacharow, a Jupiter Communications analyst, believes the sites must use content to distinguish themselves as such magazines as Vogue, Mademoiselle and Good Housekeeping have. Although Women.com and IVillage believe they are different from each other, each defines its niche as women with busy working and per share and sales to companies such as Dell Computer that sell computers directly to buyers rather than through retailers a cheaper and more efficient method.

Pfeiffer ran Compaq successfully for eight years, increasing the company's revenue from $3.3 billion to $31 billion. By the beginning of this year, however, it had become clear that the firm needed a new strategy to compete in a world where computers are given away and new competitors are sprouting up. Analysts expect Compaq to lose 15 cents a share in the second quarter. "The board made it clear we felt a change in leadership should be made," Rosen said in April. Pfeiffer "understood and elected to resign." Capellas said he has taken on the job with no promises of a grace period through the transition or any other special arrangement.

"I have sought no assurances," he said. "I would not go into this job if I thought I needed assurances." your garden grow! 1 1 i iuturttqij in tie sonal lives. On IVillage, for instance, women can learn how to make grilled peaches with rum-spiked whipped cream or discover five ways to handle their in-laws during the holidays. Women.com users can learn the ins and outs of choosing a stockbroker or read about one woman's love affair with cars. If anything, both sites have been expanding their content rather than narrowing their focus.

"We want to reach out to as many women as possible," McDaniel said. To better build their brands and audiences, both companies recently launched television advertising campaigns. Maier says Women.com's TV campaign, produced by San Francisco-based Citron Haligman Bedecarre, intends to differentiate Women.com as a fun, hip Web site for women trying to get things done. Meanwhile, IVillage worked out a deal with NBC for an estimated $25 million of prime-time advertising in exchange for 10 of its stock. The national campaign, produced by DDB Necd-ham in New York for prime-time airing, portrays IVillage as a place women can go to get help.

In addition to the ad campaigns, both companies hope to attract larger audiences through cross-promotional deals. Traffic from Hearst's magazine Web sites is directed to Women.com, just as Women.com directs its users to Hearst magazines sites. And along with its NBC advertis Looking Look Jji3 rr thin! lAKESS 1'tw jit ing deal, IVillage has a cross-promotional arrangement with Snap.com, the Internet portal service from NBC and CNet. Snap.com promotes IVillage on its site, and the two companies are jointly producing content on Snap.com. "Both companies have been ag-- gressive in developing their net- works and pursuing various deals," I Sacharow said.

"But the industry is still developing. Both companies still are in the process of inventing themselves." Notes General Motors Warner-Lambert Kraft Foods Inc. and Sprint Inc. have agreed to participate in an in-depth study to assess the advertising impact of a new technology that allows consumers to simultaneously jump from television commercials to Web sites. The Myers Report, a New York-based advertising industry newsletter, says Nielsen Media Research will conduct the three-month test in Massilon, Ohio, where a cable system allows viewers to immediately access additional information on products and services advertised on television.

Kraft Foods Inc. assigned advertising for Minute Rice and Shake 'n Bake to Foote, Cone Belding from Young Rubicam and assigned grated Parmesan cheese to J. Walter Thompson from FCB. All agencies are based in Chicago. (A Times Staff Writer) The advertising and marketing staff can be reached at adbizQlatlmet.com.

for a job? here! Ufvi in a irr it 3f- f-si iter-" Continued from CI underserved. Like most other Internet businesses, IVillage and Women.com haven't earned a 1 penny, but investors appear willing to look past the short term to the lucrative market that's developing. he estimated 49 million women online are regarded as an un mapped gold mine of advertising revenue and electronic commerce, Online advertising revenues are l'. projected to grow to $7.7 billion in -2002, while revenues from women I shopping online could reach $19.8 billion in the same year, according research firm Jupiter Communi- cations. That's up from the $2.1 billion women spent shopping last year on the Internet.

Plus, women tend to hold the I purse strings, controlling 85 of all personal and household goods 'spending, according to Women's Consumer Network, a Washington-' based market research group. li Women.com and IVillage are similar in how they reach out to women, offering an abundance of information using bright graphics and lively, user-friendly copy. Both also take advantage of their abilities. For instance, at IVil-t-tige's "work from home" area, tyomen can chat with others about Itjheir businesses or get advice from author of a book about home- businesses for women. 'Through this medium, I know we can do enormous things," said tVillage Chief Executive Candice Carpenter.

Such offerings, coinciding with iCOMPAQ Continued from CI its troubles behind and starting a 0 Jiew era under Capellas' leadership. "In the end, our choice was easy. Michael Capellas stood head and shoulders above the rest," he said. "This is the only offer we made." Rosen said one of Capellas' key strengths is that he is already familiar with the company. "Michael has a distinct tage in that he is already doing needs to be done," Rosen said.

But some analysts called the choice disappointing. Because of Compaq's size and the scale of its current troubles, many had ex-! pected the company to seek a powerful, big-name chief executive 1 who would have the experience and credibility to move forcefully in putting its business in order. Capellas, who had distinguished i in the transition period after Pfeiffer's departure, is largely an unknown quantity on Wall Street, said Jonathan Ross, an analyst with ABN Amro in San Fran-, cisco. "The Street is probably not going to be overly enthusiastic, because they want a big name," he said. "If Compaq really wanted someone inside, they could have picked him months ago." the burgeoning female Net population, could alter the way women get information and how marketers reach them.

No one predicts the demise of women's magazines, which have long captured women's attention. But publishing executives realize they must establish an Internet presence to remain relevant to the technc-sawy. That's why they're partnering with women's Web sites, hoping to play off one another's strengths. For instance, while Web sites offer interactivity, women must still turn to magazines to see glossy photo spreads of the latest fashions. "If I were to tell you there was no concern in the print world that the Internet will take away readers, I wouldn't be telling the truth," said Al Sikes, president of Hearst's new-media and technology unit.

"But because both feature strong characteristics, they could enhance each other." The landscape is likely to become even more complex as powerful new players enter the market. Geraldine Laybourne, a veteran television executive who turned Viacom Nickelodeon into a leading kids network, is launching a women's cable channel and related Web sites through a venture called Oxygen Media. Backed by such investors as Oprah Winfrey's Harpo Entertainment Group and America Online Oxygen is gearing up to become a leading destination for women both on television and the Internet. And on June 10, Time Warner Capellas came out of the blocks promising to bring a clearer focus and higher energy to the world's largest maker of personal computers. "The key is that every employee wake up in the morning knowing exactly who their customers are and who their competitors are," he said.

"We hit the ground running and we start today." Still, the news of Capellas' promotion was greeted with a sigh of relief from industry analysts who had watched Compaq drift. "Just naming someone is a positive step forward," Ross 'They were bleeding a little bit and needed to do something." The announcement of Capellas' promotion came after the stock market closed. Prior to the an-. nouncement, Compaq shares fell $1 to close at $25 on the New York Stock Exchange. In March, Compaq acquired Shopping.com, a Corona del Mar-based seller of merchandise on the Internet, for $220 million.

Despite Rosen's highlighting Capellas' knowledge of the firm, he is a relative newcomer to Compaq, having arrived less than a year ago to become chief information officer. Before Compaq, Capellas worked at Oracle SAP America and the oil field services company Schlumberger Ltd. limp rail i.