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As far as dot-coms go, Boca Raton-based Hollywood.com would seem to be in a better position than most. It has an enviable alliance with television network CBS and, thanks mainly to new marketing initiatives, the company experienced a one-year tripling in revenues to $3.65 million in the quarter ending March 31. Chief executive officer Mitchell Rubenstein attributes most of the jump to increases in advertising sales and business-to-business revenues. Over the past three years, the company has transformed itself from a bricks-and-mortar retailer of movie memorabilia to an online provider of entertainment information. If it continues at this pace, Rubenstein says, the company should be profitable by next year. But not everyone is so optimistic. Investors, for starters, seem wary. The company’s stock price has fluctuated between $11 and $20. That’s down considerably from the $34 it was trading at in April 1999 when CBS announced that it would take a 30 percent stake in the company in exchange for $5.3 million in cash and $100 million worth of marketing and advertising space on CBS’s billboards, and television and radio stations. And there may be good reason for the pessimism. To complete its transformation, Hollywood.com still needs to surpass some major obstacles, including the need to raise more money and fight off some formidable competitors. For now, the company’s future depends on its ability to increase revenues with its current mix of advertising, licensing and e-commerce. The entertainment company reported losses of $24.7 million on revenue of $10.1 million at the end of last year. Rubenstein, for his part, would prefer it if investors and others didn’t focus on the company as it is now, but on how it will look once the transformation is complete. “You cannot look at us [being] in the beginning stages, but after the dust settles,” he says. Though it started out this year with less than $3 million in cash, the company launched Broadway.com at the end of April and plans to start Movietickets.com by Memorial Day. Broadway.com will broaden the company’s entertainment content with information on professional stage performances across the United States. It has acquired Broadwaytheater.com, which has exclusive rights to sell tickets to Broadway performances on the Web. Meanwhile, the Web site Hollywood.com, as the name suggests, provides information on movies, movie stars, what’s hot and what’s not. It generates revenue from advertisers such as M&Ms, Microsoft, eBay and iVillage. During 1999, the site raked in $3.95 million in revenue, and an additional $1.77 million came from in business-to- business sales and $924,000 in e-commerce. Two units — Baseline and CinemaSource — provide the company’s business-to-business revenue. CinemaSource lists all movie show times in theaters in the U.S. and Canada and licenses that information to Web sites such as Yahoo, Excite, CitySearch, AOL Digital City and newspapers, including the New York Times. Baseline caters to movie professionals and provides a database on movies to clients such as Disney and Universal Studios, which pay an annual fee to access the site. The quick rollouts are part of a strategy to grab the lead in a highly competitive field of entertainment Web sites. But observers note that much of that expansion has come thanks to CBS and question whether it can be sustained without the influx of new capital. Virgil Cilli, one of the company’s few analysts, says CBS has been the backbone of the company. “Without CBS, Hollywood.com would be below standard,” he says. In April of last year, the media giant announced the deal to provide $100 million worth of advertising over a seven-year period on all of its media properties, including TV, radio and billboards, in exchange for the 30 percent stake in Hollywood.com. CBS, however, is not Hollywood.com’s only source of advertising. An agreement with the National Association of Theater Owners (NATO) calls for a free promotion before all films shown in participating theaters plus posters and other forms of advertising. In exchange, Hollywood.com Inc. lists the information on these movie theater’s show times. “The fact that we do not have to pay for our advertisements gives us a leg up over any competitor entering into this arena,” says CEO Rubenstein. Not according to E!Online, a Hollywood, Calif.-based entertainment Web site that competes with Hollywood.com. Laurel Dunlea, vice president of marketing for E!Online, thinks that “the breadth and depth of [our] content is far more robust.” So is its traffic. E!Online attracted 3.2 million unique visitors in March, placing it first among a group of five independent Web sites on entertainment, according to Media Metrix. Hollywood.com placed fourth with 1.2 million unique visitors behind TVGuide.com and IMDb.com. Still, Hollywood.com is building site traffic by forming alliances with media all over the world, including the launch of br.Hollywood.com through AOL Latin America, distribution of content on PCs manufactured by Legend Holding Ltd. in China, and distribution of content on British Telecom’s Internet platforms throughout the United Kingdom. As a result, Web traffic from foreign customers has increased dramatically, tripling in a one-year period to 52 million and accounting for about 30 percent all of the site’s Web traffic according to Media Metrix. And certainly no one is about to write off Hollywood.com just yet. Though the lack of profits has caused survival problems for some Internet-only companies, Hollywood.com’s auditors believe that the company’s cash flow along with the sources of capital will be enough to support the company throughout the year 2000. “We are pretty much in a strong position in that we really do not need to look for capital, capital comes to us,” says Rubenstein, who declined to name any prospective investors. However, Cilli, the analyst, believes the company has raised as much money as it can from CBS and will get no more. “They have done better than holding their own right now,” he says, “but somewhere down the road someone will acquire them.”

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