Zoom Pays the Ultimate Price for Being Cool - It's Out of Business

CHAPEL HILL — Zoom Culture became a victim of its own press clippings, insiders said Wednesday, a day after the three-year-old media company abruptly shut down when investors declined to put more money into the firm.

Trying to maintain a "cool" aura befitting Zoom's target demographic of young adults led to overspending and a lack of focus at the company, according to former employees, who were left to conduct a post-mortem on the firm as investors begin the effort of selling off assets ranging from cutting-edge digital video production equipment to the rights to Hip Hop Nation and other shows in production or on the drawing board.

"We started out as an Internet company, changed to a media company and ended up a f____d company," writes Shea Gunther, a Zoom co-founder who now works for a wind energy company in Colorado.

Gunther, Nathan Wieler and a couple friends formed Zoom in mid-1999 as an online venture that streamed digital video shot by college-age students and initially ran the operation out of Gunther's Chapel Hill apartment. As outside investment began rolling in the next year, the company began pursuing more traditional video production and distribution deals.

Wieler says a repeated shift in focus from online to offline eventually harmed the company, draining resources while delaying its ability to respond to new opportunities.

Overstaffed and overspending?

"I don't think we capitalized on opportunities fast enough," says Wieler, who now is working on several new projects. "It all comes down to money, and we didn't have resources allocated that would allow us to create revenue, become profitable and expand."

Money became a key sticking point for the firm, much as it had for numerous companies born during the go-go days of the Internet boom.

Rumors began circulating last summer about the board's displeasure over Zoom's burn rate, and they intensified last month when former Chief Executive Marty Lafferty was replaced by Kip Frey of lead investor Intersouth Partners. Frey is known for taking a hard line on spending at the companies with which he's involved.

One former executive believes Zoom was overstaffed for the amount of product it was generating. The company had about 40 employees when it shut down.

"Unless you work at someplace like Carsey-Werner and people are clamoring for your shows, production companies are usually pretty lean," the person says.

Zoom also has been accused of trying to emulate New York and Hollywood production shops by spending freely on employee gatherings and other perks so it appeared cool. For example, the company last fall moved its operations to an upscale Chapel Hill office building, where it was the largest tenant, and incorporated expensive production studios into the space.

"Could we have operated leaner and spent less money? Yeah, that obviously was a mistake ... especially after the initial start-up phase," Wieler says.

"But it also was just a matter of closing one or two big deals that would bring profitability to the company, and you don't know if that's just around the corner," he says. "In our case, it wasn't, but you need to have the resources available to handle a project when it comes."

Remembering the successes

Zoom did have its successes: Almost 100 NBC stations nationwide now air Hip Hop Nation, a show focusing on the rap and hip hop music scene, FOX is syndicating extreme sports show Playground Earth internationally and the PAX network aired a Zoom's first prime-time special, "Women in Comedy," nationally this past Thanksgiving.

"We had a lot of feathers in our cap, and he hoped to continue in that direction," one former executive says. "We were forging a lot of relationships in the television business, which takes a lot of time."

Insiders also say Zoom's brand integration into its programming - Hip Hop Nation was used by Universal Records to promote its artists, for example - and its use of a widely distributed cadre of "directors" to shoot video for show content are becoming industry standards.

Wieler acknowledges that outlets from Comedy Central to CNN are now handling production similar to to the way Zoom did, "but that doesn't mean the idea came from us. People come up with the same ideas independently or follow trends all the time."

Still, Wieler points to the recruitment and training of dozens of directors as one of Zoom's major achievements. He says they likely will be the company's legacy to the industry.

"People put a lot of heart and effort into the company, and I think the talent shows," he says. "We had a lot of success, but not enough and not quickly enough."

Zoom Culture: zc.tv