MetaCreations Revamps, Targets E-commerce

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December 29, 1999 (8:34 AM EST)

By Mo Krochmal,

NEW YORK -- In early December, MetaCreations announced the resignation of its CEO, the repositioning of its business, and a cross-country move.

The Carpenteria, Calif.-based software company will sell its graphics division to focus on its New York-based subsidiary, MetaStream.com, which produces a streaming technology for presenting 3-D images through the Internet. Metastream.com president Bob Rice, a Wall Street tax lawyer before founding the company that became Metastream.com, talked to TechWeb's Mo Krochmal about the changes that will be implemented with the rollout of Metastream product early next year and the company's new strategy of providing tools for the Internet store builders.

You are giving up a lot of the business and refocusing the company. Why?

The board made a pretty difficult decision, obviously, to invest on the Metastream.com side of the business and to get the focus exclusively over there simply because the growth prospects are so enormously better there than on the 2-D graphic software side of the business. Clearly, it is unusual and caught everybody by surprise, but I don't need to tell you, e-commerce is in an hyper-explosive growth space right now.

The software-in-a-box business is a very difficult business. There are tremendous challenges when you are a moderate-size company like MetaCreations is. The board had been looking at that for some time and at the same time, noticing what has been going on in the e-commerce space. MetaStream, we believe, is a genuine difference-maker for e-marketing.

The way to leverage the value in this technology is not to create a bottleneck on the tools side by forcing people to buy a tool to create proprietary content. If you are inside a tool business model like MetaCreations is, there is a natural predilection to create authoring tools around it and dominate the content creation side. That is really not how to extract the value. The point to moving to Metastream 3 is that we will have a radical new business model. We will be far more aggressive in promulgating the technology to other tools providers.

Describe the changing of the business model.

We are going to the next energy level. MetaCreations sold tools. The new business is a licensing model. We are charging large sites for the right to broadcast Metastream 3 content, and giving it free to smaller sites like .govs and .edus. For the large e-commerce sites where we think we can make a significant difference in their ability to sell product, we are going to charge on a broadcast model, time-based.

The charges scale depending on expected usage and on the feature set the merchant is intending to utilize. There is a whole infrastructure side that provides data and features to merchandisers and markers and taking feedback on how they are using product across the net. It's a flexible model, to scale the revenue to us on the value we are delivering to the site; something that is impossible in a tools scenario where everybody pays $299 for the product, whether it's worth nothing to them or $50 million.

Did you consider a transaction model where you get a piece of each sale?

People don't want you in the middle of their transaction stream. Getting paid per click, per page view, or per transaction, you get into all sorts of very unpleasant scenarios. It's confusing and hard to articulate who is creating certain things. Merchants don't want to get into situations where they don't know what they are going to have to pay up front. In our experience, people want to know what it's going to cost and then at the end of six months, renegotiate.

Isn't the software market under tremendous pressure from changing business models?

If you look at Real Networks, they are doing just fine. They are providing something similar to what we are providing, an infrastructure and a visualization play. People find that their stuff is valuable and they will pay for it. If you can help merchants sell product, they are willing to pay you for it. You have to be able to make a difference.

When will you make a profit?

Metastream.com is profitable and has been. We are profitable in the old business model, doing large intellectual property business model and licensing transactions, which we have done with Kodak and Minolta and Intel, and we are now changing to do it ourselves on a business model that is more of an annuity-based model. In the short term, revenues decline, but in the long term, they will climb dramatically...we are hoping. Once a site sees this, they aren't going to want to go back to a less robust system for demonstrating their products.

Can a technology company do business in New York?

New York will become a far more central player in the technology business. If you look at what is happening is that over time, the platforms are settling down. There is not the complete free-for-all you had 10 years ago. New York as the primary center for content creation will become more and more important on the Web. The reason we are here is that our customers are the content providers. What I care about is what do the brand managers think, the advertising agencies think, the media companies, and consumer products companies. We are after making the e-marketing experience much better than it is today. That's where the money is, and frankly, we are in business to make money.