Blues' Clues - House Of Blues Interactive - Statistical Data Included

Brandweek, Jan 22, 2001 by Erik Gruenwedel

With so many Web entertainment companies going belly up, how has House of Blues Interactive remained afloat? The principals let us in on House secrets.

Since Wall Street began to sour on pure-play dot-coms last year, myriad financial woes have ravaged many online properties, with Web entertainment companies particularly hard hit. Even clicks-and-bricks ventures have struggled to find proper footing along the treacherous slope of declining e-business.

One unlikely exception to the bursting Net bubble, however, is House of Blues Interactive, or HOB.com. The Web site is one of four business units of HOB Entertainment, an eight-year-old privately held entertainment company that hopes to create a lifestyle brand around music. Los Angelesbased HOB does just that by leveraging original live music by artists across all genres at more than 7,000 performances annually. After New York-based SFX, HOB is the largest music promoter in the world, with 5.2 million tickets sold in 2000. HOB also distributes content digitally through a variety of channels, including satellite, broadcast and cable television. It also uses Webcasts and digital downloads, Internet and broadcast radio, and DVDs and CDs.

Earlier this year at Anaheim, Calif.-based California Adventure (Disney's new theme park), HOB opened its eighth blues-themed club. It's equipped with half a dozen digital video cameras, at $60,000 each, state-of-the-art lighting and a multitrack digital audio facility. Those features are part of a successful formula that blends live music with food, retail and art into both an interactive and live entertainment experience.

As part of a multitiered business strategy involving free content (with ad-supported narrowband delivery), pay-per-view Webcasts (on broadband) and subscription services, HOB is able to meld the global reach of the Internet with offline ventures into lucrative promotional and marketing opportunities. The strategy enables HOB to attain impressive CPM levels that help to push annual revenues in excess of $350 million.

"We had it in our minds that the Internet was a true broadcast medium even in the days when there were barely any animated graphics on the Web," says Stephen Felisan, senior vp of HOB Digital and an early torchbearer for adopting new technology. "We've carried that philosophy for the last five years to try and show that the Internet is actually a superior vehicle for advertising and marketing, if done correctly."

By leveraging its offline and online business units, HOB has distanced itself on the Internet from rival theme-club chains such as Hard Rock Cafe, Knitting Factory and Planet Hollywood. That's an advantage, however ephemeral, that can mean the difference between success and failure in the low-margin, ultra-competitive live entertainment market.

"HOB has been doing it and pacesetting for a couple of years," admitted Ron Ward, Hard Rock's senior director of information technology and online efforts, to Webnoize. "Hopefully, we'll be established [online] ... in three years."

SINGING PRAISES OF STREAMING MEDIA

Entertainment delivered through streaming media stumbled out of the narrowband blocks in 2000. That followed the much-ballyhooed (and premature) predictions that broadband would be Hollywood's future king of entertainment delivery. Since then, HOB has quietly and effectively integrated its digital media assets into a successful business strategy. Its success underscores what Steve Ballmer, president and CEO of Microsoft, told attendees in December at the Streaming Media West conference in San Jose, Calif., as reported by The Hollywood Reporter.

"The digital media phenomenon is absolutely one of the engines that will fuel increased interest and activity and excitement around the personal computer," said Bailmer. "The potential market is incredible. Twice as many people listen to Internet radio every week as watch Monday Night Football."

Among digital delivery channels being explored by content providers, one touted as a potential firebrand is digital radio in automobiles. It's a prospect that is expected to become reality in three to four years, and could be a synergistic home run for HOB, said Eric Scheirer, an entertainment and media analyst with Cambridge, Mass,-based Forrester Research.

"If HOB were to make a deal with the companies that program satellite digital radio services, potentially that would be a revenue stream for them similar to a cable TV model," says Scheirer. "In fact, as a large and established player with good business relationships within the [music] industry, they have an advantage over an Internet pure play because they would be able to make more effective [read: cheaper] deals."

LIFE BEYOND THE INTERNET

While much of the cyber industry rhetoric involves debating the merits of online entertainment and whether it will ever be financially successful, HOB has sidestepped the fray by leveraging digital media through an offline business, according to Chris Stephenson, senior vp of sales and marketing for HOB.com.