Web Developers and Indianapolis Motor Speedway and Video production and Sports Business

IMS Productions joins Web video network

January 22, 2007

IMS Productions has agreed to partner on an ambitious project that one Internet analyst called "the most awaited new application on Planet Broadband."

The Indianapolis Motor Speedway's video production arm has agreed to be one of the primary content providers for The Venice Project, a collaboration of big-name Internet entrepreneurs intent on shaking up the television industry by launching a 30-plus-channel, TV-like network online.

"Long term, this is going to mean quite a bit of business for us," said Buddy McAtee, IMS Productions president and executive producer. "In 36 months, people will look at this as a really big development in the history of the Internet."

The Venice Project is no fly-by-night operation, said analysts familiar with it. The company has 150 employees in offices in New York, London and The Netherlands.

James Enck, telecommunications analyst for London-based Daiwa Securities Ltd., said The Venice Project, whose Web site is www.joost.com, is backed by two of the biggest innovators in the Internet's relatively short history.

The project was founded in 2006 by Scandinavian entrepreneurs Janus Friis and Niklas Zennstrom, who roiled the music industry with their production of Kazaa file-sharing software and rocked the telecom industry with their Skype Internet phone service.

Skype was sold to California-based eBay for $2.6 billion in 2005, and Kazaa was sold to Australia-based Sharman Networks for an undisclosed amount in 2002.

IMS Productions, in addition to providing Speedway and Indy Racing League content, will be involved in various non-motorsports productions for the new network, McAtee said. Industry observers, citing IMS Productions' growing body of work beyond motorsports, think it will be a strong partner for the project.

Growing assets, profitability

IMS Productions, which was formed as Telex Sports and Entertainment in 1987 primarily to shoot footage at the Speedway, appears prepared for major diversification.

Though McAtee wouldn't divulge finances, he said the firm's profitability continues to grow, with its high-dollar mobile trucks booked 48 weeks a year.

In addition to two 50-plus-feet mobile production trucks and a graphics truck, IMS Productions has 5,000 square feet of studio space, five edit bays, new video for Internet conversion facilities, and an extensive video library system.

IMS Productions officials are looking to invest a seven-figure sum to convert to high-definition production in the next two years, McAtee said.

All this adds up to millions of dollars in fixed assets IMS officials are eager to put to work. McAtee said the diversification also gives his 39 employees greater experience and new creative outlets they crave.

In the last decade, IMS Productions expanded beyond simple video production. It now conducts network negotiations, does broadcast design and development, selects talent, and produces support programming.

Heartfelt

Last month, IMS Productions' first non-motorsports documentary was honored with a Grand Festival Award at The New York International Independent Film and Video Festival.

"Heart to Heart" is a one-hour documentary chronicling the story of Bailey Hunsberger, a then-12-year-old Indianapolis girl who suffers from various heart defects and was treated at Riley Hospital for Children.

"Heart to Heart" premiered at the Imax Theater in September and is on sale through the Internet. IMS Productions, McAtee said, is negotiating with ABC Family Network for a TV broadcast deal.

"Heart to Heart," which is hosted and produced by actor Patrick Dempsey--of "Grey's Anatomy"--was filmed and produced from November 2004 to June 2006. It cost several hundred thousand dollars to produce and was bankrolled by IMS Chairman Tony George, McAtee said. All proceeds from the show are going to Riley Hospital.

Seeking ROI

IMS Productions' next big project could bring George a return on his investment.

Early indications are that The Venice Project is different from other Internet video providers, said Om Malik, founder of GigaOmniMedia Inc., a San Francisco-based news service focusing on technology and the Internet.

Malik, who has viewed a test site set up by Venice Project founders, said the video was "stunning and crisp," and far better than sites such as Google Inc.'s You Tube.

National Geographic and Warner Music Group have also signed on as content providers.

The Venice Project co-founders promise users will be able to watch professional video, such as TV shows and movies, on their personal computers with picture quality much better than anything currently on the Web, McAtee said.

The free service combines elements of TV, such as channels users can flip through, with Internet functions, such as chatting among users and keyword search options for programs that can be pulled up on demand.

Like broadcast TV, advertising sales will provide the bulk of the revenue, which will be shared with IMS Productions and other content providers. McAtee declined to divulge specifics of the financial arrangements.

Companies such as Wrigley, T-Mobile and L'oreal's Maybelline brand have already signed on as advertisers.

A small number of users have been testing the Web site since December, and a number of tech trade publications are clamoring for a preview. The Venice Project's founders have eschewed publicity in an attempt to keep the project under the radar until it's launched. They unveiled its new name, Joost, and Web address Jan. 16, and plan a larger launch within 90 days.

Beyond motorsports

This isn't IMS Productions' first run at diversification. In the 1990s, it started handling commercial accounts for some of the region's advertising agencies and also did work for corporate clients, including Cincinnati-based Kroger and Indianapolis-based HH Gregg.

It also did work for the Indiana Pacers and Indianapolis Colts.

"They have some of the best [video] capabilities in the Midwest," said Terry Lingner, president of locally based Lingner Group Productions Inc.

While this sort of diversification might seem odd for a company launched primarily to shoot auto racing footage, Lingner doesn't think so.

"This is merely an extension of when the Hulmans owned their own TV stations," he said.

What makes the arrival of The Venice Project more exciting, said Malik, is that it is coming in the wake of an explosion of Web video demand. New York-based research firm eMarketer Inc. estimated that 123 million Americans will view Web video at least once a month in 2007, which is more than a 50-percent increase from 2006.

Since IMS Productions has more than $15 million in fixed assets sitting in its studio, Tim Frost, a Chicago-based motorsports business analyst, thinks the diversification strategy is smart.

"If they can find utilization [for that equipment], outside the Speedway and IRL and even outside of motorsports, that's the purest kind of return on investment," Frost said.

But New York-based motorsports analyst Dennis McAlpine thinks IMS Productions needs to work on providing more and better video on IRL's Web site before it takes on another project.

"Frankly, the video presentation on their own Web site is not that dazzling," McAlpine said.

Lingner, who's worked with IMS Productions as well as competed against it, said he's learned not to doubt the wisdom behind the operation.

"The Hulmans are some of the best entrepreneurs this state has ever seen," Lingner said.

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