The Hollywood Reporter, 01.09.04
IFilm said Thursday that it has closed a deal to sell its profitable subsidiary OTX, or the Online Testing Exchange, to a host of investors that include Strauss Zelnick and Bob Pittman.
Although it becomes only a minority investor, ZelnickMedia — a firm headed by Zelnick, the former CEO of BMG Entertainment — is considered the lead investor and will manage the firm.
ZelnickMedia, along with Pittman's venture firm Pilot Group Lp. and other investors, paid $30 million for OTX, with founder and CEO Shelley Zalis and certain other senior executives splitting $4 million. Zalis also maintains a 13% stake in OTX and remains its CEO.
IFilm CEO Adam Frank said that after "helping incubate and provide a platform for its growth," it seemed the right time to book profits on OTX and concentrate on iFilm's two core businesses: its ifilm.com movie portal and database and its Lone Eagle and Hollywood Creative Directory publishing assets.
Recent media speculation that a divestiture of OTX would spell the demise of iFilm is unfounded, Frank said. And in fact, the company will be announcing a new product this month. Frank also noted that iFilm doubled the number of advertisers at its site last year.
"All these Internet businesses that started five years ago were ahead of their time," he said. "We're beginning to click."
The departure of OTX and its 80 employees leaves iFilm with 36 employees, Frank said, and no job losses at either entity are expected.
Zalis, in fact, said she intends to hire an additional 40 people at OTX, which is used by every major studio to test their marketing materials as well as by consumer product firms like Procter & Gamble.
Zalis said iFilm had been approached by several suitors seeking OTX and that ZelnickMedia was a "perfect fit" and that OTX had "outgrown" iFilm.
"It positions us in a place that, if I need more financing to develop out-of-the-box stuff, it would be available to me," she said.
The investment marks ZelnickMedia's fourth, having previously acquired minority stakes in direct marketing firms Time Life and Lillian Vernon as well as Japan's oldest music label Columbia Music.
"Any business that helps Madison Avenue and Hollywood answer the question, 'Am I getting bang for my advertising buck?' is of interest to us," said Scott Siegler, the ZelnickMedia partner who heads its West Coast operations.