Seth Epstein has exited Razorfish, the New York-headquartered digital communications firm that last year (SHOOT, 7/30/99, p. 1) bought Fuel—the Santa Monica-based broadcast design studio that Epstein founded in 1995. The Fuel acquisition also included its sister commercial production arm Tonga in Santa Monica. Fuel’s design operation was shortly thereafter consolidated into Razorfish, while Tonga assumed the Fuel moniker. In fact, Epstein will continue to be represented as a commercial director by Fuel, which is headed by executive producer Matthew Marquis.
"The decision to move on [from Razorfish] was unbelievably difficult," Epstein explained. "I love what I do, but I’m a hard-core entrepreneur. When you’ve never worked in a large organization, there are compromises and politics that you have to learn how to be facile with. I learned an immense amount. But at the same time, you don’t want to hang around in an environment where you can’t make the largest contribution."
Epstein is currently exploring other business opportunities. He stated that he has no plans to launch another commercial production or design company, or to attempt to buy Fuel back, because his contract includes a non-compete clause which he said he would "never violate."
"I will direct when I can because I love doing it. But I’m exploring ideas in completely different arenas, outside of media and TV and anything I’ve ever done before," he related. "You reach a point where you say, this could be a fascinating time. If I knew [exactly what my plans were], I would tell you."
Prior to handing in his resignation (SHOOT, 11/17/00, p. 42), Epstein had been on sabbatical for several months. He’s now again available as a spot director. Razorfish creative director Vanessa Marzaroli handles day-to-day operations at the West Coast broadcast design division, based at the Razorfish Santa Monica office, and consisting mostly of former Fuel staffers. The spot live-action division remains housed in the longstanding Fuel facility, also in Santa Monica.
Razorfish executive producer Janet Arlotta, who had joined Fuel a year prior to its acquisition, characterized Epstein’s departure from the parent firm as "very amicable." She added, "Since the beginning of 2000, he had became more involved in the global Razorfish operation. Then he requested a sabbatical. So for us it wasn’t really sudden. But we miss him personally. He’s one of the most inspirational people I’ve ever met."
Last summer’s sale of Fuel and Tonga made Epstein a multimillionaire on paper. The cash-and-restricted-stock deal was valued at between $25 million and $35 million, based on a Razorfish share price of about $36. But after hitting its 52-week high of roughly $57 a share in February 2000, the stock declined steadily, including falling 43 percent on a single day, Oct. 6, from approximately $10 to about $5 a share, when the company announced that its third-quarter earnings would fall well below expectations. Around that time, Razorfish also announced plans to lay off as many as 200 people, or 10 percent of its staff, in an effort to remain profitable.
A press release issued by Razorfish last month predicted that fourth-quarter earnings of about $50 million would result in additional stock losses. "The market for our services has changed dramatically and we underestimated the magnitude of this shift," said Razorfish co-founder/CEO Jeff Dachis. "As a result, we overestimated … our performance expectations. Despite the market shift, we still believe that the underlying trends and strengths of our business model remain in place."
Shortly after that announcement, however, five class-action lawsuits were reportedly filed on behalf of Razorfish shareholders who had purchased stock from Feb. 15 through Oct. 5. The suits claim that Razorfish made false and misleading statements. As SHOOT went to press, Razorfish stock was trading at a little over one dollar per share.
According to Marquis, Fuel has remained profitable over the past year and will continue its expansion. A little more than a year ago, the executive producer announced plans to increase the live-action directorial roster to six or seven, to hire a second executive producer on the West Coast, and to open a New York office, which would be headed by a third executive producer (SHOOT, 11/19/99, p. 64). Those plans have yet to come to fruition, but some of them remain in place. The company recently signed director Lara Shapiro, formerly of bicoastal/ international hungry man (see separate story, p. 7), and Marquis hinted that two additional signings were imminent. However, he also admitted that the launch of a New York office is a ways off; nor are there immediate plans to hire a second, much less a third, executive producer.
Moreover, director John Lindauer, who joined Fuel shortly after the Razorfish acquisition (SHOOT, 9/24/99, p. 7), is moving over to bicoastal Believe Media (see "Street Talk," p. 30). But Lindauer insists that his decision to leave shouldn’t cast a negative pall on Fuel. "Fuel is awesome, and they have been incredibly supportive," he said. The director explained that he decided to come aboard Believe in large part because of an Internet project he began developing last year with Nick Johnson, an artist at iBelieve, the company’s new media division. Lindauer declined to go into specifics, but said the project, which began as an informal exploration, "has grown into something more than we’d originally imagined, to more and more levels of coolness. I got really excited about it and it started to eat into my availability. So it just made sense to have everything under one roof."
Epstein also expressed complete confidence in the live-action operation: "Matt Marquis is building a world-class production company. I think people are going to be surprised at what he’s doing."
In addition to Epstein and Shapiro, Fuel represents directors Jarl Olsen and Neil Tardio, Jr. Recent commercial projects include a Tardio-directed campaign for Michelob Light via the Leap Partnership, Chicago; an Olsen-helmed client-direct spot promoting merchandise from Disney’s 102 Dalmatians; and a Lindauer-helmed spot for the Maryland Lottery via Eisner Communications, Baltimore. Among other recent clients are Sprint, Southwest Airlines, Twix, MTV and the NFL.
As for the broadcast design operation, Arlotta is also optimistic. "The market is unsteady, and obviously [employee morale is] affected by that," she said. "But we have a lot going on. I feel the perception of the market is at one level, but we’re at a different one. We have tons of jobs in. We’re booming."
One recent Razorfish project was for American Family, a series that is slated to begin airing on PBS in the spring. Produced by El Norte Productions, Los Angeles, the series is based loosely on Gregory Nava’s La Familia, and involves an interactive component organized around a family Web site. Razorfish was brought in by the American Film Institute (AFI), which sponsors a mentorship program that teams traditional television production companies with new media firms. For the project, Razorfish developed a three-pronged model to demonstrate how the interactive component could work on TV, the PC and interactive television (iTV); Arlotta said the latter element is a prototype that could be implemented in future seasons when iTV reaches ubiquity.
While Fuel and Razorfish operate independently of one another, one collaborative project was for McDonald’s "2000 Monopoly Game" campaign via DDB Chicago. Directed by Lindauer, the five spots included animation and design produced by Razorfish. Epstein and Arlotta said there have been other developmental collaborations as well, but they weren’t at liberty to discuss them publicly. Epstein also hinted that some R&D projects were put on the back burner due to the market volatility of the past year.
"We had so much momentum going into the deal [Razorfish’s acquisition of Fuel], and we all shared a strong vision of the future," he said. "As time went on, we had some interesting explorations, but you have to have clients who want to spend the money. Lately, clients have been concerned with the fundamentals. Fuel brought an immense amount of talent and enthusiasm [to Razorfish], and it is still a great collaboration, but the market is evolving. You can’t pass judgement now. Five years from now will be the time to look and say if it was a good relationship."
At this juncture, Epstein’s sights are set on the future, but he also acknowledged his former staff. "Everyone worked so hard. We all gave our lives and we built not just a company, but a way of life. The last few months have been difficult given the marketplace. But we’ve had amazing clients, and the staff has given so much."
In addition to New York and Santa Monica, Razorfish maintains offices in Amsterdam, Boston, Frankfurt, Hamburg, Helsinki, London, Milan, Munich, Oslo, San Francisco, Silicon Valley, Stockholm and Tokyo. The firm employs more than 1,900 people. Its clients include Charles Schwab, Intel, Excite, Nokia, Vodafone AirTouch, Nissan-Europe and NatWest.
