Like many people in the commercial production industry, Seth Epstein, spot director and founder of Fuel, Santa Monica, has an eye on the future. For that reason, in July he sold his four-year-old broadcast design firm and its commercial production arm, then known as Tonga, to publicly-traded global digital design firm Razorfish (SHOOT, 7/30/99, p. 1). The deal, valued at between $25 million and $35 million, teamed Epstein’s boutique company with a leader in Internet branding and strategy, Web site design, and what it terms "digital change management solutions" for clients such as Charles Schwab, Intel, Excite and Nokia.
"I distinctly knew that we needed to tune into the future," says Epstein. During a lengthy process of "self-evaluation" prior to any acquisition talk, Epstein spoke with numerous people within the commercial production and graphic design industries, from competitors to complementary companies, to get a sense of how people are preparing for convergence. One of those companies was Razorfish, and the result was a meeting of similar minds. Says Epstein: "When I met everybody [at Razorfish], it was like, ‘My God, they’re just like us.’" Moreover, he maintains that the deal is not about an infusion of capital, or about access to clients and branch offices. "It’s about having a culture around the world. That’s what is cool," Epstein says. "You can go into any office and see that it’s this culture and this digital generation that is building something that has never been done before."
Building Blocks
Exactly what the company is building remains to be seen, and Epstein admits that questions abound regarding the future of interactive and high-definition television, as well as broadband content. "This [digital] medium is moving very fast," he explains. "We know there are connections [between television and the Internet], and we’re figuring them out. The important thing is that we are a company that is not waiting. We are not being defined by the market. We are defining the market.
"[The deal with Razorfish] brings a lot of creative and technical aspects to what we’re doing," Epstein continues. "In terms of specific synergies of what’s evolving, a year from now there will be some concrete things that we can talk about, but right now we’re still doing a lot of exploring."
Even so, several changes have already taken place. In terms of Fuel and Tonga, the broadcast design aspect has been merged into Razorfish, while the commercial production arm has been renamed Fuel and is growing rapidly as a traditional live-action spot production shop. Two commercial directors have been signed since the acquisition, most recently, Neil Tardio Jr. (see separate story, p. 7), formerly of now defunct Farenheit Films. John Lindauer joined Fuel in September (SHOOT, 9/24/99, p. 7). He is currently working on a two-spot assignment for Thingamajob.com via Eisner Communications, Baltimore. Lindauer and Tardio round out a roster that also consists of comedy helmer Jarl Olsen, who recently wrapped a three-spot package for GottaJob. com via Ryan Drossman/MARK USA, New York; and Epstein, whose style is visual and youth culture-oriented. Epstein is on assignment for Powerdeck digital baseball trading cards via St. Louis agency Momentum.
Fuel executive producer Matthew Marquis envisions a six- or seven-director shop, hinting that a fifth director will be signed imminently. He and Epstein are also on the verge of hiring a second executive producer on the West Coast. They plan to open a New York office next year, which will be headed by a third executive producer and supported by a full production staff.
"Down the road, it’s going to be a huge advantage to be aligned with Razorfish," says Marquis. At this juncture, however, "Fuel is a live-action company, earnestly pursuing traditional live-action production. That’s really mission number one: to make of Fuel [in production] what we made of Fuel in graphics. We’re just hoping to build an amazing roster of people who share our vision of collaborative work and great creative."
Likewise, Epstein says, "Fuel is a boutique production company that gives immense attention to the directors, the quality of work and client services. That is not going to change."
Razor Sharp
Shortly after Razorfish acquired Fuel and Tonga, the company bought publicly traded computer-system advisor and designer International Integration (I-Cube), based in Cambridge, Mass. The marriage, valued at $677 million in a stock swap, brings a critical depth to the new company, which retains the Razorfish moniker and is headquartered in New York. "Razorfish was a front-end company," says Epstein. "They did a lot of brand analysis and executed it in a visual manner. What they were missing was the ability to do large back-end integration with existing databases. By working with I-Cube they are able to take [digital integration] from complex computer mainframes all the way up to the desktop experience." The ultimate goal? "We want to dominate the user experience," says Epstein. "We will make the user experience across platforms consistent for a brand."
That said, the company is not looking to replace traditional advertising agencies. "[Razorfish is] not an ad agency, nor do we want to be," Epstein states.
It is worth noting, however, that digital media companies such as Razorfish are blurring the definition of what it means to be an ad agency. A significant part of Razorfish’s service is to design and establish a client’s brand in a digital environment. Bringing Fuel’s broadcast design division into the fold blurs the definition further. Additionally, one of Razorfish’s clients is the Omnicom Group, the conglomerate that owns BBDO Worldwide and DDB Worldwide, among other ad agencies. In September, Razorfish launched Omnicom’s Web site. That assignment could be seen as a case of vertical integration, because Omnicom also maintains the Communicade division, which manages significant minority investments in Internet and digital media development companies, including Razorfish.
Marquis insists that the Omnicom relationship has little bearing on Razorfish, and even less on Fuel, which has not seen an influx of storyboards from Omnicom agencies. "That [relationship with Communicade] is a non-majority holding, significantly less than fifty percent," he says, adding that the investment is venture capital-oriented, as opposed to being a strategic alliance."
Epstein and Marquis are taking steps to distinguish Fuel from Razorfish and to clearly maintain Fuel’s own brand. While Razorfish has been generating a lot of positive buzz on Wall Street as well as in the media, Epstein explains that it is important for the commercial production aspect not to be overshadowed by the digital company, which employs over 1,000 people in offices from San Francisco to Helsinki. "The first rule of brand extension is to not overextend [the brand], because then the consumer can’t distinguish what the company does," he says. "All this digital generation, change-the-world kind of stuff is more about the graphic design component of our business. Our live-action component is really a distinct world." Adds Marquis: "[The name] Fuel means something to agencies, and there is a lot of equity in that."
Time will tell whether the Fuel/Razorfish relationship is evidence of a burgeoning trend towards consolidation between digital enterprises and traditional production houses. But Epstein says, "I’ve had a lot of production companies contact me and ask what we’re doing, why we did the merger and how to think about the future. People are thinking, ‘How do we get in on this?’ But that is very different from [people saying] ‘I have a vision of the future. That is why I must follow this path.’ Are people looking at [convergence]? Sure. But the people who know in the core of their soul that [the digital] medium is very powerful, and who understand the medium—those are going to be the guys who figure out what the right relationships are."
