BBC News Online: Business

Macromedia in net film deal

In a cost-cutting exercise, around 100 out of the combined companies' 300 staff will be sacked within six months and AtomFilms' Seattle office is expected to close.

"It's been a wild year. A lot of dot.coms will be consolidated over time," said Rob Burgess, Macromedia chairman and chief executive, adding that the merger should boost revenues and cut losses.

Many online entertainment companies have failed this year as they have struggled to find viable business models and because they have simply tried to repackage traditional content for the internet.

Combined assets

Under the terms of the deal, shockwave.com will acquire AtomFilms in a stock-for-stock deal. Macromedia will be the largest single shareholder in the consolidated company, though it will own less than 50% of the stock.

It has an extensive catalogue of award-winning animation and live-action entertainment, fostering independent filmmakers and animators.

"By joining the energies and talents of these two highly creative companies, we have the potential to change the way people are entertained around the world," said Mr Burgess.

The merger will combine both companies' assets, including AtomFilms' more than 1,500 short films and animation programmes and shockwave.com's roster of shows and series, interactive games, music, and creative applications.

Growing demand

Shockwave.com has more than 30 million registered users.

AtomFilms has access to hundreds of millions of viewers through distribution agreements with more than 100 customers, including internet sites, broadband services, television, airlines and wireless devices.

Industry analysts expect demand for online films to grow as more people get high-speed access.

The two companies expect to seal the deal in the first few months of 2001.