The Digital Entertainment Network, or DEN, is back in the news again over management issues. The company is expected to announce next week that CEO Jim Ritts is stepping down after losing a political battle with other management and the company's board, sources said this week.
The company is also expected to reveal it has secured an additional round of funding of at least $20 million, led by Chase Capital Entertainment Partners, and may announce it will refile for an IPO.
The company had been expected to debut on the stock exchange by the end of 1999, and it would have been the first online entertainment pure-play outside of music to do so. A source at DEN underwriter Credit Suisse First Boston said in November that the planned $75 million IPO had been slated for a late December date. But December came and went, and no DEN IPO. The company says the IPO has neither been delayed or shelved, but a source inside DEN did say earlier this month that "we're going to have to refile or write addenda because of some new things." On Jan. 13, a company representative said, "We didn't delay our IPO; it's still on."
DEN launched in 1996 as a content creator for niche audiences. Last year, its approach was fine-tuned to focus on the 5- to 24-year-old GenY market. Its show lineup includes "Frat Ratz," the Christian-themed "Redemption High" and extreme sports show "Aggronation."
Last year, the company raised $30 million but logged no revenues. Its prospectus revealed its advertising relationships were primarily based on barter arrangements, and that no cash was exchanged.
Last fall, DEN also suffered the embarrassment of having its founders resign in the wake of accusations by a minor that a founder, Marc Collins-Rector, had engaged in sexual activity with him.
Over the past two weeks, management has held extensive meetings with board members, who were in Los Angeles to discuss funding and the future of DEN.
Final decisions over management restructuring will be made over the weekend.
Ritts, a former commissioner with the Ladies Professional Golf Association, joined in March 1999. Prior to that, he had worked with other members of management at Channel One, an in-school TV network backed by Whittle Communications. Ritts had also been named chairman in October.
Ritts signed a three-year contract entitling him to a base salary of $350,000 for his first year, and $500,000 each year after that. DEN has been paying Ritts a $4,500-per-month housing cost stipend, which was to end in March.
According to the prospectus, Ritts would earn out the rest of his contract if it is perceived that DEN let him go.
Ritts' salary, while high, received less scrutiny than the $1 million annual cash salary paid to DEN president and former Disney exec David Neuman. Several news reports in October pointing out this discrepancy were possible drivers behind the company's failure to issue an IPO by year's end.
Executives at Chase would not return phone calls. DEN executives were also not available for comment.