The Scoop...

A Star is born

Since its founding in March 1998, BigStar Entertainment has become a major presence in the online entertainment industry. In September 1999, PC Data named the company the No. 1 online retailer of movies - an enviable position to be in, as the total U.S. video sales market is valued at $8 billion annually, and the online video market is expected to reach $575 million by 2002.

Avoiding the black hole

While BigStar has a considerable foothold in the Shop-A-Tainment industry, CEO David Friedensohn intends to carve out a large enough piece of the market to fully protect the company against late-arriving competition. BigStar's main rivals include industry giants like Amazon.com and Blockbuster, which entered the market in the second half of 1998.

The BigStar strategy is original in that the company tracks customer usage and buying patterns, and uses this information to target and personalize customer e-mails. In this way, the company uses its own 1.7 million customer e-mail addresses as its primary marketing strategy, which stabilized the company's own marketing costs and also began to generate revenue when BigStar started selling its e-mail personalization service to other businesses.

Building a bigger star

BigStar has also increased the merchandise on its web site, now selling everything from feature films to fitness shows. In addition, visitors to the site can read movie reviews or watch movie trailers before purchasing a film, read celebrity biographies, and customize other features to their own specifications. One of the site's newest features is "BigStar Broadband Theater," which allows visitors with high speed Internet access to view a feature-length film. Eventually, BigStar expects to have a purely digital rental-retail program. Until then, BigStar will enjoy greater exposure through its partnership with ValueVision International. In May 2000, the company launched The BigStar Show on ValueVision's SnapTV Network featuring news and gossip about movies and celebrities.

So far, it looks like Friedensohn's strategy is working. BigStar's partnerships with companies like AOL's Moviefone, Earthlink, Women.com, Yahoo!, and Gay.com have helped the company gain access to huge online communities of consumers from a number of key demographics. BigStar's August 1999 IPO netted the company much-needed capital. However, even though the company has reduced marketing expenses by 60 percent, BigStar has yet to make a profit, and does not expect to anytime in the near future.