Roo Sheds Staff, Names 'StartUp.com' Star CEO

by Mark Walsh, Dec 20, 2007, 7:00 AM

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Facing financial woes, online video provider Roo Group Wednesday announced a change in leadership and staff reductions.

The company said JumpTV executive Kaleil Isaza Tuzman will take over as chief executive and chairman, replacing Robert Petty. Roo also announced the resignation of four independent members of its board of directors--Simon Bax, Stephen Palley, Scott Ackerman and Doug Chertok.

In addition, Roo said it had cut 21% of its staff, or about 40 employees.

Isaza Tuzman, who still serves as president and COO at international Internet TV broadcaster JumpTV in Dubai, will assume his new role on Jan. 9. Petty will remain with the company as part of a three-member board for now, which also includes Executive Director Robin Smyth.

Before joining JumpTV, Isaza Tuzman ran the media-focused investment firm KPE in New York. He may be best-known, however, as the star of the 2001 documentary film Startup.com, which tracked the demise of his GovWorks.com startup.

One of Isaza Tuzman's immediate goals at Roo is to bring its burn rate under control. The company powers video distribution and syndication on a network of more than 1,000 Web sites including properties owned by News Corp., a Roo investor. It also provides advertising services for clients, including media buying and planning. But revenue growth hasn't kept pace with increasing expenses.

For the quarter ending Sept. 30, Roo had a net operating loss of $8.5 million on revenue of $3.4 million. For the first nine months of 2007, Roo posted a loss of $22 million on revenue of $10 million. It had $16.3 million in cash and cash equivalents.

"Historically, the company has not demonstrated the kind of cost discipline that it should given its cash position," Isaza Tuzman said. "I think that Roo will be run a bit more like a traditional business that has a short time frame in which to become profitable." He did not rule out further layoffs, but said the company would also seek other ways to reduce expenses, including outsourcing more functions and instituting a "broad swath" of cost-control measures.

In terms of business strategy, Isaza Tuzman said a key change would be for Roo to deliver live streams instead of focusing on providing video-on-demand for third-party sites. "Once we have live streaming, we have a much better chance of getting exclusive content," said Isaza Tuzman. "To the extent that we can show up with a broader menu of content products, we'll be in a stronger position to expand our distribution network."

In addition to News Corp., other Roo content partners included mtvU, VNU and Agence France-Press.

Isaza Tuzman said he did not expect News Corp., which took a 5% stake in Roo earlier this year, to invest further in the near term. However, Isaza Tuzman has the right to buy up to 51% of the company's preferred stock at 38 cents a share, and up to $5 million of its common stock at 16 cents a share. Roo closed Wednesday at 20 cents a share, down from a 52-week high of $4.49.

Isaza Tuzman said four new board members will be appointed by January.

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