Tuesday Report - October 5, 1999

Steven Spielberg is a multi-talented person who's done extremely well. It's estimated that during his last 20 years his work has generated more than $7 billion in revenues, by leveraging his uniqueness through barter.

Though Spielberg is most famous as a director (films E.T, Close Encounters of the Third Kind, Jurassic Park, Shindler's List) he has been more prolific as a producer of other directors' movies, as well as of television shows and animated films.

He's made a tidy fortune from merchandising his films and from helping design theme-park rides for Universal Studios.

Spielberg's success, say friends who are top Hollywood executives, has been achieved in large part by workaholism, ambition and pragmatism...plus his talent for striking good trades! "There is no better businessman in Hollywood than Spielberg," exclaimed Sidney Sheinberg, a former president of MCA.

It's Spielberg's business acumen that has made him possibly the most expensive talent in Hollywood today. He hasn't taken a flat fee for his work in 10 years. Instead, he trades on his talents by taking a top-drawer 10 to 15 percent of the worldwide gross on his movies.

Interestingly, Spielberg has also eliminated his financial risks by having other people pay for his ventures. In his earlier days, for example, a chunk of his production company, Amblin Entertainment, had its overhead paid by Universal.

In exchange, Spielberg gives the studio creative advice on everything from movies to merchandising. And the rest of his Amblin Entertainment bills were divided among the other major studios where, once again, he bartered his advice for the payment of his overhead.

Change Ahead For Barter Industry
As High Tech Marries High Touch

Last week we pointed out the biggest change in the 40-year history of the trade exchange industry is underway, coming in the form of a new "clicks and bricks" business model. This phrase was succinctly explained by Val Vaden (partner at Vector Capital) at the International Reciprocal Trade Association's 20th Annual Barter Congress held September 23-26 in Vancouver.

Vector Capital and El Dorado Ventures are funding a new company, BarterTrust.com, which is headed by Mike Edelhart (an internet guy and former VP of Softbank) who will provide the "clicks," or internet, expertise.

The "bricks," or off-line expertise, will be supplied by the three trade exchanges BarterTrust.com has acquired: Ray Bastarache's Barter Network, Sue Groenwald's BarterCorp, plus Chris Haddawy and Greg Pavlov's Barter Business Network.

Wall Street and Publicly-Traded Companies Will Fuel Change

Industry leaders anticipate that members of trade exchanges will benefit from the new business model of "clicks and bricks." Barter companies now publicly-traded (OTCBB) are: Ubarter.com, eBIZnet, Cinnabar, Mutual Exchange International, and ITEX. Next year it's anticipated several better funded companies will be on the scene with anticipated IPO's: BarterTrust.com, Bartercard of Australia, barter.com, and TradeBanc.

Better, Faster Service

Operationally, Patti Falus, a top broker from Ubarter.com, provided a look into the future with her comments at the IRTA convention. "Things are going to change dramatically. There will be a greater array of products and services available as the industry grows. Our industry is going to be huge, and it's happening much quicker than expected.

"For example, who can wait for samples to be shipped? It's important to have the information online to view, it's just so much easier, faster and cost effective. I even see prices dropping for some goods/services. Think of the magnitude of being able to trade at a price lower than cash! It's unbelievable what's happening and what can happen when you bring the internet into play."

More Consolidation...Greater Cooperation

The industry will change as consolidation continues. There will also be a flurry of joint ventures and strategic alliances forming. Look for independent exchanges within geographical areas becoming much tighter. A "circle the wagons" mentality will likely surface, and working cooperatively with one another will become the norm. Ultimately, the winner will be each trade exchange's client base, as service will become paramount...online as well as off-line.

SEC Mounts Coordinated Assault Against
Financial Reporting Misdeeds

On September 28th the Securities and Exchange Commission announced the filing of 30 enforcement actions against 68 individuals and companies for engaging in fraud and related misconduct in the accounting, reporting, and disclosure of financial results by 15 different public companies. This coordinated filing, the first aimed at financial reporting, reflects the Commission's continued commitment to ensuring the integrity of our financial reporting system.

Four cases involved abuses of "barter" transactions...an increasingly used technique in which companies generate revenue on gains by trading non-cash assets for other non-cash assets. In each case, the company used one or more such transactions to inflate its net worth and/or earnings. In the case of one company, the ITEX Corporation, barter was the company's principal business.

Follow-ups...

From September 7th: Eric Aronson, 31, of Old Westbury (NY) and the co-owner of Tradeandswap.com, a barter web site, pleaded guilty in a Manhattan federal court to three counts of securities fraud in connection with the sale of shares of Satellite Recovery Networks. He faces a maximum of 15 years in federal prison, said Herb Hedad, a spokesman for the U.S. Attorney's Office in New York.

From September 14th: Ubarter.com a business-to-business e-commerce company announced at its annual shareholders' meeting that Eric Best of MindCorps and John Wade of FreeShop.com have been named as outside directors to the company's board of directors.

Coming soon. . .