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Extreme sports Internet content provider HardCloud.com closes

Just two weeks after Broadband Interactive Group handed out pink slips to 65 employees of its Bluetorch.com unit, the Web saw another extreme sports casualty last week as HardCloud.com shuttered its virtual doors.

HardCloud.com, which has offices in San Clemente and San Francisco, laid off its entire staff of 55 last week after failing to find a merger partner or secure a second round of venture capital funding, said a company employee who was packing up her office last week. The company received an initial round of funding for $6.5 million from Los Angeles-based eCompanies LLC a year ago.

“Now is not the right time for this market,” said the employee, who asked not to be named. “Bluetorch had a similar situation happen and others are not far behind.”

The closure comes just weeks after HardCloud.com started selling extreme sports apparel and accessories online. Just last month, the company staged a big presence at the Action Sports Retailer Trade Show in San Diego. Its HardCloud Caf & #233; featured 10 iMac computers with high-speed Web links for visitors to check out its site and broadcasts of global surf spots. On tap were free e-mail, beer and coffee.

Unlike brick-and-mortar rivals such as Anaheim-based Pacific Sunwear of California, HardCloud and other online businesses haven’t had a significant source of revenue other than online ads and fledgling online sales.

The extreme sports industry has surged in the past year as companies began chasing after the 34 million people who, according to industry watchers, make up the action sports market. HardCloud and others have looked to go beyond their core market to the larger 12- to 24-year-old group, which has an estimated $250 billion in spending money.

The fast growing industry is dominated by apparel makers Quiksilver, Billabong, Gotcha and Ocean Pacific that want to associate with sporting events by putting their names on them, sponsoring athletes and creating a buzz.

Online entrepreneurs tried to follow suit, pouring money into event sponsorships such as the Bluetorch Pro in Huntington Beach or HardCloud.com’s ASR exhibit.

Along the way they acquired other Internet sites. Swell.com, for instance, purchased Huntington Beach-based Surfline.com in February, an online international weather forecasting site used by surfers to check wave conditions. The company also agreed to become a three-year sponsor of the National Scholastic Surfing Association.

Swell lured away big names such as Doug Palladini who was group publisher of EMAP’s Action Sports Group with titles such as Surfer, Skateboarder, Snowboarder, Bike and Powder magazines. Swell also picked up several top editors of these industry magazines such as Steve Hawk who had been Surfer’s editor for nine years.

Then in October 1999 the founders of Irvine chip maker Broadcom Corp., Henry Nicholas and Henry Samueli, along with Gotcha International began pumping millions into the their Broadband Interactive Group and its Bluetorch site, which launched in January 1999. The site began producing an hour-long action sports program on Fox Sports Net originally called Bluetorch Rush Hour and renamed Bluetorch TV in June. The recent layoffs left Bluetorch with 66 employees on the TV side in a move away from publishing and Internet-based marketing. In September, the company discontinued publication of its magazines division, consisting of Wave Action, Pit, Wakeboard, MX Rage, Skate and Swerve.

Amid the proliferation of extreme sports sites, the online sites of traditional action sports retailers such as PacSun.com are doing roughly a couple of million dollars in online sales annually. PacSun.com, which offers the retailer’s branded and private label apparel, also features music and video clips, athlete interviews, online contests and information about Pacific Sunwear sponsored events such as the X Games.

The challenge for upstarts is competing with traditional surf or skateboard shops, said Court Overin, trade show director of the Action Sports Retailer Expo. If they can create a computer monitor that has the same vibe, sense of community, the smell of new wetsuits and the beach, they might have something, he said.

“The opportunities that the Internet provides in theory are really exciting, but applying that to the real-world situation is different,” Overin said.

Swell.com, which has roughly 80 employees, is one of those still standing. It was founded by Jeffrey Berg and Nicholas Nathanson. Berg also is founder and president of a money management firm Matador Capital Management. Nathanson was a member of the research division of Salomon Smith Barney where he focused on the e-commerce sector. The company got its start with $22 million in venture capital and angel investments.

Swell.com is moving from San Clemente into new distribution facilities in San Juan Capistrano this month. It has yet to officially launch any of its sites, said COO Palladini. The plan is to create an online entertainment site featuring e-commerce with individual brand name boutiques for about 15 companies including Reef, Oakley and Billabong. Other features include free e-mail, chat rooms, forums, message boards, classified advertising, weather forecasting, photographs, video streaming and editorial content.

“(Bluetorch and HardCloud) were our two closest competitors, but we have broader competition with companies such as PacSun and Alloy,” he said.

Ten-person Extremesports.com of Dana Point is another player in the thinning segment. It was started by DynoComm Productions Inc. of San Clemente a year ago, which has produced surfing and other sporting events for ESPN and others. The aim of officials there is to leverage off their existing production business.

“It’s a tragedy for the industry in a lot of ways,” said extremesports.com founder Alan Gibby of the recent events in the industry. “Some people will get a perception that this is not a market anymore on the Net. But the Internet is never going away. It’s only going to get bigger and better.” n

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