Is This The End.com?

In every revolution there comes that bitter moment when the flag-waving has to stop, the grand social theories have to adapt to reality, and a large number of the revolutionaries inevitably find themselves hauled off to the guillotine. The dotcom revolution is no different, except that, true to form, it has accelerated the process. The time it takes to go from hero on the barricades to zero with your head in a basket has shrunk to a nanosecond.

For even the truest of new-economy true believers, bloody April--during which the NASDAQ fell 25.3% and the IPO window slammed shut--has given way to a Summer of Discontent. While most of the big names have recovered a bit from their April depths, they are still down for the year: Yahoo, off 50%; CMGI, down 70%; Priceline.com off 57%. Just last Friday, amid renewed analyst concerns about disappointing revenues, Amazon.com dropped 19% more to close at $34, off 70% from its December high. Amazon laid off 150 workers in January, Oxygen Media fired 15, and AltaVista sacked 50.

And when these Internet elephants begin to stumble, the mice get crushed. For every Amazon or Yahoo, there are 10,000 smaller Net companies that never got the chance to go public--and now probably never will. For those companies and their employees, who believed just as hard as Jeff Bezos and Jerry Yang but got to the barricades a lot later, the business climate is drastically different. Call it the new new economy.

Consider the case of Tor Thorsen, movie reviewer and employee No. 5 at Reel.com formerly one of the Web's largest DVD and video stores. Six months ago, Thorsen was a true believer. Three years' worth of 60-hr. weeks seemed about to pay off. He held 32,000 shares of Reel.com which was planning to go public. And he was whooping it up at the Sundance Film Festival. A-list stars like Kevin Spacey, Nick Nolte and Emily Watson granted interviews. "For the first time, we were really part of the film scene," recalls Thorsen. "People knew our name. They were like, 'See you next year.'"

Except there will be no next year. Last week Reel.com's headquarters in Emeryville, Calif., was like a ghost town. Every last one of the site's 230 employees had got a pink slip the previous week. Some, in a rush or in disgust, hadn't even cleaned out their cubicles. Thorsen and 14 others remained as independent contractors, keeping the site running while its owner, Hollywood Entertainment, based in Portland, Ore., worked out the details of how to give it a decent burial.

In 1998, in the full flush of the revolution, Hollywood ponied up $100 million for Reel.com Now, with the site's IPO canceled because of lack of interest and venture capital running dry, its e-commerce operations were halted. That left Thorsen's 32,000 shares worthless. "I used to think about buying a house and paying off my student loans," he says. "Now I'm thinking about unemployment."