Web Start-up DEN Replaces Top 2 Execs, Drops IPO Plan

Internet entertainment start-up Digital Entertainment Network has replaced its top two executives and scrapped plans for an initial public stock offering as it retools after the fall departure of its founders.

The Santa Monica-based company is expected today to name former Capitol Records President Gary Gersh, who had led DEN’s music division with partner John Silva, as its full-time chairman.

Onetime Microsoft executive Greg Carpenter, who had been DEN’s chief technology officer, will be promoted to chief executive, according to sources familiar with the company’s plans. Gersh declined to comment.

The pair succeed CEO Jim Ritts and Chief Operating Officer Bruce Gamache, neither of whom returned calls. Ritts, one of a number of Channel One veterans at DEN, had been acting as chairman since the abrupt departure of DEN founder Marc Collins-Rector and two of his allies as Collins-Rector settled a sex molestation lawsuit.

DEN, which makes short live-action video features viewable over the Internet and aimed at teenagers and young adults, has more than 300 employees, a number that is expected to decline as it shifts its focus toward using content created by other companies.

DEN also is expected to announce an infusion of money--$24 million from Chase Capital Partners, Enron Broadband Services and Intel--bringing the total raised so far to $65 million. The company has also been negotiating for an investment by NBC.

At the same time, the stakes controlled by Collins-Rector and former executives Chad Shackley and Brock Pierce have been reduced from about half the firm to about 25%, sources said.

Former Disney television executive David Neuman will remain as DEN president, and Silva will become sole head of DEN Music.

One of the first pure entertainment sites to plan an IPO, DEN secured long-term advertising from Pepsi, Ford and others, as well as early investments from Dell Computer and Microsoft. But viewership has remained low at the DEN.net site and employee turnover has been high.

Abandoning that $75-million IPO for the foreseeable future, DEN will have to cut expenses, including million-dollar executive salaries that had attracted criticism.

Future salaries will be capped at $175,000 before stock and options, much closer to the norm for an Internet start-up, according to sources at the company.