Videos from cyberspace

Roger Trapp reports on a rare event: an internet firm that is already turning a profit

It is a common complaint. You go to the video store looking to rent a film for the evening, only to spend what seems like an inordinate amount of time finding something you might actually want to watch but have not seen before.

And the situation is not much better when it comes to buying videos. Even the largest shops sell only a fraction of the 50,000-odd titles available in Britain, where the market for video and DVD is worth pounds 1bn a year.

Which is why three young entrepreneurs from Belfast saw an opportunity to make their contribution to the e-commerce revolution. And it seems their hunch was right, since BlackStar, the internet video sales company created by Darryl Collins, Tony Bowden and Jeremy Glover, is one of the few internet start-ups to be making any money.

Set up in an office above a builder's yard just 18 months ago, it has just secured a second round of funding. It has raised $6m (pounds 3.8m) from Atlas Venture, a specialist in financing technology firms, and from investors in Texas Pacific Group, the firm that has recently been involved in deals with Punch Taverns and Ducati motorcycles. And this will be used to fund infrastructure and marketing initiatives aimed at helping prepare the fledgling company for competition.

Such is the rate of progress that the latest financiers, who are building on the investments made by local business angels when the company was started at the end of 1997, could be seeing a quick return on their money. BlackStar, which is chaired by James Osborne, the prominent Irish entrepreneur who oversaw last year's flotation of Ryanair, is looking to go public in the next 18 months, via either the London Stock Exchange or New York's Nasdaq exchange.

Much impressed by the example of Amazon.com, which revolutionised the book trade before moving into selling other products online, BlackStar's three founders say they have got to this position through an absolute dedication to customer service.

Mr Collins, an award-winning film maker who came up with the idea of BlackStar with Mr Bowden, a video fanatic, says that from the start they have asked people what they liked about the service and what they felt could be improved. "We've had constant nudges towards what has turned out to be obvious."

As an example, he cites how one early customer suggested that the company publish films' catalogue numbers on its website at www.blackstar.co.uk. That way, said the customer, dedicated fans like himself could tell at a glance whether the film would be of interest. BlackStar made the change within half an hour, says Mr Collins, pointing out that many larger companies might have asked consultants to look at the issue first and so wasted valuable time.

This reputation for paying a lot more than lip service to customer service has won the company customers all over the world. It has, for example, built up such a strong relationship with a customer in Turkey that he recently visited Belfast specifically to see the people he had been dealing with electronically.

"We took him out to lunch and he's an even better customer now," says Mr Collins. A German fan, who was one of the company's first customers, regularly sends chocolates.

BlackStar, which is planning to have 75 employees - still at the original office - by end of the year, is living proof of how the internet can change the economics of business. If a little-known start-up based in a part of the world hardly associated with high technology can promise to supply customers in 95 countries with videos from a list of 50,000 within days, just about anything is possible.

But, although it is the web that has given them their opportunity, the company's founders are not blind to its limitations.

First, for all their nods to Amazon.com, they insist that their business model is much more in line with a conventional retailer than the mail- order operations that most e-commerce ventures adopt. The price the customer sees quoted is what they pay and there are no hidden costs. Moreover, delivery, which is promised within 48 hours in the UK, is free and the process is tracked until the package reaches the customer.

Second, BlackStar realised from the start that brand building has to be done using conventional media in the "real" rather than virtual world.

It is this confident approach, the company believes, that has attracted investors, and will help it reap even greater rewards.