By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
Corson, however, was undaunted. Wettreich struck him as a cool cookie. "He seemed like he could handle bad stuff. He said things with an air of confidence," Corson says. He believed Wettreich had learned from the weathering he had endured. "He's young," says Corson, "but he has been humbled."
Corson and a partner decided to sell their rights to Digiphone to Camelot--and Wettreich. "We knew he would work harder than others because he has more to lose," says Corson. "His image as far as running a company was lagging. Danny has been through hell and high water."
In exchange for his interest in the Digiphone prototype, in February 1994 Corson received royalties, cash, and a spot on Camelot's executive ladder. Corson won't disclose the total value of the package, but says it could amount to more than $1 million, depending on how well the product sells.
By July 1994, Wettreich had begun putting bulletins on the Public Relations Newswire about his new vision for his company: "Camelot announces that it has discounted operations of its remaining two financial services subsidiaries which completes the restructuring undertaken by Camelot during the last 12 months. We have closed or sold all of our businesses to concentrate on exciting new ventures such as CD-Rom software ."
By February 1995, Wettreich revealed more about his plans about both the Mr. CD-ROM chain and Digiphone. Though the software was not yet available, Wettreich was touting it to investors through all the public-relations channels he could find.
His dispatch led to some embarrassing moments.
In an April 3, 1995, demonstration of Digiphone for a Dallas audience of bankers and other potential investors, Corson telephoned a colleague in Eugene, Oregon, using the software. The connection was made, but the Internet provider in Eugene unexpectedly disconnected the local user. Wettreich and Corson, red-faced, had to explain the snafu. "It was an eye-opener," recalls Corson, who termed the showing "disastrous." "We had only a three-minute window of opportunity," he says, "and some guys walked out of there thinking it didn't work."
Stan Bunger, then an anchor for KRLD-1080 radio, attended the event. "It was pretty funny," Bunger recalls. "You could hear people jeering in the back of the room: 'Buy a Mac.'" Bunger recalls an angry investor marching up to Corson, who was busy performing the demonstration, and demanding to know what the hell was wrong with the software.
Amid the chaos, Wettreich's performance impressed observers. Recalls one financial reporter in attendance: "As the presentation went down in flames, he was very cool."
In the long run, the embarrassing demonstration did little to dampen investors' interest in Camelot--and its hot new product. In June 1995, Clark Hunt, a grandson of H.L. Hunt and son of Lamar Hunt, along with partner Barrett Wissman, agreed to put $1.2 million into Camelot and to keep that investment in place for at least 12 months. Wissman declined to go into details about the decision, offering a comment that explains the gee-whiz appeal of Digiphone: "If there is a product [with which] you can make free long-distance calls, it's fascinating."
Last November, Wettreich raised another $5.3 million with a private placement to institutional investors.
The advertising copy touting Digiphone--part of a $1 million campaign--states its message simply: "Join the Digiphone revolution. Call anywhere. Talk forever. Never pay long distance." The print ads include an unusual feature: CAML, Camelot Corp.'s stock symbol on the NASDAQ exchange.
"I've never seen a company put its stock symbol on product advertising," sneers Daniel Nissan, marketing director of New Jersey-based Vocaltec, Inc., which offers Internet Phone, the only product competing directly with Digiphone.
In truth, both Vocaltec and Camelot have a long way to go before giving long-distance carriers sleepless nights.
Camelot is a step ahead of Vocaltec because it already has a product that promises full "duplexing," meaning both sides of a conversation can talk at once, giving the Internet telephone chat a more natural feel; but both software products suffer from what is known as Internet delay--brief but annoying gaps in conversations that last for parts of a second for U.S. calls and as much as a second and a half for international calls.
Product backers contend that the savings from Internet calling will far outweigh these minor annoyances, but they also suffer from the absence of an industry standard, making it even less likely that two Internet users will have the compatible software necessary to talk long-distance. The prospect also remains that Internet long-distance telephone calls will go the way of video phones--a much-ballyhooed concept yet to hook consumers.
It's hard to tell how Digiphone, priced at about $50 in most stores, is moving so far. In September, the month Digiphone became available, Camelot reported that it had $2 million in preliminary orders. The company has reported no subsequent sales figures.
Also unclear is how the Mr. CD-ROM stores are faring. Though only five are open now, Wettreich has raised expectations, predicting a phenomenal rate of growth: 100 franchise locations by the end of 1996.
At the company-owned Mr. CD-ROM store on the corner of Preston and Forest Roads, business seemed brisk one pre-Christmas afternoon. In an aisle marked "EDUCATIONAL" in bright red lights, a mother bemoaned the dearth of offerings for her child's Macintosh computer, but at the cash register, the line was three deep. Each customer held two or three CDs, most priced at more than $10 each, with the more expensive titles running as high as $100.