5-Year Outlook: Convergence: One Size Fits All in the Livingroom

round 8:30 a.m. on a weekday in mid-August, Seattle commuters tuned to rock station KMTT heard the future roar. The Rolling Stones, declared disk jockey John Fisher, were about to hold a press conference 3,000 miles away, on a barge off Brooklyn, N.Y., to announce a new national concert tour. And listeners with a computer and a modem, he announced, could dial up the station's home page on the Internet to view the event--live via modem--through a new type of software called video streaming. The two-inch-square walking, talking, strutting image of Mick Jagger and the band started rolling briskly across the computer screens of thousands of Internet users around Seattle--and the rest of the globe--at 1:10 p.m. EST. More than just a fleeting moment in time, the event appeared to many to augur a world to come in which consumers can brush aside conventional media providers with the flick of a mouse and a vertiginous array of electronic devices can emerge to feed the growing hunger for information on demand. "People have scoffed at the idea of the convergence of the media for a long time, but it now appears that the buzzwords are justified," says Eric Dubin, a telecommunications analyst at Infrastructure, a high-tech investment research firm. Indeed, five years farther on down the road, the various media are likely to meld together so seamlessly that accessing information and entertainment digitally from some sort of cable in the wall or beam in the sky will become almost as simple as turning on a light by flipping a wall switch. And any sentient human being who complains they can't get no satisfaction from the pervasive new sphere of data will be perceived by peers as either pitifully unplugged or slightly mad. The impetus for the headlong rush to the future are the age-old drivers of commerce--greed and fear. Advertisers, who foot the bill for most media, lust after the money to be both saved and attained when they gain the ability to narrowly target customers through digital devices, track habits, and actually transact a sale at the instant of highest brand impact. Consumers have likewise proven themselves anxious to use the global network of computers to plunge more quickly into the media stuff that interests them and tune out the rest. Meanwhile, traditional news organizations, alternately fretful and fascinated, mostly want to figure out how to facilitate both aims--for a small fee--and get the hell out of the way. Says Fisher, the KMTT disk jockey who also runs the station's World Wide Web site: "We know that if we don't embrace the Net, somehow it's going to eclipse us." Any such forecast is little more than an educated guess--after all, few of today's avid Internet surfers had even heard of the Web just four years ago, so the danger of being blindsided by new technology is immeasurable--but some numbers help set stakes in the ground. Today, about 98 percent of U.S. households have telephones, 97 percent have television sets and 66 percent get cable service. However, only 38 percent of households have PCs, and fewer than 25 percent regularly access the Internet. Of those people who do live and breathe the Net, most pay around $20 a month to connect through cheap phone modems at speeds of 14,400 to 28,800 bits per second. A fortunate fraction in the vanguard spend upwards of $100 a month to use pricier ISDN modems that cruise at up to 120,000 bits per second. The key bottlenecks in the wider acceptance of the Internet as a broad gateway to news and entertainment are the relatively high costs of computers and the slow telephone access speeds. Most experts concur that these factors point inevitably toward a time, five years out, in which the Internet will become the mass medium of choice--not through the phone/computer duo but through the cable/TV setup. A dark horse galloping on the near-horizon, however, is extremely fast access to the Internet via digital satellite downlinks, courtesy of such companies as Echostar Communications and Hughes Electronics Corp.'s DirecPC division. Cable's principal advantage is that its "broadband" technology offers a much fatter pipeline through which the media can push its wares. Today, MediaOne Express, a cable unit of telecommunications giant US West Communications, is offering neighborhoods in Boston, Detroit, Jacksonville, Fla., Chicago and Miami access to the Internet at 1.5 million bits per second--a speed 10 times faster than current ISDN phone modems. In five years, says vice president Rob Stoddard, the vastly upgraded system won't break a sweat pulsing data and video downstream through its hybrid fiber-optic and coaxial cable network at 10 million bits per second. The price even now isn't bad: $70 to $100 a month for high-speed Internet access plus 60 to 70 regular cable channels. In a year, Stoddard says, MediaOne will add standard voice telephone service to its list of offerings in those test cities--an event that will completely blur the line in consumers' minds between their cable and telephone utilities. In fact, the MediaOne cable is likely to be split three ways once it enters the home--with one line going to the television for cable programming, another going to the personal computer for data, and the third going to the telephone for chatting with your friends about all these neat gizmos. Five years hence, therefore, consumers will care as little about whether their video, data and voice-service provider has roots in the cable or telephone industry as they currently care about whether their electric power is generated by water, oil or gas. A consumer will simply make a hardware choice based on various telecommunication conglomerates' prices, marketing and customer service. Several recent surveys have indicated, however, that most people have a higher degree of satisfaction and confidence with their telephone company than their cable company. These telephone traditionalists' ace in the hole will be an upgraded service called ADSL, or asymmetric digital subscriber line, which will permit data to speed up to 8 million bits per second over the current twisted-copper-wire network running above every street in America. The possibilities for a new-media experience at such speeds are the stuff of science fiction; the cool hardware will beget ever-cooler software. The result, according to experts? The broadcast media's current linear control of consumers' TV time will vanish. How about the chance to scan video headlines, a scenario in which you can plop on the couch at the end of a long day at work, point the remote at the screen and watch TV networks' coverage of the day's events in the order you wish? Better yet, technology called Intercast, developed by PC-chip giant Intel Corp., will watch the vertical blanking interval of all TV signals during the day and assemble a personal news and entertainment broadcast just for you via the Internet. Says George Bell, chief executive of the Internet directory company Excite Inc., which is competing with the likes of Yahoo! and Microsoft to be the principal home base, or content aggregator, for Web users: "In whatever delivery form, news and entertainment will become much more personalized over the next five years. For our customers, the effect is to greatly increase the efficiency of time spent in the media." This media convergence of the future is already starting to get interesting, thanks to outfits like Worldgate Communications Inc., a two-year-old interactive TV software startup in Philadelphia backed by Motorola, Citicorp and the leading set-top cable box makers. Under the direction of Hal Krisbergh, the company has developed the ability to turn almost any existing set-top box into an Internet access device; it's undergoing trials now on Cablevision, Comcast and Charter cable systems in New York, Philadelphia and St. Louis. The beauty of this approach, according to analysts, is that Worldgate does not require a consumer to buy any new equipment. Internet access simply becomes a premier tier of cable service viewed on the tube at a price Krisbergh has pegged at $4.95 a month. In contrast, a rival Microsoft product aimed at television Internet use called WebTV must be purchased for several hundred dollars. Extending the concept two to five years out, advertisers are salivating at a critical piece of the Worldgate vision called "channel hyperlinking." If this concept takes off, a television viewer instructed by an anchor to visit a Web site to learn more about sharks will push a button on the Worldgate remote control and see that page onscreen in less than three seconds. The speed comes from two factors: Over a cable modem, the Internet is always on at blinding speeds--just like broadcast television. And the set-top box will be smart enough to know that if you're watching National Geographic's sharks special, it should go out and load the relevant Web page ahead of time, a process known as "caching." Advertisers love this concept because it will work the same way for a 30-second spot on, say, the latest John Grisham novel. A push of the button, and consumers can learn more about the product, see an online video interview with their hero, enter a contest, and even order the book--the cost will show up on their cable bill. David Harkness, a vice president at the media metrics firm A.C. Nielsen Corp., says he believes advertisers and TV programmers will take readily to channel hyperlinking--thereby pushing the two media together faster--because it strongly enhances the value proposition of a broadcast-media buy. Currently, networks charge a flat $12 to $16 per thousand viewers for an ad in prime time, but Harkness believes they will be able to charge far more if the advertisers know they can make a sale on the spot. In addition, a record of all that linking will help both networks and advertisers understand consumers in minute detail. "Right now, we can't tell Dell Computer which TV programs are going to have the highest propensity to deliver people who are going to buy computers online," Harkness says. "But by 2002, we'll know the answer with great precision." Of course, there is a catch: Internet content, which is largely dependent on text, looks like mud soup on a standard interlaced television screen. It will improve quite a bit on new high-definition TV sets running off a digital feed, but will still compare unfavorably to the average 15-inch computer monitor. And the television is such a dumb beast, even with a set-top box on its shoulders supplying meager brains. The difficulty of reading text on TV--or a computer monitor, for that matter--creates a nice opening for the survival of newspapers and magazines. Even in 2002, says Jack Driscoll, editor-in-residence at the Massachusetts Institute of Technology's Media Lab, folks are still likely to be reading headlines on paper in the morning with their coffee and toast. The problem, says Driscoll, the former editor of the Boston Globe, is that newspapers might not make it to 2010 in their current state because "the process of whittling away will be well under way." Despite the fact that people will continue to want the tactile quality of leafing through a newspaper, he believes that advertisers will increasingly undercut the medium by fleeing to more direct means of communicating with customers. One solution: Highly personalized, downloadable newspaper "books" created with digital ink and acetate-like paper now under development in the Media Lab's engineering workshop. Paul Janensch, professor of mass communications at Quinnipiac College in Hamden, Conn., and former top editor at three newspapers, forecasts that during the next five years the most successful news organizations will be ones that are diversified across all media, have a global rather than a merely local orientation and create original content rather than hunker down as a distributor of warmed-over wire copy. "When it comes to forecasting the future for news, nobody knows anything," Janensch says. "It's like roulette: If you want to win, you've got to bet a lot of numbers." Among the diversified media giants spinning the wheel effectively so far is Cox Enterprises Inc. in Atlanta. The company owns five large newspapers, 12 television stations, 45 radio stations and the fifth-largest cable TV operator in the country. The firm's newest baby, Cox Interactive Media Inc., has been given the sole responsibility for creating Web sites in the company's key markets that protect, unify, promote and extend the mother firm's other properties in the new medium. Peter Winter, president of Cox Interactive, has set an ambitious goal of becoming the No. 1 local Web site in terms of audience and advertising share in 25 U.S. markets by 2002. The first four efforts in Atlanta, Austin, Texas, San Francisco and Charlotte, N.C., do show promise: The highly localized sites (including www.austin360.com and www.gocarolinas.com) are attractive and appear to have grown organically from roots in radio, television and print into a useful hybrid. "Cox spun radio out of newspapers, TV out of radio and cable TV out of broadcast TV," observes Winter. "We have a history of mobilizing quickly when a new media comes along and building a significant presence. We aren't constrained by any artificial expectations of quick profitability." Few other mainstream media companies have jumped so far so fast. One is NBC, a unit of General Electric Co., which formed a joint venture with Microsoft Corp. to create a powerful cross-media brand out of the MSNBC cable network, MSNBC Web site and MSNBC desktop business video service. The joint venture has leaned on the software strengths of its Redmond, Wash., partner to develop numerous user-engaging innovations, such as a voting device that lets readers recommend articles to each other, a charting engine that conjures up complex graphics of newsmaking stocks and occasional audio and video news clips. Cal Vornberger, chief executive of Tumble Interactive, a new-media design agency in New York, believes that the trick for the networks in the next five years will be to do more of what NBC is doing: They must become fully interactive with their viewers through the Web. In research for ABC Television, he counted 50 wildcat Internet sites devoted to the network's shows, including six for Home Improvement alone. This community-building function should be taken over by the network for fun and profit, he proposes, as greater viewer loyalty will pay off in valuable rating share increases. In the end, suggests corporate-image consultant Katharine Paine, the coolest business of all in the year 2002 might be one that would allow consumers to turn all these electronic media and messages off--a filter that will blunt all advertisers' attempts to grab your eyes and ears via television or radio in the car, office or home. But there is an inherent danger to that see-no-evil approach, she says with a wink. Consider the story that she tells about her late father, Ralph Delahaye Paine, the longtime publisher of Fortune magazine, and his boss at Time Inc., the legendary print-media empire builder Henry Luce. In 1968, she says, Luce turned to her dad and complained: "Del, why didn't you ever tell me about television?" Markman is managing editor of Microsoft Investor, an investment news and analysis publication on the Web at http://investor.com. He can be contacted at jonmark microsoft.com. Projected Ad Expenditures for 2001 ($ millions) Source: Veronis, Suhler & Associates

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5-Year Outlook: Convergence: One Size Fits All in the Livingroom

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