IQ News: Streets Of Gold?

The Times joins the rush of New York City e-guides. It will lose $12-$15 million on its new media division in 1997, and $8-$11 million in 1998, but the usually staid New York Times Co. has not lost its appetite for electronic publishing. Indeed, having established the newspaper's Web site as a national Hot 100 destination and pioneered database marketing for its advertisers, the Gray Lady will up the new media ante this year in a play that will put the company in direct competition with America Online, the Home Shopping Network and Microsoft in the nation's biggest local market. Due to debut in the first quarter of 1998, New York Today will be the latest, and potentially most ambitious, entry into the online city guide field, a niche that was all the rage among content providers last year. But in contrast to most rival guides (and its sister, www.nytimes.com), New York Today will not target national advertisers. "We don't want people to confuse our local New York service with The New York Times on the Web, a major national news service," says Martin Nisenholtz, president of The New York Times Electronic Media Co. (The Times Web site draws 83 percent of its audience from outside the New York metropolitan area--proof for Nisenholtz that "once you unfetter The New York Times brand name from paper distribution, it becomes a national product set.") The city site doesn't use the Times name, in part because some content partners and advertisers "wouldn't be comfortable with it" in an era of media-alliance sprawl. To differentiate this interactive Gotham guide from other listings-oriented city sites, Nisenholtz is relying on broader coverage: "I believe that arts and entertainment, going out to eat and going to the movies are important parts of people's lives in the city, but they're only part of our concerns." Along with leisure listings of entertainment and restaurant reviews drawn from the analog Times, New York Today's digital library will feature a large reference section. "We'll have useful original content, like how to get a driver's license or how to pay a parking ticket--things you need to know when visiting or living in New York," says Dan Donaghy, general manager of the new site. Also aimed at local problem-solving on the Web: an extensive assortment of "Life" pages, to include a health section and online real estate, automotive and employment classified ads currently running in the Times on the Web. Why is the Times willing to spend so lavishly in a completely unproven medium? One observer sums it up simply as a "fear of Microsoft." Now in 10 cities, Microsoft's city guide series, Sidewalk, was a wake-up call for the newspaper business, as the software giant entered local advertising markets for the first time. But the fact that the Big Apple's local advertising supports so many print publications, as well as dozens of TV and radio stations, leads Sidewalk's business unit manager Matt Kursh to reassure other media that "the New York market can sustain three or four online city sites, without taking away ad dollars." Even so, at about the same time as New York Today's debut, another online city guide will be making a splashy celebrity-studded relaunch. Digital City NY, a business unit of AOL Studios (owned primarily by America Online and Tribune Co.) has signed local personalities, including newspaper columnist Pete Hamill, playwright Wendy Wasserstein and musician David Byrne, to exclusive content deals. "We're introducing a whole new product in New York that will raise the standard for city sites," says Paul De Benedictis, president and CEO of Digital City, now in 32 markets nationwide. The oldest city site in New York (by way of its Metro Beat acquisition) belongs to Pasadena-based CitySearch, which recently drew a large investment from the Home Shopping Network. HSN's Barry Diller has proclaimed "city magazines" the local TV broadcast format of the future; CitySearch seems a natural online complement to this strategy in its 17 markets. Meanwhile, CitySearch concentrates on developing relationships with small and medium-sized advertisers. "Our support comes almost exclusively from local advertisers," says Charles Conn, CEO of CitySearch. As a creator of software tools for city site management, CitySearch is also the major competitor to the Times' technology partner on New York Today, Zip2 Corp. of Mountain View, Calif. Last November, The New York Times became a 4.9 percent owner of Zip2, along with such investors as The Hearst Corp. and the parent companies of the Dallas Morning News and St. Louis Post-Dispatch. Pundits have observed that the Times hasn't always been judicious in its choice of partners--or new businesses--in the past. One deal, giving the Nexis electronic database online exclusivity to Times material in perpetuity, had to be one of the most uneven new media arrangements ever (a change in ownership at Nexis provided a loophole just as the Net took off). And as recently as 1993, the Times published a weekly entertainment guide on paper called Critic's Choice, which was targeted at visitors to the city but failed to achieve critical mass. One major difference today is the presence of Nisenholtz, the rare "interactive media pioneer" who actually merits the designation. Nearly 20 years ago, he set up a ground-breaking teletext system at New York University; he went on to found Ogilvy & Mather's Interactive Marketing Group and had a brief stint as director of content strategy for Ameritech Corp. before joining the Times in 1995. Newsroom insiders also say new media is no longer a career dead-end at the Times; Rob Fixmer, editor of the Times site for its first two years, was recently promoted to technology editor at the paper. And in the current media environment, the Times has business incentives that its online competitors lack. In a recent report, Forrester Research analyst Bill Bass predicted that newspapers risk losing more than 10 percent of their ad revenues by the year 2001, as advertisers go online or force rate reductions in print buys. "No online city sites are even close to making money, and the first ones probably won't until 2000 or 2001," Bass say. "But they're smart to introduce an online city guide and fend off brand and ad erosion." One possible source of revenue, charging subscription fees, is never ruled out by city site publishers but isn't very likely. "Advertising revenues are never enough to fund a site," Bass says. "But Web guides charging subscribers is like a local TV channel charging viewers. It won't happen." The electronic media division is clearly a favorite of Arthur Sulzberger Jr., recent successor to the mantle of Times chairman. Sulzberger has made no secret of his desire to make a major digital acquisition for The New York Times Co. in '98. With such potentially huge deals in the wind, a multimillion-dollar loss must seem a small price to pay for a fast-track new media tutorial.

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IQ News: Streets Of Gold?

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