The Age of Convergence   

Phone companies, cable systems and entertainment producers are rushing headlong into the new interactive electronic world while the print media try to figure out how they fit in.

In the pleasantly upscale Cascades housing development in Northern Virginia, Bell Atlantic has created a deceptively low-key "Intelligent Home" at 20648 Bellwood Court. Each room displays interactive services and tools that address family members' daily needs. The kids' bedroom features education, the kitchen is equipped for shopping, while the living room is for entertainment.

The technology pales in comparison with the new virtual-reality rides at major theme parks – until you realize there's nothing virtual about the reality in Bell Atlantic's home. Most of its services are here or close to being here, including the massive upgrading of cables, curbside wiring and computer systems needed to make it all happen.

The Intelligent Home then becomes an exciting distillation of the opportunities and technologies that seem destined for American households. But it is also a sobering vision for newspapers, and that was even the case before Bell Atlantic startled the communications world last fall by announcing it planned to buy the huge cable and programming company, Tele-Communications Inc. of Denver.

Newspapers have already begun to develop electronic ways to deliver news and information (see "The Future Is Now," October 1993). But most have not done much beyond annointing an electronic news editor and throwing together some audiotex and fax offerings. And still fewer have responded to Bell Atlantic and the host of equally imposing powerhouses that are laying the groundwork for multimedia empires. But across the country the tempo has picked up and it's clear this is a game newspapers very much want to play.

Omaha, Orlando and Castro Valley, California, are just a few of the unglamorous settings for one of the most glamorous events of not one but two millennia – the coming of the Age of Convergence of computers, fiber optics and cable. These cities will host some of the highest profile, best-funded research and development efforts to determine if consumers want – and can afford – this new "interactive multimedia."

In the more plebian settings of online services, equally significant content and packaging shifts are underway that are of more immediate significance to print journalism. The personal computer clearly will be a major delivery vehicle for multimedia content, as well as a more friendly environment for the newspaper industry's efforts to develop interactive products.

The Appeal of News

With a limitless library of movies and games soon to be only a keypad away, news and information services don't rate too highly in many surveys of likely demand for multimedia products. That's not surprising, however, because respondents probably have a clear idea of the movies and games they'd order, but little familiarity with interactive news products.

People do love to talk, and online conversations have proven big winners with the large online companies as well as smaller computer bulletin boards. Responsiveness, timeliness and some sense of individual control are key. And plain old text does just fine in this medium.

Dataquest Inc., a large Silicon Valley research firm, polled 200 families last summer about their attitudes toward multimedia. Bruce Ryon, the firm's principal analyst for multimedia research, notes that survey participants had to have $30,000 or more in annual household income and own either a computer or video game system. The resulting group was hardly representative of the general population; 90 percent of the households surveyed included married couples, with an average of two children around 12 years of age.

The research firm was interested in getting opinions from people who were already users of new technologies and, presumably, would be heavily represented among early users of multimedia products. What it also got was a group that highly values news and information services, and hard-core newspaper readers. In fact, 88 percent of the respondents were newspaper subscribers, and 36 percent received two or more dailies.

"My initial hunch was that they would be more interested in entertainment than in information," Ryon says, "but they were actually more interested in information, and news ranked fairly highly in the information category."

Asked to rate various types of interactive content, the respondents ranked news highest, with a rating of 52 percent. Educational information was next (45 percent), trailed by interactive game shows (38 percent) and directories, including program listings and restaurant menus (30 percent). Bringing up the rear were entertainment (29 percent), financial information (26 percent) and games (22 percent). These were responses from parents; presumably, teenagers and young adults would vote somewhat differently.

Beyond the interest in news, Ryon says, consumers also expressed a strong desire to gain some control over the flow of information that is inundating them. That control is one of the most attractive features of interactive media, permitting users to retrieve what they want when they want it. "People want to be able to view TV news the same way they read a newspaper," Ryon says.

Corporate Convergence

The most dramatic signs of convergence have been the far-reaching mergers announced or proposed by many of the biggest players – telephone companies, cable systems and video powerhouses.

Bell Atlantic's planned merger with Tele-Communications Inc. was the biggest of the deals, perhaps even big enough to send members of Congress and Justice Department officials scurrying for antitrust statutes that were placed in storage during the Reagan-Bush years. But the battle between the QVC Network and Viacom International for control of Paramount Communications focused even more attention on the growing popularity of marrying huge storehouses of content – mostly movies, game shows and syndicated and cable series – with powerful new platforms for on-demand delivery to consumers. Almost lost in the shuffle: American Telephone & Telegraph's $13 billion deal for McCaw Cellular Communications, and at least two other big-bucks efforts to develop a national network for wireless cellular communications. These networks will carry a new generation of personal information products that can bypass traditional phone service.

At first glance, the wave of multimedia alliances seems to be a good deal for newspapers and magazines. Although print often has been forgotten in the glow of multimedia developments, it has been rediscovered as a provider of content to the new digital dynamos. Newspaper stocks, in the dumps for most of the stock market's march to record highs last year, were sharply higher last October after Wall Street analysts recognized that someone has to bring food to the party.

The search for the digital Holy Grail is taking these growing giants into several high visibility test sites, although with as much as $100 billion already wagered on interactive media, there's clearly no turning back. In the 1970s, Knight-Ridder and Times Mirror were ahead of the curve with videotex systems, and walked away from those experiences with some minor wounds and institutional savvy. Today, however, companies ahead of the curve will more likely try to redefine the curve instead of walking away.

Choice and Control

Three major trials of viewer-controlled programming delivered to TV sets are scheduled for launch this year, and there are numerous, smaller-scale efforts. They all will be using high-capacity, glass-fiber and coaxial cable to provide digitized information – text, audio and visuals – that can be ordered on demand.

A lot of attention will be focused on ease of use. In fact, the early stars of multimedia are less likely to be the content than the television set-top units that viewers will use to communicate with the service, and the hand-held remotes they will use to help them navigate.

Clearly, for a society that can't program VCRs, wading through lots of new offerings will be tough. Behind the scenes, the experimenters will also gauge the delivery capabilities of the participating telephone systems, which have been beefed up with fiber optics and computerized switching systems.

The "multi" in these early applications will be dominated by visual material. People don't plop down in front of their TVs to read the dictionary or to punch in checkbook balances for an electronic bill-paying service. And text is difficult to read on TV screens, which lack the resolution of computer monitors. Moreover, while kids' noses seem to break the plane of the TV screen regularly, most older people prefer to sit 10 to 15 feet away.

Therefore, the potential of delivering newspaper-like content on television is not clear, says Bob Meyers, Viacom's vice president of corporate development for interactive television. "We really haven't come to grips with how you transition something that's a printed, portable medium with what's an entertainment, visual medium." Meyers believes computer screens may be the more appropriate delivery vehicle for information products that have heavy text and graphics elements. In Viacom's test with AT&T in Castro Valley, California, the emphasis will be on visual entertainment.

Meyers stresses that Viacom, which owns MTV, Nickelodeon and Showtime, "sees itself as a programming company," so it needs to adjust as much as newspapers and other content providers do. "As the technology changes," says Meyers, "we, too, have to figure out how we are going to be distributed." Castro Valley, he says, is "a playground and gigantic focus group."

In Cerritos, California, not many cable customers have subscribed to Main Street, even though its sponsor, GTE, has spent four years and millions of dollars to develop it. Main Street provides about 60 sources of special content and is interactive. But it hasn't caught on and is viewed in some circles as a cautionary tale that consumers are not ready for or interested in a mass market product that delivers interactive entertainment, information and transactions.

Other detractors say Main Street has not been a fair test of consumer attitudes because it's a technological clunker victimized by the limited transmission capabilities of coaxial cable and copper wire. The content and visual presentation might be fine if users were expecting a low-resolution online service, but not for a television product. GTE officials did not respond to repeated requests for an interview.

Time Warner Cable, which is putting together in Orlando what is billed as the most extensive test of interactive media, envisions a more direct role for the kind of content newspapers might provide. "We believe there is a substantial benefit..to form local alliances with newspapers, to provide a variety of on-demand information," says company spokesman Michael Luftman. Besides parent Time Warner, other investors include Toshiba and U S West, one of the seven regional phone companies.

The major informational resources of Time will be used to create multimedia news offerings, putting consumers in control of tailoring the content, duration and delivery time of the news. This product, while relying heavily on video, will be accompanied by text that can be output over new Hewlett-Packard printers that are being developed and tested especially for the Orlando project.

The Orlando Full Service Network (FSN), as the project is called, expects to offer some content by April to an audience of some 4,000 customers of the local Time Warner cable system. The Orlando Sentinel will likely provide some local content for the test, but details of the relationship are still being worked out. The Sentinel is also developing an online product that users will access from America Online, similar to what its sister paper, the Chicago Tribune, has done.

"No one's going to be making any money out of this for a long, long time," Sentinel Editor John Haile says. "But I think we're going to be learning an awful lot.

"As a core structure, you need to have the newspaper online, and we will do that," he says. "But that's not the most important thing... We're looking at national services, things about Florida that people around the country would be interested in."

Because digital products can move around the world as easily as across the street, a broader market for certain newspaper content makes sense. Larger markets can also justify capital investments that wouldn't otherwise be prudent for local or regional papers. And while current R&D efforts don't have to pay for themselves, commercial ventures do.

In addition, Haile says, his newspaper will have to adjust to the real-time demands of electronic publishing, providing constantly updated information. And adding value to information will be more clearly seen as a requirement of a successful product. Here, Haile says, newspapers have strengths that can't easily be matched by others because editors and reporters are trained to distill the most important information from a story.

"The core job of the newsroom is the same," Haile says. "When you have 500 choices for information, the role of the editor becomes all that more important. That's one of the reasons I'm so optimistic about the future of newspapers."

Modem Mania

Today the computer screen is a more sensible place than TV for newspapers. It is much easier to read text on high-resolution monitors and, even with big gains in the amount of information that can be piped over telephone lines, it will be some time before large amounts of visual content can be handled the same way. Newspapers are becoming increasingly adept at generating and storing color graphics and photographs in digital form, and this fits in nicely with the technology curve on which online services now sit. And don't assume that computer screens will be limited for long by low-capacity phone lines for outside communications. Cable TV companies are working on providing access to computers in the home over their commodious broadband systems, and online services are now testing cable modems hooked up to personal computers.

ýurther, the prospect of 500-channel cable systems is hardly intimidating to veteran online "surfers." CompuServe, the H&R Block subsidiary that is the largest commercial online service, already offers 1,700 databases and forums. With more and more content being added almost daily, commercial online services are gathering valuable knowledge about how to present information.

With such a bewildering array of content, brand-name sources of information can become strong magnets. For example, people are much more likely to access critiques by Siskel and Ebert than "generic" movie reviews. And newspapers are seen as very good providers of trusted information, especially in their local markets.

America Online, the newest and most aggressive of the major online services, provides access to the most publications, including the Atlantic Monthly, Consumer Reports, National Geographic, the New Republic and Time. It's also the only service so far to provide access to electronic subscription products from daily newspapers, first with Chicago Online from the Chicago Tribune and later with Mercury Center from the San Jose Mercury News.

CompuServe and Prodigy, the Sears-IBM partnership, have since joined in, with the most noteworthy alliances being those made with Prodigy by Times Mirror and Cox Newspapers. Cox also is working with BellSouth on interactive advertising products and, along with the Tribune Co., has been particularly active in pushing information products onto new platforms.

Prodigy views newspapers as essential to its development. "They have local content, promotional capabilities and contacts that we, as a company located in White Plains, New York, do not have," says Gerry Mueller, vice president of new business ventures.

Mueller says Cox's Atlanta Journal and Constitution, and probably Times Mirror's Los Angeles Times and Newsday, will offer subscriptions on Prodigy that can be purchased and used by customers without accessing or paying for other Prodigy services. Chicago Online and Mercury Center, by contrast, are accessed through America Online.

"We're talking to many newspaper groups," Mueller says, stressing that each relationship is different, depending on the paper and how it would fit into Prodigy's offerings. The negotiations involve pricing, content, costs, advertising and revenue splits, and what papers will do to promote the service.

At CompuServe, interactivity is paramount, says Kevin Knott, director of product marketing. Partly for this reason, Knott is lukewarm about newspapers whose electronic products consist of simply putting each day's paper online. "There's not much added value" in that for a CompuServe subscriber, he says. Knott is very interested in time-sensitive schedules and similar service information and reviews – movies, plays, restaurants – that showcase newspaper skills and can reside on the system for reference.

CompuServe has the reputation of being the most serious of the major online services, which to some detractors means it's the most difficult to use. It relies heavily on providing specialized information and forums, which are premium services that carry hourly charges, unlike 48 basic CompuServe services covered by the minimum monthly $9 charge.

Roughly half of CompuServe's use is related to the forums, Knott says, and that model is appropriate for newspaper partners. It's also a less expensive proposition for the newspaper than creating the staffing structure for a full-fledged electronic product, which is what Knight-Ridder has done with its Mercury Center project in San Jose.

Knott says CompuServe looked at Mercury Center and decided it wasn't an appropriate model. "There's still not enough of a market to make it worth a major investment on their part" in developing an electronic product, he says, but "every paper we've talked to is interested in developing" one.

Knott has heard all the stories about how newspapers leave 90 percent or more of the available news out of each day's paper, and that this material can flow online as an added benefit. But additional newspaper staffing is needed to turn this "content" into publishable material, and newspapers can't afford to hire new staff for the meager returns now available from online services.

Making It Work

The Washington Post looked at the relationships between newspapers and online services and decided they weren't appropriate or lucrative enough, says Donald K. Brazeal, editor and publisher of the company's new electronic information unit, Digital Ink. "We believe newspapers should continue to be [the primary] publishers" in an electronic world, he explains, which for the Post means controlling the advertising and news content and supplying its electronic information directly to its subscribers.

As last year drew to a close, Post managers were still considering the types of hardware and software they need for a new online product, and hoping to be able to offer customers by mid-1994 more satisfying graphics, pictures and sound than current online services do. Brazeal isn't sure the Post will opt for working with an online provider, though. He says current newspaper-online relationships don't create a strong enough connection between the user and the newspaper. "In the Washington area," he says, "we want to have the 'Washington Post window on the world' rather than the 'America Online window on the world' or the 'Prodigy window on the world.' "

Whether the Post offers its product through an online service or not, it plans to include access to Internet, the sprawling collection of publicly accessible networks created by the government. The paper also is considering national electronic products integrating news and advertising.

Moving advertising into an electronic environment may be the most difficult challenge newspapers face. "We have a sense that [online] advertising is far more interactive [and] more akin to classified than display," says Brazeal, referring to classified advertising's emphasis on text and timeliness.

At the San Jose Mercury News, content, not advertising, is the focus, and Executive Editor Bob Ingle makes no apologies. Newspapers "haven't got financial resources compared to our emerging [electronic] competitors, we don't have the entertainment, and we don't have the technology," he says. "So, if we ain't got the content, we're sunk."

Ingle, Mercury Center director Bill Mitchell and others involved in the news side of online delivery experiments all stress that it's too early in the digital era to focus too much on revenue. The revenue will be there eventually, they say, but newspapers might not be in a position to cash in on commercial efforts unless they learn their lessons now.

"Where we are right now is at a very early, crude stage," Ingle says. "What we basically still have is text on a screen." Today's online services, he says, "are the Model Ts, the horseless carriages of the information future."

Beyond adapting to new technology, newsroom attitudes must change. "We need to be figuring out ways of using our newspapers to lead people into these new directions, and that's a fundamental premise of Mercury Center..," Ingle says. "The better younger journalists, and there's an age thing here, begin to see that the power is not on the printed page – the power is in the information."

Mitchell, who oversees a staff of 15, says the service has about 5,100 paying customers. Users subscribe to Mercury Center in addition to the newspaper, and one of the service's goals is to link the print and electronic products. "People tell us they use the printed paper very much as a guide to Merc Center," he says.

Besides the online service, Mercury Center customers also have access, for a fee, to the paper's audiotex and fax service, News Call. All services are promoted in the pages of the Mercury News.

"There's kind of a hidden dimension of all of this," Ingle says. "It heightens the need to have a very clearly defined strategy of how you're going to get from here to there, and how you're going to get there along the way." Over the years, he says, newspapers have allowed a lot of competitors to if not "eat our lunch, at least to nibble at it a lot. We have not been very creative at looking at changing economic conditions and market conditions and reader interests... If we don't get fast-moving, lean organizations to compete in this new world, we ain't going to make it."

Digitize or Die?

In fact, newspapers are already getting used to lean, but job cuts and freezes also have been the order of the day at the Baby Bells. The key difference is that most newspaper staff reductions have been reactive, whereas the telecommunications industry is slimming down to gird for new market conditions and the kind of fast-moving environment that is clearly the norm for computer-driven communication. So while newspapers may not be looking at large revenues from interactive products anytime soon, virtually no one thinks they can afford to stay out of this new business.

"They better adapt to new ways of doing things," cautions Kenneth T. Berents, a media analyst and head of research at Wheat First Securities in Richmond, Virginia. Berents, a former newspaper reporter, sees continued staff downsizings at newspapers as a fact of life, but thinks the industry is well-positioned to provide electronic content on several platforms. "I think [newspapers] are terrific, but only if they adapt to the conduits out there. Otherwise, they're dead meat."

"They have to get involved," agrees Alan Brigish, head of 10 information newsletters published by SIMBA Information/Communication Trends Inc. in Connecticut. Brigish points out that online services make money from subscriptions, advertising and transactions, and says that papers have to start thinking about the latter, which can be lucrative.

Chicago Online's Ticketmaster service is cited as an early example of a blend of transactions with information similar to that provided by newspapers. Users can order tickets as well as scan schedules of events and even download seating plans of Chicago theaters.

At Reuters America, which serves newspapers and also will be a competitor of sorts in electronic information, top editor Andrew Nibley sees an accelerated pace of change in news organizations, including his own. Parent Reuters has a major television news arm and is expanding those efforts as well as its links with electronic distributors. For example, it will be feeding news updates to customers of Motorola's wireless communications system, called EMBARC.

"The great majority of the industry took a wait-and-see attitude," Nibley says. "But I think there's been a big shift in the industry's thinking over the last couple of years and now they're struggling with how they're going to fit in. Everyone thinks they have to do something; the question is, what?

"In some ways it should be very encouraging for journalists in that there will be new outlets for what they do. I think what the whole multimedia craze has done is show that..all of the things we write about are very important. It's just that the customer wants to see it in a different form." l