Get Big or Get Out   

Size matters in cyberspace. That fact, and the advent of faster, smoother Internet access, are fueling the recent wave of alliances of big media players.

EACH DAY, the Washington Post's closely guarded news budget is e-mailed across country at 2 p.m. EST to three editors at MSNBC.com's headquarters within the Microsoft campus in Redmond, Washington. The Post sends not only a rundown of what's slated for the following day's edition, but also a list of other Post stories ready to go or in the works.
The Washington Post sharing its trade secrets with the competition?
"Everyone is in total understanding at MSNBC.com of the importance of the Post's budget and that its contents are sacrosanct," says Jody Brannon, washingtonpost.com's managing editor for news operations. "There's a lot of groundbreaking journalism on our budget that MSNBC can see, and they could tell NBC. But there's no reason to distrust them. Everyone's aware that this has to be treated very carefully."
Two hours later, after Post editors have decided what's headed for page one, Brannon telephones MSNBC.com Managing Editor Dean Wright, one of the trusted MSNBC.com> three, and fills him in. Throughout the rest of the day, MSNBC.com and washingtonpost.com staffers are in constant communication via phone and e-mail, talking about stories and video availability and other content-sharing details.
Around 6:30 p.m., Brannon sends another e-mail to Redmond with the firmed-up Post lineup. Redmond e-mails back what it's interested in, and washingtonpost.com editors go to work searching for up to six compelling links to other Post stories that can be attached to each article MSNBC.com plans to use. If a Post reporter is going to discuss a big story on "The News with Brian Williams" on the MSNBC all-news cable channel at 9 p.m. EST, then that article goes on the Post's Web site earlier than the usual 10:30 p.m. posting time.
Since MSNBC.com is co-owned by Microsoft and NBC, it's logical to suspect that the Redmond editors' allegiance lies with the network. But they say that's not the case. It can't be‹at least not under the new editorial content-sharing partnership forged by the Washington Post Co. and NBC. It's a once unimaginable alliance between two competitors now joining together, as many media companies are, in an attempt to secure their futures on the Internet. Last November, the two media giants announced an agreement to share news resources among six subsidiaries: Washingtonpost.Newsweek Interactive, the Post and Newsweek would be joining forces with MSNBC cable, NBC News and MSNBC. com.
"We came up with an agreement that makes many things possible in the way of cooperation, but nothing is required," says Post Executive Editor Leonard Downie Jr. "If there's a conflict, we can each go our own way. What I like is no one is buying anybody."
The Post-NBC compact is hardly unique.
For example, two years ago CNBC began a partnership with the Wall Street Journal. Journal reporters appear on the all-day financial news channel, and the two share a Web site, CNBC.WSJ.com, that links to MSNBC.com. CNN.com is launching alliances with about 30 newspapers to share local content in its newly created CNN Online Newspaper Affiliate Program.
In mid-January, the New York Times and ABC announced a partnership focusing on political coverage for the duration of the 2000 campaign. It's a temporary relationship: If things don't work out, the newspaper and the network can simply part company after the election. If the venture proves successful, they can extend and even broaden the connection.
That arrangement, of course, is in vivid contrast to the approach of America Online and Time Warner. In a stunning development that seemed to mark the beginning of a new era, the companies announced on January 10 that the Internet juggernaut was swallowing up America's premier old-media conglomerate.

THE WASHINGTON Post Co. and NBC opted for a path somewhere in between.
A limited number of Washington Post newspaper stories appear on MSNBC.com's Web site, and perhaps will drive some of MSNBC's 6.7 million readers to washingtonpost.com. Post reporters will occasionally appear on Williams' 9 p.m. cable newscast as well as on other NBC and MSNBC programs. The Post's dotcom venture, in return, gets access to NBC video. Newsweek, owned by the Post Co., will jettison its unsuccessful Web site and find a home on MSNBC.com. It's even possible that NBC News and the Washington Post will produce stories together, and that the two might help each other disseminate their scoops.
"We think the Washington Post breaking stories on our Web site and television properties is a critical part of the deal," says Merrill Brown, MSNBC.com's editor in chief. "They absolutely think it's a critical part, too."
It's the definition of an Internet deal 2000: Everyone takes a risk, gives up a little, and gets something to help make their Web sites more robust. It's just a little bit trickier in the news business, where daily budgets have always been jealously protected secrets, not documents shared with competitors.
What happens if the Post or Newsweek has a really hot scoop? What will NBC's owner, General Electric, do if it learns that a Post investigative reporter is working on an exposé about safety problems at one of its nuclear power plants? Remember Monica Lewinsky? What would have happened in this new news-sharing environment if the Post, Newsweek and NBC were all hotly pursuing the tale of a nubile White House intern who supposedly had sex with the president?
Whatever happened to the old days of damn the competition?
What happened is the Internet. Its use and popularity are growing so fast that news organizations are forced to form media alliances just to keep up. In the still-uncharted world of media mingling, melding and merging, major newspapers are courting television networks, cable channels are dallying with print, and print is appealing to broadcast for streaming video. Established Internet sites not renowned for strong content are suggesting partnerships with radio or magazines or television or newspapers‹or all of them. Some newspapers are even teaming up with rival papers.
Much of this frenzied wooing is a frantic attempt to prevent even more "eyeballs" from abandoning traditional media. Three years ago, just over a quarter of computer users (27 percent) were using the Internet, according to Harris Interactive, a market research firm. Today, 81 percent of computer users go online. In December, individuals spent an average of 514.5 minutes online, according to Media Metrix, which measures Internet traffic. One out of five people say the Internet has decreased the time they spend reading newspapers, according to InterSurvey, a market research firm. Nearly half of the 4,600 questioned said the Net has reduced the amount of time they watch television. And that was in December, an eternity ago in Internet time.
"Lurking behind all these initiatives is the Internet," says media analyst and AJR columnist John Morton. "The Internet has unsettled everybody. It's growing so rapidly, with as yet unknown ramifications for the traditional media. Everybody is girding themselves up for whatever awaits them. One way to do that is to expand your brand name and even your content by alliances with other media operations. You are trying to make yourself better known, more widely established."
It's just not enough for a newspaper or magazine or television or radio station to shovel that day's news onto its Web site‹at least not if it wants to cash in on what many see as the fabulous earnings potential of the Internet. (And the emphasis is on potential. Most Web news operations are still bleeding red ink.) The Washington Post is not alone among newspapers recognizing that to make its site more attractive, it has to have video as well as stock quotes, sports updates, weather, auctions, shopping and job searches. Knight Ridder recently started offering free e-mail for those who register on its Real Cities online network.
"We do believe the Web audience will demand a lot more content on the site than what they find in the newspaper," says Christopher Ma, a vice president of the Washington Post Co. and former washingtonpost.com executive editor, who helped negotiate the deal with NBC. "We've thought for several years that it made sense to have a partnership with someone who has a strong broadcast background to be a provider of multimedia news content and to help us learn more about how that kind of content could work with our print-based content over time."
In another sign of just how seriously the Post considers its cyberspace future, Publisher and Post Co. Chairman Donald Graham in late January handed off control of day-to-day newspaper operations, in large part to concentrate on the company's Internet activities.
Never before in the communications industry has there been a media platform like the Internet, with no barriers to entry. On the Internet, television, cable, print, radio and magazine sites all are chasing the same audiences and advertisers. But rather than compete, news outlets are forming content-sharing partnerships at a dizzying clip, each trading on its own strengths.
"The relevant commodity on the Internet is not really money," says Bob Ingle, president of Knight Ridder Ventures. "It's time. The Internet is moving so fast that people are forced to partner because they just can't flat do it all. You can't hire enough people. You can't learn it all. You wind up partnering to pull together the pieces that you think will make your strategy work. You can either partner or buy it. Buying it can be very expensive."
To survive and flourish in the Century of the Internet, it's now clear that print and broadcast entities must have four things: a first-rate news product; a far-reaching, reliable distribution system; aggressive marketing; and the right media alliances. Many news organizations believe they already have a superior brand, but distribution is dicey and marketing is tremendously expensive. The right alliance can solve many of the problems.
In the Washington Post-MSNBC case, the Post Co. can extend its reach with exposure on television and on the most popular news Web site, and MSNBC.com gets the Post's high-quality reporting. They each reap the benefits of cross-promotion by pushing each other's sites and a plump advertising portfolio with TV time, magazine ads, newspaper space and two Web sites.
"Probably, we've just seen the beginning of media alliances," says Gerry Barker, Dallas site manager for Belo Interactive, which last summer began a portal partnership (DFW.com) joining Belo's Dallas Morning News with its nearby rival, Knight Ridder's Fort Worth Star-Telegram. "The idea seems to make sense for companies to partner in new ways they never thought they would because of the Internet. The Internet has changed the equation. It's changed our view of the universe."

WHY IS ALL this furious partnering of opposite mediums happening now? Largely because the Age of High-Speed Broadband is upon us.
Many newspaper and television Web sites debuted in 1995 and 1996. Since the technology was crude and less reliable, with systems crashing and computer memory limited, and Internet access was costly, especially when users were charged per minute online, Internet use was limited to those with patience, a fat wallet and fast computer processors. Mainly though, the Internet was annoyingly lethargic. If you tried to click onto a particular site, you were wise to have a magazine nearby while waiting for the page to download.
As the technology and the Web sites became more sophisticated, and with the advent of unlimited Internet service for a flat fee, use patterns began to change. Internet use has grown as people have become more familiar and comfortable with the Web, especially at work.
Most offices now are equipped with high-speed Internet access known as broadband, where the lines are actually much wider than traditional phone lines and can move data up to 125 times faster than a typical home modem. Not surprisingly, 9-to-5 has become prime time for Internet use. High-speed access has caused a dramatic increase in online hours, but not necessarily at home, where the Web experience over narrow phone lines can still feel more like slogging through mud than surfing. But that pattern will change as broadband technology becomes more widely available and affordable.
"So much has happened recently, particularly technologically, that there just seems to be a greater opportunity to do something like this partnership and benefit both parties, particularly in cyberspace," says Bill Wheatley, NBC News vice president. "It's very clear that through various distribution systems, there's going to be a lot more high-speed capacity, and I think that will cause people to use the Internet even more."
Broadband means huge chunks of graphic-laden data no longer have to squeeze through a narrow funnel; it means Internet access will come much faster, and will always be available when your computer is on. No more dialing into a modem and getting a busy signal. No longer will one have to grab that magazine while waiting for full-screen, full-motion video to download, and the video will look more like television and less like pictures of Neil Armstrong's walk on the moon. "People think speed is important," says Michael Rogers, editor and general manager of Newsweek.com, "but Œalways on' is crucial. That fundamentally changes use patterns."
With broadband access, digital data will travel via fatter phone and cable lines as well as satellites. Competition among cable, telephone and satellite companies is moving the broadband industry faster than anyone expected. Cost has already dropped to about $40 or $50 a month for a high-speed residential Digital Subscriber Line. But there are still technical problems to overcome before broadband use becomes widespread in homes.
Only 2 million homes are now wired for broadband, but industry experts say fierce competition will catapult that figure dramatically upward in the next three to five years.
"Things really increased with broadband when the telephone companies started getting interested in it," Rogers says. "The phone company had a good business selling high-speed access to businesses for lots of money. They waited until the last minute to bring it into the home, and that's only because cable companies started providing high-speed access and they got afraid. Broadband is all coming together now for purely economic reasons."
The prospect of wide availability of broadband has caused all media companies to pay much closer attention to the Internet. "I think a lot of players are a little surprised at how rapidly the whole thing with broadband and the Internet is moving," says Ingle, who as executive editor of the San Jose Mercury News was largely responsible for putting the first full-text newspaper on the Web in December 1994. "A lot of people in the newspaper industry just pooh-poohed the Internet initially. They didn't understand it, and they never thought it would be as revolutionary as it is."
But it clearly is revolutionary‹and potentially a gold mine. During the third quarter of 1999, online advertising revenues were 148 percent higher than the same period in 1998, according to the Internet Advertising Bureau. "Such robust growth is important because online advertising is key to many online business models, including the support of free content and services, and subsidizing e-commerce," says Rich LeFurgy, IAB chairman.
"There's a lot of money in national advertising," says Knight Ridder's Ingle. "But you've got to get big to get it. The little players will not survive. The worst possible thing that can happen to you, in whatever you are trying to do on the Internet, is to not be in the top three. The top three guys will literally take three-quarters of the revenues. That leaves all the other players scrambling and subject to acquisition."
Tom Brew, a former print journalist and MSNBC.com editor who recently joined a nonmedia Internet start-up, agrees. For media companies on the Web, high-quality editorial is only a small part of the equation for financial success, he asserts. Companies have to expand to survive. "You think editorial is what drives this world? No. It's money," Brew says. "It's about advertising. When you reach more people, you can charge more for advertising. We are soon going to find out what the market will support. At the end of the day, is there really room for 25 big national Web sites? Volvo and Intel and some drug company are not going to want to buy 50 spots on 50 different Web sites. I think you'll see the second-tier sites fade away. It's either get big or get out."
And so news Web sites must expand to avoid being dwarfed by each other, and by mammoth portal sites like Yahoo!
Last fall, Knight Ridder was ranked in the top fifth of companies participating in the Internet economy by the Center for E-Business at the Massachusetts Institute of Technology and the accounting firm Ernst & Young. The company's strategy revolves around creating a national network of regional hubs, or portals, called Real Cities. Knight Ridder has formed two alliances with other newspapers and hopes to have partnerships and affiliations in the top 25 markets within the year.
Since mid-1995, Neil Foote has been working on developing the Dallas Morning News' Web site (Dallasnews.com), which was launched in late 1995. Now, Foote is director of operating company partnerships for Belo Interactive and is working with Knight Ridder's Fort Worth Star-Telegram to set up a regional portal that will put both newspapers online, along with local and regional business directories and city resource sites. Knight Ridder has formed a similar partnership with Central Newspapers in Phoenix and Indianapolis and has discussed with Hearst the possiblity of an alliance with the Houston Chronicle.
"We started with just our own markets, but what we really need is to be in the top 25 markets in the country," says Ingle. "If you don't have that, you can't sell national advertising and make national e-commerce deals."
Ingle, a longtime ink-on-paper editor, says every media company is looking for ways to expand beyond its editorial content. If they don't, they'll lose in the end. "Anybody on your Web site is one click away from going somewhere else," Ingle says. "We always believed the editorial content was the crown jewel, but we've found it's not enough. We are having to put services and features into the Web sites, and the e-commerce stuff, and online shopping sites. Editorial content will draw them there. But so will a lot of free services."

MEDIA ALLIANCES come in a wide variety of flavors. America Online, with 21 million paying subscribers, worked out a successful business model combining its broad distribution with strong news and entertainment content gleaned from partners such as CBS, Salon.com, National Public Radio, the Weather Channel and the New York Times.
AOL, which debuted in 1985, at first paid news organizations for content. In 1997, it began charging some partners to appear on its proprietary site‹the largest digital media property in the world, according to Media Metrix.
"People really want to partner with AOL because we drive incredible amounts of traffic to their sites," says Gary Kebbel, director of AOL News.
In return, AOL is plugged on CBS, NPR and the Weather Channel. AOL only strengthened its position in January when it agreed to acquire mammoth Time Warner and its vast array of media and entertainment properties. It appears to be an impeccable Internet 2000 deal. Each had what the other was looking for.
AOL desperately needed to expand its distribution system. Bingo. Time Warner owns the second largest cable television system in the country, and its broadband capacity will offer AOL subscribers faster home Internet speeds. AOL needs stellar editorial and entertainment content, and Time Warner is well positioned to provide that. With the pending merger, AOL teams up with Time magazine and its sister publications‹including Fortune, People and Sports Illustrated‹as well as CNN.
Time Warner, which failed to achieve a strong Internet presence with its Pathfinder.com venture, now has access to AOL's subscribers. A bitter memory for Time Warner may be realizing a relationship could have once been so much easier. "In 1990, we were offered 11 percent of AOL for $5 million," recalls Daniel Okrent, who wrote the January 24 Time cover story about the megamerger. AOL Chairman "Steve Case was out of money, and a Time executive was on AOL's board. He brought the deal by, and Time rejected it."
In a vastly different partnership arrangement, Fox News Channel teamed up in July with TheStreet. com, a three-year-old financial Web site, to co-produce a weekly, half-hour news and commentary show that appears three times on the news channel over the weekend. The partners share costs and split profits from TV ads.
"We've built a tremendous brand," says Jamie Heller, editor for TheStreet. com's strategic ventures. "We are always trying to reach a broader audience, and these kinds of partnerships help us through multiple channels."
But TheStreet.com didn't limit its alliances. In February 1999, the New York Times pumped $15 million into the financial Web site in exchange for 6.3 percent equity. The relationship matured into a news partnership. The Times' business section staff and TheStreet.com operate a joint six-reporter newsroom whose mission is providing financial analysis and updates for each partner's Web sites. Under a reporter's byline appears: "NYTimes.com/TheStreet.com."
"We don't share news all day," Heller says. "We only share the stories created by the joint-venture reporters. It's not as if we've merged newsrooms." The two companies split costs for the six reporters and, naturally, link to each other's sites.
An association with the New York Times heightens recognition for TheStreet.com. The deal also beefs up the financial content of the Times' Web site, thanks to the output of TheStreet. com's 80 financial journalists, who produce about 40 Wall Street stories a day.
"It's a good relationship for both of us," Heller says. "Our mission is financial news. The New York Times' mission is the world. In that way we are very complementary. They have excellent financial news. It's just they don't have as many people covering it. There's a lot of room for growth in our relationship."
In January, the New York Times entered another partnership, this one with ABC News. The centerpiece of this liaison is a joint 15-minute Webcast on politics. "Political Points," a live program shown on a 2-by-3-inch screen on the ABCNEWS.com and NYTIMES.com sites, appears Monday through Friday at 1:30 p.m. EST. Its target market is political junkies.
"We're doing it in large part because, somewhere down the road, when all these mediums have truly converged, a knowledge of print and video and the World Wide Web will be basic tools for all journalists," says Michael Oreskes, the Times' Washington bureau chief, who appears on "Political Points." "We're determined to be able to present the New York Times living up to its standards in that environment. This is learning how to do it."
As part of the deal, the Times will also produce four to six reports on ABC's "20/20" and as many as 16 segments for "Good Morning America," with an emphasis on health and technology.
"We are calling this a limited partnership," says ABC News spokeswoman Eileen Murphy. "We are interested in growth in the new-media area, and working with an organization like the New York Times, where we both bring different things to the table, allows us both to grow. We could still grow alone. But the strength of the two news organizations with our reputations is a real asset."

IT'S THE "TRADE that helps both teams" aspect that's essential to persuading proud news organizations used to thinking of each other as rivals to do business together.
"It's safe to say...we wouldn't be doing it if there weren't definite advantages for us," says NBC's Wheatley, who helped shape the Post-NBC alliance.
For the Post newspaper, its name and reputation--its "brand"--is its most valuable asset. And while there's little doubt a Washington Post connection lends MSNBC.com a certain cachet, the Web site in less than four years has built its own desirable brand. Since MSNBC.com's 1996 inception, it has grown rapidly to become the most popular news site on the Web, surpassing arch-rival CNN.com last June in terms of unique users each month.
"It took us a long time to pass the credibility hurdle," says MSNBC's Brown, whose site is expected to make a profit next year. "There was a good period of time when the wires and other news organizations would see our scoops and thought they were being created by a bunch of Internet flakes. Now you always see stuff that we break about technology or Kosovo. This was unthinkable in 1996."
So in the year 2000, it turns out that the upstart MSNBC.com as well as its television cousins can help the 122-year-old Washington Post advance into the new century. The Post needs MSNBC and its vast national and international Internet audience (four times larger than washingtonpost.com's), its access to thousands of hours of video and its cable audience.
"The New York Times has a huge national and international reach," says Brew, now with Onvia.com. "The Post can't really claim that. Nor can Newsweek. com. The Post is not in airports. Its reach is smaller. So how can you jump-start that? Why not team up with the biggest Internet news site out there? It looks like a smart move for the Post. And it's a real good deal for MSNBC.com, to now have a high quality print arm."
Brand name recognition can help you get big. With so many choices on the Web, brand name becomes more important in the Internet economy. People tend to stick with what they know and trust. If they find a doctor or an auto mechanic they like, they'll go back. As people become more comfortable with the Internet, research is showing that they tend to visit a smaller set of venues, according to Allen Weiner, vice president of analytical services for NetRatings. "They tend to spend more time on fewer sites," he says, "but view more pages, suggesting that the larger sites are becoming broader and deeper."

IF USE PATTERNS are already being established, that adds to the undeniable pressure for news organizations to find innovative ways to capture and keep users. MSNBC, like AOL, realized early on that partnering was a key to attracting and holding on to an audience.
MSNBC.com is involved in more than a dozen partnerships. It showcases business news highlights from the Wall Street Journal's WSJ.com, features from Newhouse News Service, tech news from CNET and information about computer technology and products from ZDNet. The roster of partners also includes Slate.com (an online magazine) and APB Online, which features crime news. And the site has access to video from 100-plus NBC affiliates.
"We are big in the relationship business," Brown says. "We are still in the original journalism business, but we need all these other relationships to create a product of scale so we can be the one-stop place to go for everything anyone needs."
But to top things off, Brown wanted a "marquee" news name to enhance his site. A former Post business reporter, Brown started talking to the Post Co. in 1997 to see if there was any interest in a relationship. But the Post wasn't ready.
By late 1999, however, with its more than 6.6 million unique visitors a month, MSNBC.com had to look awfully attractive to the Post.
"Over the course of the last two years," says the Post's Ma, "we've had many general, wide-ranging conversations with established media players and start-ups in the context of explorations. I've known Merrill for a very long time. We both covered the breakup of AT&T 25 years ago. Having landed in new media, it's natural we'd have talks. We began to see how this could be a significant relationship in the latter part of July."
But there was a concern over competition, over protecting the editorial independence of all involved. What happens with exclusive stories? Will Post editors share a scoop with MSNBC.com and keep their fingers crossed that no one leaks it? Or what happens when coincidentally an NBC reporter and a Post reporter are pursuing the same exclusive story? Will top editors confer and decide the two should work together?
"These are very thorny issues," admits Douglas Feaver, editor of washingtonpost.com and a 30-year Post Co. veteran, 28 of them with the paper. "These are the kinds of things we are both nervous about. Are we going to trust each other enough? I'm sure everyone is on alert until we get the relationship right."
The concern is still there. But after many discussions and a few months to test out the new partnership, many directly involved are less fearful. "We have a general understanding at the top level that we won't tread on each other's exclusives," Feaver says.
If a story--say the news that Michael Jordan is becoming president of basketball operations and part owner of the Washington Wizards--is in the public domain, the Post will put it on its Web site immediately and alert MSNBC.com. "If, however, our basketball reporter discovers the innards of Michael Jordan's contract, that would appear in the Washington Post first," Feaver says. "We might tell MSNBC.com we have a hot story. I'd have to have a serious conversation with Len [Executive Editor Downie] and Steve [Managing Editor Steve Coll] first."
There are no hard-and-fast rules in the new age of content-sharing. "In terms of exclusives," says NBC's Wheatley, "it's something we'll work our way through gradually. We recognize there has to be security on certain stories."
And there was another concern on the part of the Washington Post Co. MSNBC.com is half-owned by Microsoft, a corporate giant that Post and Newsweek reporters cover. Would the partnership affect a Newsweek reporter's ability to write a critical cover story on Microsoft head Bill Gates? What if a Post business reporter discovered Microsoft was doing something illegal? Would the story be handled differently? Downie says no, adding, "Merrill said he covered the Microsoft trial as thoroughly as any other news organization, without any interference from Microsoft."
Nonetheless, regardless of how many assurances are given about editorial independence, an alliance between the Washington Post Co. and a news operation owned by Microsoft is likely to negatively affect public perception, and many Post staffers are aware of that.
"There's an uneasy feeling among many reporters at the Post about the paper aligning itself with NBC, a network that is owned by General Electric and partners with Microsoft," says Howard Kurtz, the Post's media writer. "In chewing this over with dozens of people in the newsroom, I didn't have anyone exclaim that this was a great idea. I don't sense people are worried about losing our competitive edge as much as the sense that we cover these companies, and they worry that even though we'll cover those companies the same, the public perception of our coverage might be affected by this new arrangement. I'm not losing any sleep over this, but public perception is important."
As the era of strategic media alliances unfolds, dozens of challenging ethical concerns, such as the one Kurtz raises, and practical problems, such as how to share trade secrets, are emerging.
And things aren't going to get easier anytime soon. "Just when you think it can't get any crazier," says Knight Ridder's Ingle, "it does."