Copyright © 1995 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes.
In This Issue...
I began writing this newsletter in September 1994, at the time I was working for a technology company that is now owned by MCI. In March, I began working for International Business Machines Corporation. As of July, my management has agreed to allow me to do some work on the newsletter during business hours (probably about 6-8 hours a week). I speak for myself and not for IBM.
I want to thank the Interactive Services Association for an excellent 3 days in Boston. The show was a top notch production. It was great to meet with new friends and old friends and it was somewhat overwhelming for me to run into so many there who knew who I was via this newsletter. While I am typically arrogant and overbearing, I found myself in the strange situation of being shy and withdrawn. That's probably a good thing. One of life's weird balancing acts, I suppose.
I'll keep everyone posted on the coffee mug situation. I'm not trying to make any money on the mugs, in fact, I don't want to be involved with the production or distribution of the mugs at all. I am looking for someone who will take on all that and still offer a reasonable price. If you know of such a company, or you ARE such a company, please let me know. I'll keep you posted.
I bit off more than I could chew with the In, Around and Online Daily. I'll figure something out, and let you know here when I do.
Warning: many readers have complained they don't want to here anymore about Microsoft in this newsletter. If that's the case, you'll want to skip most of this newsletter.
While I didn't hear much that I'd not heard or written about before, the response from the crowd surprised me, because it didn't mirror the feedback I have received on this subject. The e-mail I get is overwhelmingly NOT in favor of Microsoft bundling MSN with Windows '95. But the crowd was split more or less 50-50. That surprised me.
A guy sitting near me was applauding so vehemently whenever Russell Siegelman stated his case, that it bewildered me. Truth is, I don't get enough sleep or it would've been immediately clear. Finally, after this poor guy had clapped so hard his hands must have hurt, I leaned over to him and said, "Excuse me, you wouldn't by any chance be affiliated with a content provider who will offer content on MSN?" And he looked at me and started with the "Well, yeah, but..." I just gave him that "uh-huh"look.
Those content providers have a huge vested interest (in an upcoming issue, I'll talk more about the content provider model). I believe the reason they were clapping so vehemently is because they know the truth-that bundling is a huge advantage. Peter Friedman of Apple's eWorld service admitted as much. He enjoys lower costs of distribution and one button access by bundling eWorld on all new Macintosh computers. But he also pointed out that Apple does not have a dominant marketing position for their hardware and their operating systems. Microsoft does.
All of the representatives from the big three stated that their cost of acquiring a subscriber is between 30-40 dollars. Siegelman will tell you, "Hey, we pay the same cost for disks as AOL, what difference does that make?"
What difference does that make? Well, I mean, if we wanted to be very picky we could say, "People BUY your software, Russ!" We could go further and say, "the other guys have to spend enormous amounts of money to distribute disks and get bundling arrangements whereas MSN software will be subsidized via software and royalty fees collected for distributing Win '95." In a way, people will be PAYING for MSN software, while the other guys have to pay. I'm guessing MSN's true subscriber acquisition costs will be significantly less than $30-$40/subscriber. Time will tell.
Mr. Siegelman made all the same arguments that we've heard before. Plus, with Scott Kurnit, who is the president of MCI's information services company, and Michael Kolowich, president of AT&T's Interchange on the panel, Siegelman offered up an argument I hadn't heard before. He asked Steve Case why he wasn't worried about the fact that AT&T and MCI and the local phone companies will start mailing all their customers disks for their new services. That wouldn't worry me much either. What are they going to do, mass mail every customer whether they have a computer or not? I don't think so. So they can telemarket or direct market their customer bases to ask them if they have a PC and a modem? And then send them disks? Sure, they can do that, and that is worth something-but it is not the same thing as one button access.
One button access is the big issue and not so much with the folks who already have computers and modems, but more importantly, with the people who don't and will be buying for the first time. With those first time users, one button access means a lot. The AOLs, CompuServes and Prodigys want to get that new user while they're fresh with excitement. At the least, they want to be on that desktop as an icon just in case the user decides to click it. As I've said, they're willing to pay dearly for this. Microsoft won't have to pay all that dearly.
As much as America Online, CompuServe and Prodigy are willing to pay, individually, they still only wind up on less than half of all the desktops. Of the 80% or so of the desktop that Microsoft owns, they'll wind up on 100% with the current plan. Clearly there are advantages here. Some would say that those advantages are not unfair, (factoring out all the content providers on MSN, there are still a lot of people who are pro Microsoft in this situation) that Microsoft has earned those advantages.
Microsoft will maintain that one button access doesn't mean anything-that distribution means nothing. But AOL, CompuServe and Prodigy know differently. They know, because they've paid dearly to get one button access. Whether you think the advantage Microsoft gains from bundling is fair or unfair-don't ever think that one button access is not an advantage. If it weren't the big three wouldn't pay so dearly for it. Knowing just how effective one button access is, is the very reason that the big three are so frightened of Microsoft's plans to bundle MSN with the operating system and get on 100% of the Windows '95 desktops. If bundling weren't a big deal-nobody would be complaining about it.
Mr. Siegelman feels the predictions that MSN will get anywhere from 2.5 million to 9 million subscribers in only a few short months are laughable. I agree. Mr. Siegelman also says that they'll be happy if they have a million subscribers after the first year. I think they could have a few million. I agree with Steve Case that the operating system is the equivalent of the digital dialtone.
When a telephone customer signs up for local service, they are asked which long distance service they want. They must make a choice or have it be randomly selected. It used to be that it was just AT&T. No more. Customers have a choice now. Lousy deal for AT&T huh? Didn't really turn out that way. See, all the competition that equal access allowed for did a great thing-it increased the size of the market so much that AT&T has as much business today as it did 10 years ago-even with a marketing share that is significantly less than it once was.
On a level playing field (i.e., equal access), the entry of the Microsoft Network into the market would be the single best thing that's happened to the industry-for everyone. It will do at least four major things:
Without a level playing field, I fear that Microsoft will become the pre divestiture equivalent of AT&T. Since that battle has already been won once, I am hopeful, that with time, it will be won again. And speaking of that...
Microsoft and the Justice Dept. are at it again. The Justice Dept. filed a motion to reject Microsoft's petition to block a subpoena requesting information about Microsoft's plans for MSN.
"The government believes that Microsoft's forced inclusion of the MSN access software with Win95 might, under certain facts, violate the antitrust laws, and Microsoft points to no potentially applicable exemption from those laws,''
Assistant U.S. Attorney Anne K. Bingaman said in a court filing Thursday.
In the court filing Bingaman made it very clear that the government hasn't decided whether or not to file an anti-trust case regarding the MSN practice, but they did give an outline for the basis on which such a case MIGHT be brought against Microsoft.
"By including the (Microsoft Network) software with Win95, Microsoft is taking advantage of market position in operating systems to gain advantage elsewhere," Bingaman wrote. "Such use of economic power to gain advantage has been a persistent source of concern."
Well, no big surprise to anyone reading this newsletter, but, sorry Anne Bingaman ,of the US Department of Justice-times up! Bill G. has shipped the "gold" master disks for the Windows '95 operating system to the manufacturers.
We might see headline entitled, "Injunction - Junction, What's Your Function?" coming soon to a newsletter near you. However, many legal analysts are saying that not only must the DOJ present a case they can win, but that the injunction can't cause tremendous hardship. The further down the road MS is to manufacturing the disks, the more difficult this will be.
I had the chance to speak briefly with AOL president and CEO, Steve Case. While I didn't ask him if his khakis came from "The Gap", we did speak about a couple of recent rumors about AOL that ran in "Ned Brainard's" Flux column on HotWired (http://www.hotwired.com). Ned had written that there was a rift between Bertelsmann and AOL over where the companies' joint venture should be headquartered. The way Ned hears it, Bertelsmann wants the HQ in Hamburg and Case wants it in Berlin. Case laughed it off, adding that there's been an office in Hamburg for months.
Ned also said the rumor mill had it that friends close to Morgan Stanley & Co., the investment banking firm handling the Netscape IPO, were saying that AOL had approached Morgan Stanley to make a preemptive bid on Netscape prior to the IPO. Case flatly denied this.
We also talked about, what else, the Microsoft Network. While Case may be worried at the marketing muscle of Microsoft and what impact bundling MSN with the Windows '95 operating system might have, he didn't seem worried at all about the MSN client software. Case, who has used the software himself, didn't find anything all that special about it-indicating, without saying it, that he felt the America Online software was more feature rich, made better use of multimedia, and was just plain better. In a way, I agree, but the potential for Microsoft to catch-up and pass AOL in this regard is rooted in MS' Blackbird tool which now looks like it won't be available until '96. In other words, you won't see any content presented in really slick ways, other than Microsoft's own content, until sometime in '96.
Case admits that services like Encarta and Bookshelf are slick, but feels there isn't enough bandwidth with a dial-up connection to fully leverage services like that right now. I agree, Encarta is painfully slow on MSN, but it does serve as a heck of a marketing teaser for the CD-ROM product!
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On the online debate panel, Scott Kurnit made a passionate case on why open standards will ultimately win. He pointed out that nobody would make a TV show planned for CBS if that same show couldn't be aired on ABC, NBC, etc. if the deal with CBS fell through. While the production costs for a television show are a lot higher than reformatting content for a proprietary online service scheme, ultimately, I believe Mr. Kurnit is correct. But the "open" standard has to progress a lot further than it has to date, and the gang on the standards committee have to start making decisions as business people rather than as academics.
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Also among the online debate panelist were Robert Massey, president and CEO of CompuServe and Ed Bennett, the still wet behind the ears head of Prodigy. Good news for both services, they both seemed to have a pretty clear vision of where they are and where they need to go. Their position is different from America Online's though. I think both services have conceded "interface" design to America Online. While they both seem committed to new software, the emphasis by CompuServe seems to be on Internet software developed by CompuServe Seattle (the company formerly known as Spry).
It's hard to get any meaningful data from Prodigy on what the deal is with P2 (now called Pnew or New Prodigy). Services on Prodigy are being integrated bit by bit, and as previously mentioned the mail interface on Prodigy is very nice (and getting better as they make improvements like allowing "append to file"). But I still can't multitask on Prodigy. I can't read Newsweek and go check mail without closing down Newsweek. I hate that! AOL has positioned itself with an excellent piece of client software and while Prodigy and CompuServe may be banking on the Internet for their futures, AOL is well positioned to succeed either way. CompuServe, in spite of their recent success seems to have the most to lose.
CompuServe needs to improve its interface and drop its pricing if it is to continue growing. The launch of MSN all but assures a price drop. CompuServe is now claiming great growth, and 3.2 million customers. Remember though, about 850K of those customers are Nifty-Serve. CompuServe doesn't make $9.95/mo. on those accounts. Not even close.
Two years ago, AOL was in a distant 3rd with around 300K subscribers. Now they're number one in the United States, and arguably, number one in the World. That's even before they've launched their European affiliate service.
AOL is 50% bigger than CompuServe in the US and Canada. CompuServe has 2 million and AOL has 3 million. Two years ago, nobody would've believed that would happen. For now, CompuServe is still riding high as the online king because they've made it a pretty profitable business. But a lot of the money they're making comes from their network and not their online service.
CompuServe realizes it has a fight on its hands. They've cut rates already, and they'll probably cut them again soon. They've invested $100 million in a software company and they've taken on the AOL strategy of a disk in every mailbox. Over the last 2 years CompuServe, America Online, and Prodigy have eyed each other as the competition. Now, collectively, they are eyeing Microsoft.
Let the games begin!
AT&T fresh on the heels of a deal it cut with BBN for BBN to provide Internet access services for AT&T has taken an $8 million stake in BBN. This investment potentially gives AT&T a little more control over the earlier deal.
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The Wall Street Journal launched "Money &Investing Update" on the Web at http://update.wsj.com /. Money & Investing update is an electronic version of the Wall Street Journal's third section. The area will be continuously updated with business news and stock market news and will feature major business articles appearing in other parts of the newspaper. While business and market news are updated continuously, the next day's Money & Investing "section"will be updated on the Web before midnight (around 11pm ET according to a Journal spokesperson).
Using Netscape tags, they've done a really slick job of giving the Web publication some of the look and feel of the newspaper.
Free for now (ain't they all...), but unlike Walter Mossberg's Personal Technology column (http://ptech.wsj.com ) , this service won't be free forever. So give it a try during the trial and see what you think.
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Banking, Banking, Banking...Checkfree Corporation and CyberCash, Inc. announced at the ISA conference that they will cooperatively develop and market products and services that will allow consumers to safely conduct payment transactions, in real time, over the Internet using credit cards, debit cards, checks or cash..
Checkfree also announced that it is teaming up with ADP, a leading provider of commercial payroll services and electronic banking, to provide the first combined electronic bill payment and banking service to the commercial marketplace.
Not to be outdone, Intuit announced partnerships with 19 financial institutions to provide electronic banking and bill paying via its Quicken product (Quicken users can already link to Checkfree). Microsoft, which bailed out of the Intuit merger under pressure from the DOJ has announced deals with Chemical Bank, the Bank of Boston and Corestates Bank to supply online banking for its Microsoft Money (for Win '95) product. Intuit got those three banks and 16 more.
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RUMOR MILL is circulating (over and over again via e-mail) that there is a virus called BUPT being circulated via America Online installation diskettes. An America Online spokesperson said that there has been no documented cases of this virus, and the government agencies that check on these things agree that there have been no documented cases. As with, "Good Times"virus, the only virus appears to be all the e-mail about the virus.
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RUMOR MILL, PART II. I've heard word that America Online is testing their own volume pricing plan with a 20/20 plan -- 20 hours of service for $19.95/mo.
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Steve Outing's Online Newspaper Services Resource Directory has a new home on the Web. Steve has conspired with the folks at Editor & Publisher to come up with MediaInfo Interactive. The newspaper resources are there and more. Check it out at: http://www.mediainfo.com/edpub .
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I'M SICK of Cyberporn. Cyberporn is an issue-is it as big of a deal as that scary Time mag cover art would paint it to be? I don't think so. I just want the Communications Decency Act to be revised in the house so that if I accidentally slip and say "Duck Shoe" (thank you Dave Barry), that I don't go to jail. BUT, whether you care or not, you'll want to check out Brock Meeks' latest Cyberwire Dispatch, and read about his experiences with Martin Rimm. The current CWD is one of the most intriguing and enjoyable pieces I've read in a long time-and it's not fiction. Judge for yourself at: http://cyberwerks.com:70/0h/cyberwire/cwd/cwd.95.07.13.html .
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Apple's eWorld service announced that they are now WWW ready. I haven't had the chance to check it out yet, but will attempt to do so very soon.
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Digital Delights-Check out freelance writer, electronic gadfly and cyber-Mom, Michelle V. Rafter's homepage. Michelle currently writes a weekly column on the cyberspace that is syndicated by Reuters. I look forward to it every week, find out more about Michelle, her writing and more at: http://www.deltanet.com/users/mvrafter/index.htm
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They're Sick of Cyberporn: The Guardian Angels are branching out from subways and berets to cyberspace. From Guardian angels to Cyber Angels and I'm not making this up-they're going to pose as children and collect info on potential online/internet pedophiles and turn them into the feds. Nothing a few reporters haven't done. They also plan to trade in their AOL address for a Web page by August first. If you're interested in the cyber equivalent of the beret (probably a propellor hat), contact: ganetwatch@aol.com.
All the purely online/Internet companies had good weeks-some of them went dang crazy. BBN was up over $5 on the AT&T deal. Netcom up $11+, PSI up $4.75, Spyglass up $9+ and UUNet up $13+. Is Microsoft rumored to be buying ALL of these companies? Microsoft itself had a good week and then soared on the news that the gold disk had shipped-even IBM is starting to look like "Big Blue"again, breaking into the 100's. (I hope that doesn't mean the old dress code comes back). Sears stock price was adjusted on Friday to reflect an All State Insurance spin off company. Sears Shareholders received stock in the new company and the price was adjusted down accordingly.
This Last 52 52
Week's Week's Week Week
Company Ticker Close Close High Low
------- ------ ------ ------ ------- -------
America Online AMER $53.50 $53.13 $54.50 $13.75
Apple AAPL $48.75 $48.63 $50.94 $26.38
AT&T T $53.88 $54.38 $55.88 $47.25
Bolt,Beranek & Newman BBN $35.25 $30.00 $35.50 $10.00
General Elec. GE $60.00 $60.00 $60.00 $45.38
H&R Block HRB $40.00 $40.25 $47.63 $33.00
IBM IBM $103.88 $99.50 $104.25 $54.50
MCI MCIC $22.06 $22.88 $25.88 $17.25
Mecklermedia Corp. MECK $36.50 $35.75 $38.25 $ 4.25
Microsoft MSFT $103.63 $95.63 $103.63 $46.88
Netcom NETC $38.13 $26.75 $38.75 $16.75
News Corp. NWS $24.25 $23.13 $24.31 $14.38
Performance Syst. Intl PSIX $25.25 $19.50 $25.50 $12.00
Sears S $34.00 $----- $----- $-----
Spyglass Inc. SPYG $38.88 $29.50 $38.88 $26.50
UUNET Technologies UUNT $49.00 $35.88 $51.75 $21.75
See you next week.
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