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Subj: Seidman's Online Insider w/e 11/10/95 Date: ============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 2 No. 44 (Formerly known as In, Around and Online) November 10, 1995 ============================================================================= Copyright (C) 1995 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes. IN THIS ISSUE ============= -E-Mail Woes -Steve Case Owns Up to System Troubles -Time Flies From AOL to CompuServe -The End of the Interchange as we know it (Sort of) -Rumors, Rumors! -More Rumors From Ned Brainard's Poison Pen -This and That -Stock Watch -Disclaimer and Subscription Info E-Mail Woes =========== If you wrote to me this week, I might not have received the mail yet, but don't resend unless you get a "bounce" message. I should wind up with the mail sooner or later... Steve Case Owns Up to System Troubles ===================================== In the monthly letter from Steve Case to AOL members, the AOL president, CEO and chairman acknowledged recent performance problems. "The extent of the problems varies depending on where you're calling from, when you're calling, and what you're doing on AOL, so some of you have experienced no problems, while others have encountered fairly frequent problems," said Case in the monthly letter. "Overall, it's fair to say that we haven't been able to provide the level of consistent quality we aim for. I apologize to those of you who have been inconvenienced." Case went on to assure that basically, his best people were working on it and that he was confident that members would see improvements in the coming weeks. Historically speaking, AOL has not done well keeping up with growth. In fairness, they'd run pretty well for months, but over the last 2 months or so there have been various problems with system sluggishness, mail not working and even an unscheduled outage that lasted several hours. These things happen, (even to Microsoft who has had its own share of troubles with e-mail on MSN), but when was the last time you picked up your telephone and didn't get a dial-tone? The online/Internet services are becoming a commodity. AOL will not be able to differentiate itself with price. Today, AOL differentiates itself with a very nice interface, tools, content and organization of that content (and let us not forget marketing). Down the road, everyone will have those things, and quality of service will become a major issue. Online services and Internet providers both need to improve in terms of "up time" for all the services provided. If it doesn't work as well as the phone system, people will not be happy. The companies that can provide that quality of service will emerge as the winners. America Online Runs out of Time? ================================ The Wall Street Journal reported on Monday (11/6) that Time magazine was preparing to pull up stakes and move the online version of the magazine from America Online, in favor of a sweeter deal from CompuServe, according to unnamed executives close to the negotiations. The story by Journal reporter Jared Sandberg stated that Time service generated about 50,000 hours of usage a month which represents over $1.2 million annually. According to the story, America Online pays an annual fee of $500,000. The story reports that H&R Block's CompuServe unit is offering Time-Warner a deal worth "several million" dollars per year. The story quotes an unnamed executive as saying that Time's switch to CompuServe is "a major loss to America Online." A Time spokesman verified that the contract with AOL is up, and that Time is in negotiations with CompuServe, but said a final decision hadn't been reached. If this report turns out to be correct, I agree that the switch is a major blow to America Online which earlier lost NBC to a better deal from Microsoft. Sandberg's story quotes AOL Services Co. president Ted Leonsis saying that Time's alleged move isn't "worth a bidding war." Leonsis added that 5 of 10 new content offerings created by America Online were outperforming the Time's usage. So what, Ted!? Chat outperforms Time's usage too, but how many first-time "members" can chat pull in? Steve Case is constantly saying that it's not about the 7 million+ homes that are already online. It's about the 93 million homes that are not. At that critical point of whether a potential member signs up or not, being able to say that you've got Time magazine may be an important factor. How do you measure the value of that? Free advertising to Time's 4 million plus readers, potential co-marketing agreements? Forget about the fact that it might be CompuServe's disk poly-bagged (Time wouldn't really do that would they?) in the magazine and not America Online's. In this case it's about more than content or how much revenue is generated. The Motley Fool may be outperforming Time on America Online, but at the critical point of signing up -- whoever heard of the Motley Fool? Sure, sooner or later America Online will try to leverage services like the "Fool" as big brand names, complete with things like side publications, Fool apparel and a Fool television show. Those things will probably happen. Seriously! But when you're spending millions on acquisitions that may not be worthwhile for some time, what's 3 million for Time, even if it is in cold hard cash instead of stock? Time will have to take the sweeter deal. Insiders say that there are about 100 employees working on Time-Warner's Pathfinder web site. Pathfinder just celebrated its year anniversary. Happy Birthday! But now it's time to make money. If they can pick up a few million from CompuServe to help subsidize what must currently be one heck of a money loser, I'm sure they'll do it. Pathfinder won't be able to turn itself into a Web based subscription service that makes money anytime soon, and perhaps that is what AOL's betting on (i.e., AOL members would still have access to the content via the Web). "Time-Warner deals are hard to come by," said CompuServe executive VP and former head of Spry, Dave Pool. "When they come by, you don't want to pass them up," said Pool. The End of the Interchange as We Know It ======================================== Well, this was going to be "The End of the eWorld as We Know It", but some quick, slick professional journalist type snagged that headline with a story about eWorlds plans to scrap their online service in favor of a Web based service. Fine, that makes sense for them, I guess. They weren't making any money, but it was kind of a quaint service! eWorld initially was conceived as a replacement for its expensive AppleLink service, and somewhere down the line they got this brilliant idea to launch a consumer online service, too. They've scrapped plans for a Windows version and are now planning the shift to the Web. AT&T has made similar plans to provide Web based services for consumers in favor of the proprietary Interchange platform. Last week I commented that one of the possible reasons for Axel Springer pulling out of the Europe Online deal was the reliance on Interchange. That thought doesn't pan out though because this week, Europe Online announced that it would launch its consumer online service as an Internet based service utilizing the Netscape browser instead of the Interchange browser. (This news didn't hurt Netscape's stock any, that's for sure!) Below are some comments I received via e-mail from AT&T New Media Services president, Michael Kolowich: "AT&T Interchange stopped signing up publishers under the old "front door service" model many, many months ago. Our sole market development focus since early summer has been to build content relationships within the context of AT&T Business Network, rather than being purely a platform for independent services. There are some organizations for which the old model is perfectly appropriate: for example, Gartner Group's @vantage is finding success and profitability very early in the game. But we recognized some time ago that we needed to offer alternatives on a much broader portion of the risk/return spectrum for content providers...and we have. (Major deals with Dow Jones, CNN, D&B, TRW, Nightly Business Report, Entrepreneur Magazine Group, Thomas' Reguster, Information Access Company, etc. etc. etc.) That doesn't mean we're abandoning the partnerships we've formed; these are going quite well. It *does* mean that we've changed our emphasis," Kolowich said. "Europe Online is entering the market with a more pure web-based product," said Kolowich via e-mail. "They're doing so with not only our support but actually at our encouragement as equity holders and members of the board of directors," Kolowich said. "In fact, the EO approach directly mirrors the approach we've developed for AT&T's services: web-based services on the low end and a hybrid platform (i.e. Interchange) for high-value services," Kolowich added. Rumors, Rumors! =============== First Reuters reported that GE was trying to sell its GEnie service, according to industry sources. GE wouldn't confirm or deny the report. "GE has decided that GEnie plays little role in GEIS," said Peter Krasilovsky, an analyst with Bethesda, Maryland based Arlen Communications. "They are not willing to put the money into an all-out war (in the consumer online service industry)," said Krasilovsky in the story by Reuters. Wow, big shock there. NOT! GE has demonstrated consistently for over a year now that they were not going to do what it takes to turn GEnie around. The only question is why they didn't try to sell it sooner. Then later, Reuters reported that industry sources were saying Sears was trying to sell its 50% stake in Prodigy, the service jointly owned with IBM. According to the story, industry sources said Sears has tried to sell to IBM three times, once for $1.2 billion, then $600 million, and most recently at around $300 million. Shoot, if the stories true, you can hardly blame IBM, I mean Sears cuts its asking price in half each time! "We're still in the midst of reviewing strategy and choices and have made no decision," said Arthur Martinez, chairman and CEO of Sears, told Reuters in Chicago late Wednesday. Martinez said the Sears board of directors met Wednesday. But it was this quote in the Reuters story from Ed Bennett that made my eyes widen: "I am the visionary...I run the movie studio and if the owners are fooling around with it, I have no idea," said Ed Bennett, Prodigy's CEO who was appointed in April, in a telephone interview. "I have no idea what the owners are doing." Well, in fairness, anytime you see the ellipses "...", who knows what was said in between! Still, the whole "I have no idea what the owners are doing" is not a remark you'd expect to hear from a CEO. I contacted Prodigy senior VP of communications, Barry Kluger, to ask him about this quote. "Although appearing flip, Bennett was merely trying to emphasize that his primary focus needs to be on doing the things that will make Prodigy successful," said Kluger by phone. Kluger also indicated that while Bennett is definitely in contact with the partners and aware of the issues from the partners, his focus is on running the business. Bennett, who will depart for COMDEX on Sunday night joked, "I'm making sure that Kluger sits next to me on the plane to Las Vegas to ensure that I don't talk to the press." Prodigy plans several announcements at COMDEX, including an agreement with Packard Bell to build special exclusive content for Prodigy members. Sometime soon, Prodigy members who access Packard Bell's Web page <http://www.packardbell.com/> will have exclusive access to file libraries, message boards and interactive chats. Look for Prodigy to cut several deals with other providers that offer exclusives to Prodigy members. More Musings From Ned Brainard's Poison Pen =========================================== WIRED magazine really made me smile by running a full page ad for HotWired's s <http://www.hotwired.com/> FLUX column which is penned by "Ned Brainard". The ad quoted me from an early edition of "In, Around and Online," saying that Flux was one of "our" top 15 things on the Web. It still is. Flux bills itself as "Rumors, Bile, Innuendo, and Sometimes Even the Truth" Well, the Ned collective did report that AOL would purchase Ubique a couple of months before the purchase was announced. But this week Brainard turned his sites on the upstart c|net and for now, it seems like mostly rumor and bile. I should qualify this by saying that I am now a c|net columnist. At least for one installment anyway <http://www.cnet.com/Central/Columns/Seidman/>. But I am trying to look past the thrill of being listed as a columnist on the columnist page, right up there with likes of John Dvorak! Brainard keyed in on the "Paul Allen" connection. Indeed, Allen, the Microsoft co-founder has invested in c|net. Ned points out that with c|net's one million dollar advertising campaign c|net, like Allen's StarWave before it, has abandoned its original business plan for the "medium of the moment". "There were always online plans," c|net president Halsey Minor said in a telephone interview, indicating that a third of the original plan focused on online efforts. "I was spending as much, or possibly more time two years ago bothering Steve Case and Scott Kurnit as I was talking to cable operators," Minor said. Brainard said the inside skinny is that c|net is repositioning from TV towards the Web and "leaving piles of Allen money dedicated to the high start-up costs of television lying around unused." "Ned failed to research, otherwise he would have discovered our two publicly announced new television projects and the three more we have in development," Minor said. "Quit? No, we plan to fill the airwaves," Minor added. Meanwhile, the rumor mill has widely reported Wired's own failed efforts to launch a TV show. As for Paul Allen, Minor says the reason he invested last October "was more for our online plans than his interest in owning part of a cable network." Minor also points out that c|net is 51% employee owned, and says that a significant part of c|net's capitalization came from its employees. Minor wouldn't give a specific amount, but said, "millions of dollars" have been invested by employees. "It's not like we're playing around with house money," Minor said. "I'll bet we have a lot more of our own money in this venture than do the principals of either Wired or HotWired," joked Minor. Brainard suggest that it won't be long before Allen questions redundancies between c|net and the content being created on StarWave. But, today, the redundancies aren't clear. StarWave, with titles like SportsZone, Family Planet, Mr. Showbiz and Outside Online, hardly steps on the toes of c|net, which is totally dedicated to the wired world. Indeed even Ned admits, c|net's competition is more along the lines of CMP and Ziff-Davis. In a way, all of those sites, including c|net are HotWired's competition. Brainard chastises c|net for a boring TV show and a boring Web page. Ned lives in a world where "mainstream" is boring. But mainstream also attracts more people. When it comes to numbers, I would gladly bet the Ned collective that c|net is dusting HotWired at this point. So my challenge to c|net and HotWired: Show us your logs! And let's declare a winner! Why mince words when you can mince numbers? Who'll be the winner? The embryonic c|net, or the year old HotWired, the quintessential Website when it first launched in October 94? With any luck, we'll find out here. c|net has agreed to put up "page hits", how about your team, Ned? c|net also has announced c|net radio, and there are plans for a redesigned front end for December and they're already playing with Java if you have a Java compatible browser. Minor, who admits to liking the HotWired site doesn't quite understand the model used by Wired where there are completely different staffs for the print and electronic versions. At c|net, there is a totally integrated approach to the Web and TV show, everything from marketing to story ideas are handled by the same people. Ned's sources for the report include a former, seemingly disgruntled c|net employee. We have reason to believe that in a previous life, this source was also a former, seemingly disgruntled HotWired employee. The x-employee said something about c|net being more about rewriting press releases and feeding corporate press releases than journalism or insight. Call me crazy, but I get some REALLY good press releases from WIRED. In fact, I'd have to say that Wired's press releases have a polish that c|net's lack (I mean this sincerely and not insultingly, Wired knows how to do good PR). And as for feeding corporate America, WIRED is the MASTER! I don't know, I just sort of have this vision. Glass houses, stones and all that. Still, Ned's still right up there on "our" top 15 list, in fact, with recent additions (since my original HotWired plug) like World Beat, DaveNet and Brock Meeks' Muckracker column, I like HotWired more than I ever did. But color me boring mainstream -- I really like c|net too. This and That ============= REQUIRED READING: Everyone's a winner now that Cowles/SIMBA has launched a Web site. Now you don't need to be on AOL or CompuServe to read the Cowles/Simba Media Daily. You can read it on Simba's own brand spanking new web site at: <http://www.simbanet.com/>. I couldn't find archives of back issues, but with all the stuff going on in new media and old media -- if you just want to know what's happening, this is the one piece of required reading. And to think, a year ago they were trying to sell it for $29.95 a month. Now it's free, so READ IT! --- AOL reported that it hit 4,000,000 subscribers (of course now we know that includes, what we'd estimate as between a quarter to a half a million trial subscribers). AOL's 1st quarter fiscal earnings for the quarter ending 9/30 came in at a loss of 10.26 million dollars, including a charge of $16.9 million tied to research and development with the acquired Ubique and amortization of previously acquired assets. Without the charge, the numbers looked pretty strong and would've shown operating earnings of $7.751 million or 16 cents per share. Revenues are up to a $198 million vs. $57 million for the same period one year ago (and up 45 million over the quarter ending 6/30), they're well on their way to becoming the first online service to hit one billion in revenue. -- KEEP YOUR EYE ON THIS: Bell Canada has plant to raise line rate charges for Internet service providers by as much as 400%. Their reason: because those providers use lines for 55 to 60 minutes every hour compared with voice usage on a Centrex line of about 10 minutes. The service providers claim this move is just to crush the competition once Bell introduces its Worldlinx Internet access by the end of this year. (Montreal Gazette via Edupage) -- WHAT'S IN A NAME? Last week I said the European venture between America Online and Bertelsmann has yet to be named. Not true -- it has been named: AOL. Not America Online, just AOL. -- SPEAKING OF AOL INTERNATIONALLY... Members who travel can now access AOL abroad with the new AOLGLOBALnet that is now available in more than 130 cities in nearly 50 countries -- at "significant savings in comparison to the present alternatives," according to the press announcements. For more information on how to use this new network and on the pricing of it, use keyword AOLGLOBALNET. -- MCI Announced plans for a major music retail initiatives. MCI will begin selling cassettes and compact discs via an 800# and the World Wide Web. The Newscorp/MCI joint venture will handle the Web piece. -- THEY'RE VERY SERIOUS: Microsoft hired former New Republic editor Michael Kinsley to start up Microsoft's own online magazine biz. Kinsley, who will be leaving CNN (where he co-hosted Crossfire, among other things), will serve as a writer and editor for a magazine about politics that will launch "early next year" on both MSN and the Web. -- COMPUSERVE AGREED to pay $568,000 as part of settlement of a musical copyright infringement lawsuit. The issue was CompuServe had snippets of music available for download that infringed on copyrights. In settling the suit CompuServe made no admission of guilt and said it plans to work with the Harry Fox Agency (one of the plaintiffs in the suit) to come up with a way to license songs for use in the CompuServe forums. -- See you next week! Stock Watch =========== Wow: Spyglass doubles -- up over $50/share in two weeks... This Last 52 52 Week's Week's Week Week Company Ticker Close Close High Low ------- ------ ------ ------ ------- ------- @Net Index IIX $255.31 $246.03 $255.31 $185.76 America Online AMER $81.63 $86.75 $88.50 $16.50 Apple AAPL $39.75 $36.50 $50.94 $33.63 AT&T T $63.00 $63.75 $66.38 $47.25 Bolt,Beranek & Newman BBN $38.50 $34.00 $39.38 $12.63 FTP Software FTPS $33.00 $27.50 $35.50 $20.25 General Elec. GE $65.63 $62.88 $65.63 $45.38 H&R Block HRB $46.63 $44.38 $46.63 $33.00 IBM IBM $97.38 $101.50 $114.63 $68.00 MCI MCIC $25.38 $26.00 $27.13 $17.25 Mecklermedia Corp. MECK $16.00 $16.25 $24.38 $ 2.13 Microsoft MSFT $96.88 $99.50 $109.25 $58.25 Netcom NETC $79.00 $69.00 $79.00 $16.75 Netscape Comm. Corp NSCP $97.50 $95.25 $102.25 $45.75 NetManage NETM $22.75 $20.63 $27.25 $12.25 News Corp. NWS $19.25 $19.63 $25.13 $14.38 Performance Syst. Intl PSIX $20.81 $22.63 $25.50 $12.00 Sears S $38.63 $36.00 $38.75 $21.50 Spyglass Inc. SPYG $92.00 $72.00 $92.00 $26.50 UUNET Technologies UUNT $72.50 $64.25 $74.50 $21.75 Disclaimer ========== 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. Subscription Information ======================== To subscribe to this newsletter by e-mail: Send an e-mail message to: LISTSERV@PEACH.EASE.LSOFT.COM In the BODY of the message type: SUBSCRIBE ONLINE-L FIRSTNAME LASTNAME Example: Subscribe Online-L Robert Seidman If you wish to remove yourself from this mailing list, send a message to: LISTSERV@PEACH.EASE.LSOFT.COM and in the body of the message type: SIGNOFF ONLINE-L . A Web version of the newsletter is available at: <http://www.clark.net/pub/robert>.