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============================================================================= Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 No. 10 March 10, 1996 ============================================================================= Copyright (C) 1996 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes, so long as attribution is given. IN THIS ISSUE ============= -Notes from the Editor -Browser Wars: The Empire Strikes Back -AT&T in Discussions with Online Services -More Fun With Numbers -More on WOW! -Newsworthy Notes -Stock Watch -Lame Disclaimer -Subscription Info Notes from the Editor ===================== Be sure to check out my c|net column! Either go through c|net's main page < http://www.cnet.com > and select the "personalities" department (this way you'll be sure to see the other great stuff there) or take the direct route and go directly to: < http://www.cnet.com/Content/Voices/Seidman/index.html >. New columns show up bi-weekly, usually on Monday nights. This Monday a rant on "mailbox portability" should show up and since I haven't discussed mailbox portability here, you should read it there! As a result of posting a response to a readers message to the entire e-mail list last week, I received a ton of e-mail. I tried to respond to it all, but if I didn't respond to you, I apologize. Most wanted to know if I get a lot of e-mail flaming me. Fortunately, most of the e-mail I receive is extremely positive. I set myself up for some of it simply by working at IBM and writing this newsletter, so people are entitled to have that sort of opinion. Still, the notion of IBM being in the Stock Watch before I began working there because of their 50% ownership of Prodigy seems lost on Eric. Perhaps he's right though. I mean, that's why, week in and week out for the last year and a half I've preached the gospel of OS/2, RS-6000, and the network PC to the exclusion of everything else, and continually stated that Prodigy is the best online service known to man. That AOL is, in fact, a conspiracy! There isn't really even an AOL service. It's just that Steve Case owns the media! (For first time readers, I'M KIDDING!!) IBM really is in the Stock Watch only because of their ownership in Prodigy and their Internet access service. While SGI is involved with the Internet in a big way, it's not an area I cover. I never told Mr. Kimminau that I don't list SGI because I have no contacts with SGI. I told him I don't list SGI because it's not something I ever write about. With all the stocks involved, it would be far easier for me to just remove the Stock Watch section entirely, but I think it serves as a nice barometer. It was never intended to be an all inclusive listing. The good news for Mr. Kimminau is that there is a lot of interest in the areas that SGI is involved in. I'd encourage Kimminau or anyone else to please start writing such a newsletter. Still, I very much appreciate the dissenting views sent my way. If everyone agreed with everything I said (and believe me, that isn't the case!) I'd never learn anything. Browser Wars: The Empire Strikes Back ===================================== We've all been following the news that America Online and Netscape have been engaged in discussions. Where the talks would lead, no one could be sure. Speculation ranged from a licensing agreement to a deeper partnership, one where AOL would even have a seat on the board of Netscape. There is little I see in the news these days that surprises me, but when I saw the Wall Street Journal story by Jared Sandberg, my jaw went slack for a few seconds. The essence of Sandberg's story was that Microsoft was talking to AOL in an effort to derail the Netscape talks and get America Online to go with Microsoft's Internet Explorer browser. While Microsoft has turned the Internet Explorer into a viable browser, Netscape still dominates the market. With UNIX, Mac and PC versions available, it is estimated that Netscape ties up as much of 85% of the browser market. Microsoft is looking to break into the market in a big way, and getting their browser in the hands of AOL's 5 million members would go a long way in helping. CompuServe, which is the Switzerland of online services prefers to be "browser neutral" and offer their customers whatever they want. Still, CompuServe, according to my sources, is in an exclusive licensing arrangement with Microsoft for its Internet Explorer for the soon to be announced WOW! service. Even so, CompuServe and Netscape announced late in the week a non-exclusive arrangement to provide CompuServe members with the Netscape browser. Analysts have viewed this as a setback to Microsoft. The real setback for Microsoft in my mind was their own love affair with the Win 95 operating system. Sure, you'd expect a little bit of nepotism, but maybe Microsoft bought into their own Win 95 hype a little too much, concentrating their initial browser efforts on the Win 95 version. Now they're playing catch-up with both Windows 3.1 and Macintosh flavors of the Internet Explorer in beta testing. But they're not shipping yet. Most people don't have Win 95, so that's been a problem for Microsoft. *Enter America Online* Both Microsoft and Netscape want an AOL deal, perhaps even need an AOL deal. On the news that Microsoft was in talks with AOL, investors finally got the idea that Microsoft may still have a chance here and the Netscape stock, which was already having a bad week, dropped into the $30's. It rebounded a little to close at $40 on the week, having lost over 25% of its value from the previous week's close. The talks between Netscape and AOL and Microsoft and AOL make for one of the stranger love triangles I've seen in the online industry and one that may have given Steve Case the leverage he wanted with Netscape. I've written previously of why I think an AOL/Netscape deal makes sense and if Netscape's stock price continues to fall, a merger might be possible after all. It has been rumored that AOL was seeking a seat on Netscape's board, but industry insiders are speculating that Netscape is leery of such an arrangement over fear it may alienate other partners (Prodigy, CompuServe, etc.) Still, Steve Case must be feeling pretty good about being the center of a love triangle. Did I hear you say that there must be a catch? Will you walk away from a fool and his money. Sonny! If you want it, here it is, come and get it. But you better hurry cause it's going fast. Excuse me for slipping into a Badfinger lyric, but the whole notion of Netscape-AOL, AOL-Microsoft makes me think of those words. And I like the thought of Bill Gates responding to AOL in his best Baby Blue Badfingerese with "What can I doooooooooooo, what can I say? 'Cept I want you by my side." Steve Case and AOL have some tough decisions to make, but I believe that they're in the driver's seat on this one. In this case, there is a catch. AOL's browser in its soon to be released 3.0 version is not bad, not bad at all. Case may be thinking he doesn't need to do a deal with anyone, and in the end, that may be his best bet. You can't quantify to Case that not having Netscape has hurt AOL. They continue to add thousands of subscribers per day. The thing is, AOL's development cycles to improve the browser are slow compared to Netscape's. Netscape has released 2 upgraded versions of its browser (1.2 and 2.0) and AOL is still working with what they released last Spring. Insiders tell me that with the release of AOL 3.0 for Windows, updates, at least to the Windows browser, will not need to be tied to a new release of the AOL software. I don't see Steve Case doing any deal simply for the sake of doing it. There has to be something in it for AOL. In this case, something more than just a browser. With Netscape, it appears AOL wants to combine in a fight against Microsoft with a seat on Netscape's board in return. With Microsoft, there's no way I see AOL just doing the deal to get the browser for free. There has to be something else, and I can imagine nothing Case wants more than an AOL icon on the Win 95 desktop. With Microsoft Network migrating away from an online service to more of an integrated Internet access solution, the notion of AOL preinstalled on the Win 95 desktop seems less preposterous than it once might have. It remains to be seen just how badly Microsoft wants a deal with AOL. If America Online does a deal with Microsoft, even if they get something they really want in return, it's a risk for them. If AOL helps Microsoft gain a dominant position in the Internet realm, someday that might come back to haunt them. Sidebar ======= I saw Duff & Phelps analyst Abhishek Gami quoted in the news saying that Spyglass collects a licensing fee from Microsoft even though Microsoft gives away the Internet Explorer. This surprised me because I thought Microsoft had paid a one time lump sum fee. "The original "marquee" deal SPYG struck with MSFT was for about $2MM for unlimited use of the browser," Gami told me via e-mail. "Recently, when MSFT held its big coming out party to reveal its Internet strategy and products, they quietly announced an extended pact with SPYG under which SPYG would develop STT (now SET) for MSFT in exchange for unlimited rights to the technology," said Gami. "They also announced that SPYG would supply additional browser technology under a __royalty__ agreement." Good deal for Spyglass! Though neither Spyglass or Microsoft will disclose the terms of their arrangement, Gami estimates that it is in the $.35 - $.45 range. According to Gami, Spyglass collects on "... every copy MSFT distributes, regardless of whether it is given away, bundled, or embedded." AT&T in Discussions With Online Services ======================================== The Washington Post reported that AT&T was in discussions with the major online services about ways that customers of AT&T's recently announced WorldNet service could link to the online services. The move was largely seen as a way for AT&T to gain customers quickly by forming alliances with the better known online brand names. I asked Peter Krasilovsky, Sr. Analyst at Bethesda based Arlen Communications for his thoughts on this. Krasilovsky said that Steve Case had told them that AOL was not averse to providing discounts for buying AOL service in bulk since it reduced AOL's customer acquisition costs. Krasilovsky thinks the online services would perhaps be better off doing a deal with a cable company rather than a deal with AT&T. "(There is) Lots of cannibalism involved and an AOL subscriber would not use AOL for mail and other services, reducing profitability," said Krasilovsky. While Krasilovsky sees deals with AT&T better than no deal at all, he points to the recent affiliation between the German arm of Europe Online and German's T-Online where T-Online subscribers can access Europe Online content and pay only per minute charges rather than subscription fees. According to Krasilovsky, such a deal would be a worst case scenario for AOL. In other AT&T WorldNet News, the Cowles/SIMBA Media Daily reported that AT&T is still overwhelmed by the volume of calls inquiring about the new service. AT&T released a statement saying it will have to increase capacity for the service and hire more people to answer questions and solve customer problems. No kidding! According to the Media Daily, through last Thursday, AT&T had received 210,000 calls for details on the service with 147,000 ordering software. Tom Esvlin, VP for WorldNet said a sampling of calls indicated that more than half were planning to sign up for the unlimited plan and more than 70% have some online or Internet experience. More Fun With Numbers ===================== The latest version of Odyssey's Homefront study (January '96) reports that the number of households accessing the World Wide web has doubled in the last six months, but points out that the 8% of the households now surfing the Web from home is a small minority. But, it does show that a vast majority of households online (and only 11% households are online, according to the Homefront study) are at least occasionally using the Web. In fact, and this data may play a part in whatever deal AOL does with Netscape or Microsoft, when asked to chose between quality of Internet/Web access and quality of content, 47% of those surveyed said that quality of Internet access was more important. 37% said that the quality of content was more important. Despite the growth in the number of households using the Web, more than half are accessing via one of the commercial online services, and Odyssey reports there is little change in this stat since their July 95 results and this seems to jibe well with the FIND/SVP research < http://etrg.findsvp.com/ >. Odyssey also provided this little blurb in their press release regarding the online market: Online Service Market Penetration (Percent of PC Households) July `94 Jan. `95 July `95 Jan. `96 America Online 4% 5% 13% 14% CompuServe 5% 4% 6% 6% Prodigy 10% 8% 7% 5% Microsoft Network -- -- -- 1% Though the above numbers only represent the homes with PCs, they point out some interesting things. One, sending a disk to everyone and their mother appears to work. Secondly, you don't need an advanced degree to see that if you take CompuServe, Prodigy, and the Microsoft Network and add 'em together, they don't have the market penetration that AOL has. Keep in mind, this study is only for households and only in the US. So CompuServe's counting of about a million Nifty-Serve accounts and several hundred thousand in Europe don't come into play. Still, it looks like the growth trend for online services penetration is down. In the six months from January 95 to July 95, the Homefront survey showed the percentage of PC households on one of the major online services go from 17% to 26%. From July 95 to January 96, it was still 26%. The number of homes with PCs is growing so the online services are still growing their subscriber base. But, they really haven't gained any penetration percentage wise, in the last six months, according to the study. According to Odyssey, only 35% of the households in the US have a personal computer. According to Odyssey president Nick Donatiello, despite analyst predictions, the market for home computers is still strong. In fact, a larger percentage of households without a PC indicated they were extremely likely to buy a PC in the next six months than in previous versions of the Homefront study. While that's good news, there is also still a huge opportunity with existing PC households where over 2/3rds are not on any online service. More on WOW! ============ WOW! will launch soon, but only with a Windows 95 interface, if you read between the lines of recent press releases. A Mac version is expected in the Fall, and I'm still digging to see what the plans for a Windows 3.1 interface are. I'm also getting word that WOW! will make significant use of CD-ROMs. Morgan Stanley, PC Software analyst Mary Meeker estimates that currently there are 20 million PCs with Windows 95, while there are about 115 million PCs with Windows 3.1. This basically means that WOW's initial success is almost totally tied to sales of new personal computers. The *best* they can hope for is growth along the lines of the Microsoft Network, and while I think that leaves them in a bad position, some would disagree. "I think WOW is aiming for an emerging market, rather than an existing market for the most part," Abhishek Gami, an analyst with Duff & Phelps told me. "That is, they want to target consumers with a highly multimedia-based product on a more advanced platform -- both of which are still penetrating the market (CD-ROM and Win95). So, rather than trying to just play catch-up, they will (and must!) create a whole new ball game based on something unique," said Gami "I don't think a slower roll out will be extremely dangerous," Gami continued. "CompuServe disks are getting into the market at a better pace, which will probably stabilize and perhaps increase its growth rate. A huge influx of WOW users might actually overwhelm the CompuServe network (though it has been somewhat underutilized for years). Any early bugs could also be dealt with more easily if necessary. As Win95 and CD-ROM penetration increases, so must WOW's. So, I don't expect AOL-like growth rates, but perhaps an MSN-like growth pattern might emerge if pricing is done correctly," said Gami. Great points, but today, market share seems to be critical. Given the dollars being poured into WOW! and CompuServe's upcoming spin-off from H&R Block, I question how well the market, or CompuServe management, will react to slow growth for WOW!. Stay tuned. Newsworthy Notes ================ The America's Carriers Telecommunication Association (ACTA), a trade association of competitive, long distance carriers petitioned the Federal Communications Commission (FCC) to stop companies from selling software and hardware products that enable making voice Telephone calls over the Internet. While the press release announcing the petition recognized that such services could impact the bottom lines of the long distance companies, they also put the spin on it that if everyone started using these services, it would be bad for the Internet as it would slow it down even further. -- TIME MAGAZINE IS BACK ONLINE. Now they're on CompuServe, and from my perspective, it's good to have them back on an online service. GO word TIME on CompuServe. -- TECHNOLOGY, NOT CENSORSHIP URGES AOL'S CASE. Speaking to the National Press Club in Washington, DC, AOL chairman Steve Case said, "The censorship issue is going to be one of the hot issues over the next year or two." Case said technology that allowed parents to block their children's access was the right solution, and not censorship. -- APPLE'S EWORLD is officially closing its doors at the end of the month. The company will try to set its sight on Web services and forged, or rather re-forged an alliance with America Online to bundle AOL software on Apple computers. Apple will provide Apple related content to America Online and eWorld customers would be invited to join America Online. There's good reason to believe that a lot of eWorld customers are already on AOL, but remember, the America Online service was originally developed for the Apple platform so there are probably a lot of sentimental ties to Apple at AOL, not to mention, a lot of Mac users. -- NEWSWEEK is heading to AOL. Long time readers know that I loved the Newsweek implementation on Prodigy, but Prodigy, which trails AOL by almost 4 million subscribers (Electronic Information Report estimated Prodigy had 1.4 million subscribers at the end of 1995) doesn't have the eyeballs. Newsweek plans the service to launch on AOL this June and also plans a Web site this year. A good content week for AOL, who gets Newsweek and expands its pact with Rodale Press. AOL will add Runners World and Scuba Diving in addition to the Rodale publications already available on AOL (Backpacker, Bicycling and American Woodworker). Hey, remember 37% of those surveyed in Odyssey's Homefront survey said content was very important. 37% is more than enough to get elected president in some countries... -- MICROSOFT ANNOUNCED ActiveMovie, the "the next generation of cross-platform digital video technology for the desktop and the Internet." Active movie will provide "State-of-the-art MPEG playback for full-screen, television- quality video on mainstream systems, Internet playback and streaming for fast and easy playback of all popular media types on the Internet and flexible, extensible and future-proof architecture for easy integration of new technologies, third-party enhancements and real-time special effects," according to the press release. Standards, standards, standards. They're probably scrambling in Mountain View (home of Netscape). -- BUDDY BUDDY. AOL launched a preview of its Buddy Lists (keyword: Buddy ) for Windows AOL members. Buddy will alert you when friends you pre-select come online. But don't panic, there are privacy features (and while Buddy is not available yet on the Mac side, Mac users can get to the privacy features to block those pesky Windows users from seeing when they're online) which let you block everyone, block only a list of names you specify, or block everyone but the names you specify. Stock Watch =========== Bleah... % 52 52 Week Change Week Week Company Name Ticker Close 1 Week High Low ------------ ------ ----- ------ ---- --- @Net Index IIX $214.63 -4.4% $259.85 $185.76 America Online AMER $44.00 -3.8% $57.00 $16.75 Apple AAPL $26.00 -3.3% $50.94 $25.38 AT&T T $63.13 0.8% $68.88 $47.88 BBN Corporation BBN $29.75 -12.5% $48.75 $16.50 CMG Information Svcs. CMGI $34.75 -6.1% $50.25 $5.50 CyberCash Inc. CYCH $32.00 -31.2% $64.50 $24.50 FTP Software FTPS $13.00 -5.0% $40.63 $10.38 H&R Block HRB $32.63 -5.1% $48.88 $31.50 IBM IBM $114.25 -3.3% $128.88 $80.38 MCI MCIC $28.88 -1.7% $31.00 $19.09 Mecklermedia Corp. MECK $9.88 -8.1% $24.38 $3.94 Microsoft MSFT $95.13 -0.4% $109.25 $66.50 Netcom NETC $23.50 -4.1% $91.50 $19.00 NetManage NETM $11.25 -6.3% $34.00 $10.00 Netscape Comm. Corp NSCP $40.00 -25.4% $87.00 $22.88 News Corp. NWS $22.25 -1.7% $25.13 $17.75 Oracle Corp. ORCL $47.00 -4.3% $55.00 $28.00 PSINet Inc. PSIX $9.13 -7.6% $29.00 $8.75 Sears S $45.88 -4.9% $50.00 $24.59 Spyglass Inc. SPYG $21.00 -8.7% $61.00 $13.25 Sun Microsystems SUNW $45.25 -7.7% $57.13 $16.13 UUNET Technologies UUNT $26.13 -12.2% $98.75 $21.75 Lame 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. 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>.