[9823] in Commercialization & Privatization of the Internet
Interactive Flops
daemon@ATHENA.MIT.EDU (Arthur R. McGee)
Sat Jan 22 00:00:04 1994
Date: Fri, 21 Jan 1994 20:50:02 -0800 (PST)
From: "Arthur R. McGee" <amcgee@netcom.com>
To: communet@uvmvm.BITNET, com-priv@psi.com
---------- Forwarded message ----------
Date: Fri, 21 Jan 94 10:14 EST
>From: George Lawton <0004478863@mcimail.com>
Subject: Interactive flops
ARLEN COMMUNICATIONS INC.
SUITE 600E 7315 WISCONSIN AVENUE BETHESDA MD 20814 USA 301-656-7940
IT SEEMED LIKE A GOOD IDEA AT THE TIME
Presentation to
SCTE "Emerging Technologies" Conference
Phoenix, AZ January 6, 1994
Gary H. Arlen
President
Arlen Communications Inc.
Before we begin, I'd like to share a small factoid spotted in
business Week a few weeks ago:
"Information Superhighway revenue to date: $0.
Number of articles since 1992 on
potential Superhighway profits: 30,410.
Cow let's put things in perspective.
- - -
"January" gets its name from the two-faced Roman god Janus, who
could; look forward and backward at the same time.
That's the first of several word lessons you will hear from me
today. But you'll also get some history lessons, because it's the time of
year when we look back and ahead. And I'm here to take a look 'way back
and try to figure out what's coming up...and how we can learn not to make
the same mistakes again
My topic is interactivity, and the next word lesson involves the
lingo of our two-way TV world.
Prestalgia..."longing for the days that haven't happened yet."
-- It's the motto that keeps us going as we dream about the
future.
Vuja de..."that uncomfortable feeling you're somewhere you never
want to be again."
-- It's also the reality of good ideas gone wrong.
Now here are a couple of words I disdain:
Revolution.: I'll buy the idea of a fast evolution --but as we've
tortuously found out, nothing of what we're doing happens at a
revolutionary pace. Yet "revolution" is almost as over-used as the
next word:
Convergence: This term is used so often and so randomly that it
actually has no meaning now. It sounds a little too cosmic to me...or
maybe too harmonic. Most people try to use "convergence" to mean the
point where cable TV, computers and telephone technologies come together.
Frankly that sounds more like a collision . . . and I'd hate to be
standing there when that convergence collides.
Actually, the true convergence is one of applications... and I find
it very exciting because that will be the birthplace of the new forms of
content and services which will actually drive the new interactive
industry. I think of convergence as the blending of entertainment and
education into "edutainment" such as the Carmen Sandiego software...a new
form for a new medium. Even infomercials -- the convergence of
entertainment and advertising -- represent an interesting new hybrid,
which has real promise after we get over the first evolutionary wave
of low-ball implementation.
But let me get back to my basic premise here...namely a look at the
history of interactivity. Now it's easy to take cheap shots at the
pioneering new media ventures of the past decade. I thought about going
'way back...say to the 1920s when the "phone company" tried to develop
something called "toll radio." At that time the phone company was AT&T
and its vision of broadcasting was a pay-per-use system in which listeners
would. pay as they tuned into radio programs. (The idea was obliterated
by the development of commercially supported radio.) Then I
considered looking back to the subscription TV schemes of the '50s and
'60s. But I thought that given the short time we have here today, it's
best to concentrate on the false starts in the two-way TV business since
the late 1970s.
And that means we start with QUBE.
Whatever else it was, QUBE was a visionary scheme that helped Warner
Amex Cable win a lot of other franchises.
About the same time that QUBE was percolating in Columbus, several
other low-key projects were underway -- some under the guise of videotext
or viewdata as it was then called. Most of us have forgotten that the
first attempts to create online home services envisioned that mass market
services would be delivered via telephone lines hooked up to a home TV
set. Remember, this was before ADSL or any of today's compression schemes.
In France, before there was Minitel, there was something called the
Teletel project. I remember going on a junket and we were in a very
upscale French home which was pilot testing the system. I noticed that
the family had connected the Teletel set-top box to an old black-and-
white TV set up in the bedroom rather to their new, color TV set
in the living room. I asked why? The perfectly understandable response
was that they didn't trust the box and didn't want to take a chance on
ruining their expensive new color TV set.
In England, the British Post Office had developed Prestel to send
simple (that is, "ugly") graphics and text downstream to home TV sets
through a ~200 set-top box. AT&T and Knight Ridder bought into the
concept and tried to adapt it into the Viewtron system that debuted in
south Florida in the early '80s. of course, when AT&T got its hands on
the idea, the set top box became a $600 device. (I remember that
the actual production price was closer to $1200 per unit, but AT&T sold
the box for i600 and hoped to make up the difference by volume. That
never happened, because Viewtron never had more than a few thousand
customers.)
Meanwhile, a somewhat less visible similar project was underway in
Los Angeles, where the Times Mirror Company ran a videotex service called
Gateway. This was an equal opportunity failure. The cable-delivered
version was a complete washout, but the phone-line system didn't succeed
either.
I remember two things about the Gateway project:
1. Consumer research. Throughout the two year test,
participating households were asked if they would pay $10 per month to use
the system. Consistently, customers said yes, they would pay $10 per
month for the service. So when the test ended, the same households were
invited to stay with the service and write a check. Very few actually did
so, and the President of the Gateway project summarized the findings of
all his expensive market research in two words about his customers:
"They lied."
2. Creative jury-rigging. The Gateway people adapted as best they
could to accommodate for the lack of hardware and software. In
particular, I remember the so-called "Beverly Switch," which handled
realtime Ticketron ticketing. When a Gateway customer ordered a ticket
to a sports event or concert, he tapped the order into the home device
and the Beverly Switch went into action. Beverly was a secretary at
the Gateway office and when a signal came in, she logged into a Ticketron
terminal at her desk, placed the ticket order then keyed another message
back to the customer that the tickets were confirmed. Beverly was
eventually promoted and was replaced by another secretary, so the
interface became known as the Joanne Switch.
Now let's stroll through the hall of shame -- or I should call it the
Hall of Good Intentions from the first age of interactivity, circa 1981
to 1985. Remember, that none of these projects was designed to fail.
They were just in the wrong place at the wrong time...although some of them
may have simply been just plain wrong to start with. Here are a few of my
favorite examples:
Indax. Cox Cable had great hopes for this interactive shopping,
banking and entertainment service that it tested in San Diego and -- where
else? -- in Omaha. Perhaps my fondest memory of Indax was a promotional
video narrated by none other than Stanley Marcus (of Neiman-Marcus)
extolling how happy viewers would shop comfortably from home at 2 a.m. if
they wanted to. I should add that this was in 1981 -- well before QVC or
HSN were up and running, and certainly before the Full Service Network
began banking on such an audience.
Telelst: The idea was to download movies through a dedicated
receiver hooked up to a VCR. For a flat monthly fee of about ~20,
subscribers would get two movies per night, which could only be played
back on the equipment where they were received. ABC' tested it briefly
in Chicago in the mid-'80s. It was a broadcast -- not a cable --
version of subscription TV, but not enough homes had VCRs or were willing
to pay for the interface box. Appropriately, the movie featured on
the cover of Telelst's inaugural program guide was that Tom Cruise movie:
"RISKY BUSINESS." That's just what Telelst turned out to be. It didn't
last a year.
Nabu Network: 'Finis was an intriguing attempt to deliver
videogame-s into custom-built set-top boxes via a cable hookup. The long
range plan was to implement multi-player videogames. Nabu was born in
Canada and had a modest success there, so it was rolled into the U.S. Tom
Wheeler actually left his job as president of NCTA to head up the U.S.
Nabu company... which he did for the year or so the company was in
operation. I don't know if the folks at Seqa Channel have studied the Nabu
history.
Warner "Electronic Home Services" and Warner "HEITS"
(Home Entertainment, Information and Transaction Service): After QUBE,
Warner didn't give up on two-way TV. Neither EHS or HEITS got beyond the
preliminary test stage, but they underscored Warner's continuing vision for
interactivity. In addition, through other subsidiaries -- notably its
Atari game division at the time -- Warner tried out other interactive
projects throughout the 1980s. I still haven't figured out if any of the
people who lived through those Warner projects are stilt around to help
Time-Warner sort out what to do in Orlando.
Telaction: This one cost about $120 million, but who Lares since it
was JC Penney money, not that of any cable company. In fact, that became
one of the problems. Penney spent millions in 1937 through 1990 creating
a hybrid
cable/ telephone/ videodisc home shopping system. The set-up let viewers
see still pictures and read text about merchandise by tapping on a
telephone keypad. This gave the viewer control of a videodisc
catalog which then transmitted images back to that viewer's set. One
problem: Penney designed the system without making any deals for local
cable distribution. When the system was ready to go, Penney didn't have a
downstream route, which ticked off the merchants who had been promised a
launch before the Christmas shopping season. 15 months later, when
Penney had finally completed a handful of cable deals in suburban Chicago,
the merchants had lost two Holiday selling seasons and were not happy with
the small results. Telaction lasted less than a year after that.
Teletext in general: This was also an import, based on the
unsuccessful efforts in England and France to put data delivery into the
V3I and distribute a set-top box to receive it. The idea flopped
completely in France, and in England has caught on modestly after a
decade. Nonetheless, in the U.S. in the early "30s, CBS, PBS, NBC and
a raft of cable companies jumped on the teletext bandwagon. One
problem: there was no standard and the European promoters of two
incompatible formats each attracted a small contingent of followers.
Group W Cable was the leading cable company supporting the "World
System Teletext" format based on British technology: Zenith, Southern
Satellite Systems, Taft Broadcasting and Field Broadcasting also using
this system. Meanwhile, CBS, NBC and eventually Time Inc. endorsed
a modified version of the French-based "Antiope" system, backed
unenthusiastically by Panasonic, Samsung and a few other set-top
decoder makers. The FCC refused to set a technical standard, further
dooming the teletext business ... which by that time had pl-oven that
Americans really did not want to read text from a screen or look at
dresses that seemed to be made out of Lego blocks. Teletext stayed
quietly alive until mid-1993, when Zenith and Great American (the
successor to Taft) put it out of its agony.
Time Teletext: This was a special case, since the grandiose
Time plan was to go beyond the VBI and dedicate an entire channel to
delivery of a vast teletext database. Now you have to remember, this was
the "spare-no-expense" Time Inc. that. actually set up a test kitchen in
the basement of the Time~Life building to try out the recipes it would
transmit through its teletext system. Not that the recipes taken from
Time-Life's own cookbook series were good enough Vast teams of graphic
designers created stylized frames: my favorite were the "pasta pages"
which illustrated the different styles and shapes of dozens of types of
pasta. Time Teletext actually got onto a few cable systems before someone
pulled the plug in November 19F33.
And that brings me up to my next lesson: Here's a phrase to remember
when dealing with all the new media hype:
That's one of my favorite lines from THE WIZARD OF OZ... and it
perfectly captures the audacity of many interactive TV developers.
Perhaps my most vivid memory of this syndrome took place in a hotel
suite at an NCTA convention. Time Teletext was showing its prototype
system on a large TV screen, placed atop a fairly large table which was
shrouded in a curtain. I traced the wire coming out from the table and it
ran into an adjacent room which was closed off. Although the courteous
Time staff prevented me from looking under the table or into the next room
..it was obvious (and later confirmed) that the prototype was running off
a sizeable minicomputer....all of which, of course, "would be reduced to
a couple chips" before the commercial rollout.
I was reminded of this last month when I visited the
Microsoft suite at the Western Cable Show. Again, I saw a remarkable
prototype, but we weren't allowed to go into the other room where that
big wire ran from under the table.
And that brings me up to the present day. The incredible frenzy over
interactivity has prompted me to look back into my files for clues about
how these services will be adapted.
I'm the first to admit that the world has changed drastically in the
past few years.
The widespread use of PCs means that millions of homes are
technically proficient -- or at least more understanding than they were in
the 19i30s.
The technology today is "way cool" and certainly more
appropriate for TV. No more settling for tacky graphics with awful
jaggies. Now we can offer "true video" and cybergraphic illustrations,
which is what TV is supposed to do.
The arrival of the Nintendo-nauts has created an audience that may
be interested in the interactive offerings that are being developed,
especially games and new types of entertainment.
Content suppliers are more sophisticated about how to develop
and adapt material for the interactive platforms. They understand that
information alone is not sufficient -- that the service should offer
transaction and other features to complete the interactivity.
"Mouse potatoes."
So now it's time for another vocabulary builder. Try out the term
"Mouse Potatoes." Yes, that's the word for people who go far beyond our
beloved power zappers.
The idea is that, unlike the lethargic couch potatoes, the new breed
of interactive devotee will become so enamoured of his remote control air-
mouse that he will aggressively interact with anything and everything on
the screen. This is the ideal customer, but let's try to stay real.
How many such mouse potatoes are out there now? And equally
important: do they have money to spend on interactivity~
This comes to mind because of the research we've been doing about the
appetite for interactivity.
On the positive side, our study on ELECTRONIC ACCESS indicates
that 26% of prospective customers are very interested and another 40%
are somewhat interested in using advanced interactive systems. Oui
question was deliberately vague and we limited our pilot study to homes
with $35,000 or higher annual income --- well above the national average.
Nonetheless, the finding is very encouraging, suggesting that two-
thirds of this affluent audience is ready for the kind of services we're
talking about. Best of all -- and predictably -- most of those interested
in such services are youngish.
But that lesson from California keeps coming back to haunt me:
"They lied" during the research phase.
That's why I think the lessons of the first age of
interactivity are so important today.
For many cable promoters, the idea of interactive TV merely means
"movies-on-demand." In other words, we're confusing the issue by saying
that interactive TV involves access to passive, linear feature films.
Other industries are also adopting the term "interactive" to include
phone-in responses to video programs ~- something millions of people
have been doing on QVC and HSN for years.
Hence, my view of interactivity is that it involves creating
new program formats to suit the capabilities of the networks that are now
being built. Certainly multiplayer games and videophony play a
significant role in that business. New types of non-linear fiction may
appeal to the most avid Mouse Potatoes --- but we shouldn't count on them
being a very large audience segment in the immediate future.
Shopping and merchandising may play a role, but it won't be merely
QVC as usual. We know, for example, that the economics and formats have
not yet been figured out for on-demand shopping.
So that brings me down to some conclusions about what we've learned
from a decade of interactive experimentation.
1. Money matters. I'm not just talking about the expense in
building and servicing the interactive superhighway. I'm getting down to
the level of the individual user, who will be cautious about spending
money for new systems and services. The five-year rollout timetable for
VCRs during the early '80s should give us some clue about how willing
Americans are to buy into new technologies -- even when they know what
they're getting. Which cannot always be said of interactivity!
2. Familiar faces. As I went through my files of who's been who
in the new media biz, I fondly noted that multi-million dollar dead-ends
have not discouraged AT&T, Time and Warner (separately and now
collectively), Times Mirror, Cox and other players from continuing
their pursuit of the interactive grail. Hearst abandoned its
Electronic Publishing venture set up a decade ago, but now has
revitalized attention at a much higher level with a new interactive video
group.
3. Joint ventures are tricky: The recent binge of acquisitions and
collaborations does have a dark side. That is, they don't always work!
It's fun to watch the mix-and-match efforts of companies to team up for
new media ventures. One of my favorites was Cox Cable and Chase Manhattan
Bank which tried to cook up an information and transaction service in
1984. When Cox retreated, Chase and Jerrold hooked up for a while,
until the project died. Over the years, GTE has collaborated with
numerous partners, and I lost count of AT&T's pro-posed alliances.
Nonetheless, when something works it proves the adage that you have to
kiss a lot of frogs before you find your prince.
4. Beware of equipment promises: Vendors can get bored and then
get lost. Sanyo and Zenith hyped World System Teletext in 1984,
but Sanyo split shortly thereafter and Zenith only stayed around
because of a long-term contract commitment. Panasonic and Samsung
hawked the rival Antiope teletext format for a short while in the
mid-'80s, but quickly disappeared.
5. Don't trust the government: I hardly need say that to a cable
audience in 1994, but this caveat will take on many forms during the
coming years as the government insinuate-, itself in many issues
(notably the Information Infrastructure and spectrum licensing) that
will affect deployment of interactive services.
6. History does repeat: It's worth looking back at the
lessons of tine previous attempts at interactivity.
Knowing customer response developing new services -- or else you could
get stuck with a serious case of vuja de.
At a seminar some years ago, I met a guy from a paper manufacturing
company. He was there to check out if all this electronic publishing and
two-way TV hype would really affect his company's production of
newsprint and slick paper for magazines. Appropriately, the seminar
came to the conclusion that mass market reach for these services was
years away.
After two days this individual looked around the room at us new
electronic media groupies and politely told us we were crazy to be in
a business that wasn't going to "be real" for years to come.
I don't know what he's doing today, but he certainly must have
chuckled every time he read that another new media project had tanked.
Nonetheless, we persevere.
As I said, a lot of things "seemed like a good idea at the time'
I'm confident that some -- if not many -- of the systems being proposed
today will reach the market and succeed.
And for those that don't, it will give me more material for my
Hall of Shame report a decade from now.
Thank you.
