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Life After Television, Updated
The “killer
app” for these new broadband systems is supposed to be pay-per-view
television. But, says Frank Biondi, president of Viacom, “there has
been no serious take-up for pay-per-view in 20 years. We are way behind
revenue projections on motion picture pay-per-view.” When Time Warner
raised its pay-per-view movie bandwidth from five to 60 channels in the
Borough of Queens, monthly revenue is reported to have risen by only some
$4 per home. “If people really hated going down the block to pick
up a movie, video stores would have a thriving delivery business today,”
commented Michael Noll of the University of Southern California in the
software newsletter Release 1.0.
3DO’s new super-Cd-ROM multiplayer and graphics processor may someday
find a market outside Wall Street. But judging from the fall of the company’s
stock price, from a high of 48-1/4 when the machine was launched into
stores last October to 26 in mid-January, sales have been disappointing.
3DO indicated that some 50,000 units had been shipped to retailers, compared
with earlier company projections of “fewer than 100,000” and
euphoric expectations of many more. Similarly, after investment of untold
hundreds of millions of dollars, the Philips CD-I players still lag in
the marketplace. If the world is rushing to multimedia, why is it so slow
to embrace the leading new multimedia players?
“Like Feeding Vitamins To A Horse”
Games show magnate Jon Goodson of Mark Goodson Productions declares that
people don’t want to interact with game shows. “It changes the
game—for the worse.” A 1993 Dataquest study reported that people
really don’t want to interact with sports events. TV Answer, now
Eon, and Interactive Networks both failed to break through with plans
to supply interactivity to current-day televisions over special radio
frequencies allocated for the purpose by the FCC. Hollywood has determined
that audiences have no interest in shaping the outcomes of films; they
want to be surprised. If people don’t want to interact with video,
how can the world move beyond television?
The new standard for digital HDTV, though far ahead of the old analog
systems, will not be officially unveiled until 1995, according to Richard
Wiley, chairman of the FCC’s Advisory Committee on Advanced Television.
The broadcast companies that are supposed to adopt it are mostly uninterested.
“We see no way any of us will make money out of this thing,”
says John Swanson, vice-president, engineering, at Cox Broadcasting.
Most of the fiber-to-the-home and fiber-to-the-curb companies have been
disappointments—Raynet and BroadBand Technologies have had difficulty
selling their equipment. A superb passive optical technology has so far
failed to save BroadBand’s stock price. It tumbled from a high of
52 early in 1993, amid the uproar over the information superhighway, to
a low in the mid-20s by the end of January 1994 as revenue projections
were lowered by analysts. Raychem has pumped more than $100 million into
Raynet without yet generating a profit. Meanwhile, the telephone companies
have been dallying with a new system called Asymmetrical Digital Subscriber
Line, which will let them send full-motion video down a conventional phone
line at six megabits per second (near to the practical rate of an Ethernet
computer network). Although Eli Noam of the Columbia University Telecommunications
Center says ADSL is “like feeding vitamins to a horse rather than
buying a truck,” the phone companies feel that if they have to compete
with TV, it is cheaper to supercharge the old copper nag for the last
few hundred yards.
On the content side the picture is equally cloudy. At multimedia conventions,
television executives declare that there is no way they can make money
with the kind of stuff currently available on CD-ROMs and other such platforms.
During intermissions they mutter off the record that the only way to jump-start
this market is through virtual sex.
In the late 1980s the entire Japanese electronics industry was riding
high with the harvest of profits from decades of investment in consumer
electronics. Deciding that “content is king,” Sony and Matsushita
each bought major Hollywood studios. As these companies moved on toward
HDTV, Western pundits prophesied that Japan would dominate all advanced
electronic industries, from semiconductors to supercomputers. Instead,
however, the Japanese electronics industry entered a period of prolonged
decline, suffering heavy financial setbacks and even losing its lead in
semiconductors to American firms.
Strategists Focused On Wrong Industry
From Cerritos to Denver and on to Orlando, Omaha and Castro Valley, from
3DO to CD-I and beyond, from BroadBand to Raynet, from Sony to NEC, the
current and impending disappointments spring from one key mistake. With
some notable exceptions, the leading strategists are focusing on the wrong
industry. You can’t get beyond television by collaborating with TV
companies in their long slide to obsolescence. You can’t create a
new information infrastructure by propping up the old telephone networks
with the right to provide tv-type services.
The new 3DO and Philips CD-I game machines, for example, both link to
interlaced TV screens that display every other line and then fill in the
gaps on a second sweep. Interlaced screens mean cumbersome text and limited
graphics. Interlaced screens doom multimedia to a fringe videotext fuzz.
Yet these new game players shun the personal computer and its installed
base of 33 million home units in order to build up a new installed base
from scratch, connecting to visually inadequate televisions.
Interactivity, almost by definition, is a computer function, not a television
function. Making the boob tube into an interactive hive of theater, museum,
classroom, banking system, shopping center, post office and communicator
is contrary to the nature of the box.
Millions of Americans, however, are eager to turn their personal computers
to these pursuits. Therefore, it is natural that nearly all the relevant
activity is in the computer industry rather than in the television industry.
The PC world provides an environment totally alien to the downside dirges
of consumer electronics.
As Peter Drucker has said, an entrepreneur should always heed the upside
surprises. Upside surprises distract business leaders from a deadening
focus on problems and target them on their opportunities. In the information
economy, the best opportunities stem from the exponential rise in the
power of computers and computer networks, microcosm and telecosm. In the
computer industry, all the surprises tend to come on the upside.
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