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| The Medium Gets The Message |
| By Saul Hansell (excerpted)
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| August 14, 2000
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TV's Monoliths Have Learned The Web Is a Fragmented World
If there were any established companies ready-made for the Internet, they should have been the big television networks. Or at least that was how it seemed two years ago.
''We have what is needed to compete because of the great depth in our brands and the great consumer loyalty to them,'' Michael D. Eisner, chairman of Walt Disney, said in 1998 on the eve of the debut of Disney's Go Network.
The broadcast networks, after all, are still the most powerful media forces in America, accounting for the two-thirds of the seven hours of television the average household watches each day. And they have an arsenal of advantages: lots of money, libraries of programming and decades of experience in attracting and keeping big audiences. And most important, the networks have the ability to promote their Web sites with unlimited amounts of advertising on television, which is still the most persuasive medium.
But after great effort and hundreds of millions of dollars of promotion, the networks are still also-rans on the Web. Traffic to their various sites badly lags behind the big portals like Yahoo, America Online and Microsoft's MSN, which are the closest thing the Web has to major networks.
Certainly Wall Street has all but written off the broadcast companies as Internet players. The publicly traded shares of NBC Internet and ABC's online cousin, the Walt Disney Internet Group, are down more than two-thirds this year -- a steeper decline than those which the stocks of their larger competitors have suffered.
And last week, NBC Internet, citing slowing ad sales, said it would lay off 20 percent of its work force.
CBS, meanwhile, has delayed plans to spin off its Internet operations into a separate company. And CBS's new parent, Viacom, has postponed the offering of shares in its online music business, the MTVi Group.
What went wrong?
To begin with, the networks overestimated their own strengths. Their vaunted promotional abilities, for example, were helpful in persuading people to try their Web sites. But lacking the depth and sophistication of features that the successful portals had, many of the network sites could not turn the merely curious into steady customers.
And for all their early confidence, the network companies have been uncertain whether to make their Internet operations independent, to emulate the fast-moving style of other Web companies, or to keep them part of their broadcast operations, to take best advantage of their popular media content and packaging skill.
''The mistake made over and over again by traditional media companies is that they dabble in new media rather than doing something strategic to integrate with their core assets,'' said Tom Rogers, chief executive of Primedia and former head of NBC's cable operation and much of its Internet activities.
But the best days of both Go and Snap seem to be behind them. It is true that Go was the Web's sixth-most-popular site in June, according to the research firm Media Metrix. And Snap, counted along with the other sites run by the NBC Internet unit, ranked ninth. But on the Internet, both audience and revenue appear to be concentrating in a handful of leaders at the very top. Indeed, over the last year, Go and NBCi have actually lost audience share, even as the leaders -- America Online, Yahoo and MSN -- have all increased their shares by more than 10 points.
CBS, meanwhile, has taken a different tack. Rather than trying to create a network-scale portal, the company backed a dozen independent, specialized Web services, like MarketWatch, Sportsline and iWon.
Among CBS.com and sites in which Viacom-CBS have investments, none was among the top 50 -- except iWon.com , a site that gives cash prizes to users, which ranked 21st.
(CBS.Com had been losing audience share earlier this year, but has bounced back somewhat on Web traffic related to the network's hit show, ''Survivor.'')
''We are focused on the marriage of the Internet and on-air,'' said Fred Reynolds, Viacom's chief financial officer, who held the same position at CBS, where he looked after the Internet activities.
Indeed, CBS's Web strategy may be the one that is likely to change the least. All along, the company tended to buy partial stakes in specialized Internet sites like Sportsline in return for broadcast advertising time rather than cash. And much of that advertising comes not from the network's inventory of 30 second commercials, but within the programming itself. ''Every time Dan Rather introduces the business news from MarketWatch, we get credit,'' Mr. Reynolds said.
There are also early signs that the networks are figuring out how to create Web sites tied to their broadcast entertainment programming. Traffic is brisk at the sites for CBS's hit shows ''Survivor'' (www.cbs.com/network/tvshows/ mini/survivor/index.shtml) and ''Big Brother,'' (http://webcenter.bigbrother2000.aol.com/entertainment/NON/) the latter featuring video feeds of contestants 24 hours a day.
A major television network is, after all, an aggregation of many types of programming -- news sports, comedy, drama and, these days, voyeurism. So it seemed natural that the corollary of the network in the digital age was the Internet portal -- a one-stop shop full of entertainment and information, bundled with a search engine and lots of other useful features like news and e-mail. Portals were doubly appealing because, then as now, they get the lion's share of the traffic and advertising revenue on the Internet.
But once they waded in, the networks soon found themselves up to their knees in a swamp of tedious portal necessities like building business directories and creating retail transaction services that have little to do with the media companies' expertise.
''I learned I don't want to sell insurance or create a yellow pages,'' Mr. Eisner said. After a year of struggling to beat Yahoo at its own game, Mr. Eisner decided earlier this year to pull back from the portal business. ''It's not us. Our company stands for travel and entertainment and having a good time,'' he said.
NBC, by contrast, is still focused on building a broad portal. But the emphasis will be on shopping.
''You can't be all things to all people, and that was NBCi's problem,'' said Marty Yudkovitz, president of NBC Interactive Media.
Notably, the only network-affiliated portal that is growing rapidly is Viacom-CBS's iWon.com , which has no explicit links to the CBS network. In less than a year that site, which promises users the chance to win as much as $10 million, has grown to a monthly audience of 8.4 million people, according to Media Metrix.
Now CBS is considering buying or building a broader portal to present a unified view of its 200 local stations and its affiliated Internet sites. But Mr. Reynolds said the company would not give up its strict financial discipline that kept it from entering the sort of deals its rivals did.
''We will not be a second citizen online,'' he said. ''We are willing to invest a lot of money, but at the end of the day you have to have a business that produces more cash than you spend.''
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