The Cole Digest, April 26, 1995

We're with Chris Gulker, the newspaper executive who created The Electric Examiner, the San Francisco Examiner's presence on the World-Wide Web (Gulker is now with Apple Computer).

Chris has given us some background on the Web and now he wants to make some points about business transactions:

For the first time since their invention, more computers were sold in 1994 for use in the home than in business. On-line services are enjoying phenomenal growth, and the trend in computer sales bodes well for sustained growth of such services.

On-line services can regionalize their offerings. An America Online user who logs in from Chicago sees the Tribune's Chicago Online as a "front page" option, while the Bay Area user sees Mercury Center, the on-line newspaper service maintained by the San Jose Mercury News.

Given rampant growth and local customization, why would a paper not want to partner with an on-line service? As the services are quick to point out, partnering means:

*The paper doesn't have to invent technology or support users (no calls to the newsroom asking, "Why won't my modem work?").

*The services come with a base of hundreds of thousands of users, including users in the paper's traditional market.

*Financial risk is minimized.

*Cross-promotion promotes the growth of both entities.

How can you go wrong? Well ... a couple of issues do spring to mind. Currently, print-media excursions into cyberspace aren't making money, by and large.

How could this be?

At issue is the on-line service view that the medium is primary and content is secondary: The on-line service keeps at least half of the money paid by users.

This attitude is changing as competition among the services heats up for "features," which brings us to the next point: Newspapers aren't really a good match for the new medium.

It's easy to get information from a printed newspaper. Readers can scan headlines and get just what they want quickly. Indeed, print newspapers have been developing their technology, news presentation, for more than 100 years.

By comparison, reading a newspaper on-line is a tedious experience. Try this: Read a paper that also has an on-line presence, say, over coffee. Then, read the same stories on-line, and note how much more time it takes.

In addition, chances are you'd already heard most news, albeit in less detail, on radio or TV the previous evening, before you read it in the morning paper. Are users really interested in logging in to a computer system to get yesterday's news?

There's also the issue that an on-line newspaper tends to have the same personality as the on-line service. Most on-line service software offers few options for presentation (proposed new interfaces from Ziff Interchange and Delphi are the exceptions). The paper must bend to fit the windows offered by the on-line software, which is the same space that serves, say, the Fast Food Forum.

For their part, the on-line companies can't just throw out their interface to accommodate newspapers' desire for rich authoring tools. Getting a million people to all change over to new software takes a long time.

This translates to a need to have people re-format print news content to fit cyberspatial layouts. Different space requires different news decisions.

Mercury Center is said to have 20 people, Access Atlanta 30 and Media Link 100. These people do not mainly create content, they take existing stuff and change it to fit a different viewing space.

Consider the revenue necessary to recover the cost of 100 full-time employees. Then, consider that the value they add to the content is probably zero. Then, consider that the on-line company wants to keep at least half of the revenue, which may not be stellar to begin with.

Next week: a business model.

Onward.

\dmc

[THE COLE DIGEST is written by consultant David M. Cole, editor and publisher of the industry newsletter THE COLE PAPERS. The DIGEST is made available to PressLink members every Wednesday at no extra charge. Send comments by e-mail to cole@plink.geis.com. The COLE DIGEST is the property of The Cole Group, a California sole proprietorship. Reproduction in whole or in part without the written permission of The Cole Group is prohibited. Copyright (C) 1995, The Cole Group. Opinions expressed are those of The Cole Group, unless otherwise noted. [THE COLE PAPERS is a monthly newsletter devoting itself to technology, journalism and publishing. Subscriptions are $117 for 12 issues ($135 outside the U.S.). MasterCard, Visa and American Express cards are accepted. For more information, e-mail cole@plink.geis.com, call (415) 673-2424, fax (415) 673-2449 or write The Cole Group, 2590 Greenwich St., Ste. 9, San Francisco USA 94123-3333.]