Electronic Publishing’s Short Circuit
In the heady days of the personal computer boom, pundits predicted that people would soon begin getting their news and other information on a screen rather than on a page. But it never happened.
The problem is structural, replied the experts. If telephone companies were allowed into the electronic information business, then it would really take off as it has in France, they argued. But a court decision last year to allow local telephone companies to transmit but not own electronic information hardly made a ripple.
In July, a federal judge swept away the prohibitions that barred the communications giant American Telephone & Telegraph from entering electronic publishing and once again a wave of optimism swept through the fledgling industry. The big phone firm has not disclosed any specific plans, but many believe that the long-awaited transformation in the way that people find and use information is just around the corner.
Must Be Compelling
Perhaps. But the experience to date suggests that it will be some time before electronically stored and distributed information makes a significant dent in the way that people read or shop or manage their money. Current services remain too expensive, too hard to use, and offer little that a consumer cannot find in some other way. The first two problems are gradually being solved. The last may prove more difficult.
“For information services to work for consumers, they have to be very compelling,” says Gary Arlen, an independent consultant who has followed the industry since its birth. “Very little of what we have seen is terribly compelling.”
It’s not for lack of trying. IBM and Sears, Roebuck & Co., bravely ignoring other companies’ failures, have invested an estimated $600 million in a new service called Prodigy and are selling it hard to upscale personal computer owners. The regional Bell telephone companies are experimenting with so-called information gateways that provide easy access to a range of independently owned information services. Compuserve, the industry pioneer, claims 550,000 subscribers.
Information services aimed at the business market, moreover, have never been healthier. Dow Jones News Retrieval, Knight-Ridder’s Dialog and Vu/text, and Mead Data Central’s Lexis/Nexis--which offer corporate information, stock research, newspaper archives, and a host of other services--are growing fast and making money even faster. The stock, bond and credit services provided electronically by firms such as Reuters, Telerate, Dun & Bradstreet and TRW are also doing well.
But these so-called on-line business services have the advantage of serving a clear purpose: A lawyer looking for legal opinions, a stock analyst looking for company information, or a journalist looking for an old news story are delighted to be able to dial into a service with a personal computer and search through the reams of information stored in the databases. Companies are willing to pick up tabs that can run to several dollars per minute and up to $40 for a single search, and the users have little choice but to learn confusing search techniques.
Consumers and small businesses, on the other hand, do not need such sophisticated capabilities, cannot pay those prices and will not bother with something that’s difficult to use, experts agree. For the electronic information service business to explode out of its current $6-billion cluster of niches, consumers need to be able to do useful things easily and cheaply--and no one knows what.
Offer Many Services
“To be honest, it’s not clear what consumers are going to use these things for,” lamented a confessed “believer” at one of the major information services firms.
Established, consumer-oriented on-line services such as Compuserve, Genie, and Delphi have traditionally appealed primarily to hobbyists, who access electronic bulletin boards and “chat” services for the latest computer tips and software. These companies also offer news, investment services, home shopping and video games, among other things, and their owners are attempting to push them beyond their traditional markets.
But they remain cumbersome to use and at $10 to $15 an hour they’re not a bargain. “I’m an expert, and I find them difficult to use,” says Bruce Page, president of New York-based Magnetic Press, a research firm specializing in new information services. All the companies are continually working to simplify their log-on procedures, commands and menus to stimulate usage, which should reduce prices. Still, these services appeal to people who are already comfortable with computers as communications devices--a very small minority of the population--and offer neither extensive research capabilities nor anything else that fills an obvious need.
“The competition for everyone (in the information services business) is the traditional way of doing things,” acknowledges Brian Ek, a spokesman for Prodigy. “A lot of things on-line services offer, you can do in other ways, but we package all these together so you can do them more conveniently.”
Prodigy is inexpensive at $9.95 a month for all you can use, and it is also simple to operate. The problem is that it’s terribly slow--”I can’t afford to sit here for hours on end,” complained one user in a message on the Prodigy bulletin board--and most of the pure information services available on Prodigy, such as news and movie reviews, are extremely superficial. What Prodigy is really designed for is electronic shopping, whether it’s for stocks or groceries.
Link Is Critical
Michael Atkin, director of program development and planning at the Information Industry Assn. in Washington, has a long list of features that information services need to offer for consumers to get interested: “If I was looking for a restaurant, and I could go on-line and get the menu, and the wine list, and find out the special, and read a review and make a reservation, I would be willing to pay for that,” he says, emphasizing that he is speaking for himself and not his organization.
The link between information and transactions, Atkin says, is critical. A simple list of entertainment events is no better than what you can get in the newspaper; if you could order tickets off that list, that would be an improvement (though now that can be done with the combination of a newspaper and a telephone.) Atkin also says access to libraries, which would allow the services to have a real educational function, would also be important.
Page of Magnetic Press believes that local services, those that tell you about events happening in your community and, ideally, allow you to input your own ideas and information, will be the key to success. “There must be some kind of electronic equivalent of the town newspaper,” Page maintains. “There are databases that have 10,000 movie reviews, but they don’t tell you what’s playing at the local theater.”
Nancie Ann Mobius, managing director of information services development at Bell Atlantic Corp., one of the local telephone companies spun off from AT&T; in 1984, confirmed that customers in the company’s information gateway trials in Philadelphia and Washington had expressed a desire for more local services.
And in Santa Monica, a free local government service that allows citizens to express their views on community politics and city services, as well as find out about events around town, has attracted a great deal of interest. “People who have never even used computers before are starting to participate,” says Ken Phillips, director of the city’s department of information systems.
Will Create Awareness
Phillips concedes, however, that if the service weren’t free, many of the users would never have tried it. And local commercial services are expensive to develop, precisely because they must be built for a small potential audience. Moreover, the most obvious local service--an electronic yellow pages--may not be around for some time yet. The telephone companies that own the yellow pages are only permitted to distribute information electronically, not own the databases themselves.
Most in the on-line services industry welcomed the decisions that allowed the local telephone companies to transmit electronic information services and gave AT&T; the right to own and operate these services. They suggest that the huge phone companies will help create awareness and educate the public about electronic information. But some are skeptical that they will really be able to have an impact: “The Bell operating companies think they are much more important in the lives of Americans than they really are,” says Arlen. “It takes a leap of faith to think of the phone company as a source of information.”
AT&T;’s track record in new businesses is anything but stellar, and as one information industry official pointed out: “This is publishing, and publishing is a very subtle business. The phone companies don’t deal in that kind of subtlety. If they couldn’t make computers go, how are they going to mix it up in my business?”
AT&T; is expected to move cautiously, focusing at first on so-called audiotext services in which callers can access information on the telephone. Rumors also abound that the company will buy an existing electronic publisher such as Mead Data Central, though it’s not clear that such a move would really give the industry a boost.
Terminals Are Key
One intriguing possibility is raised by AT&T;’s discussions with Nintendo Co. of Japan, which are aimed at finding a way to use Nintendo’s widely distributed game computer as an information access device. That would help solve the problem of reaching the vast majority of American consumers who don’t own a personal computer.
Some believe that no service requiring a personal computer will ever have broad appeal. “The key to the market will be low-cost terminals” says John Gilbert, director of sales and marketing for General Videotex, which operates the Delphi service. “I don’t think people will go out and buy a PC (in order to use on-line services), but if you give out the terminals, then all these services provide value.”
Giving away terminals was the key to the growth of on-line services in France, where about 5 million people now use the Minitel system. The state-owned telephone company, as part of its strategy to jump-start the market, subsidized the development of a simple, low-cost terminal and then distributed it for free with a subscription to the service. Some of the U.S. phone companies, including Southwestern Bell and US West, are experimenting with the French model on their gateway services.
But even in France, the Minitel system is used primarily for directory assistance and sometimes-pornographic electronic dating services, and many dispute whether it should properly be called a success. In persuading people to shop, bank, and get their news with a computer terminal, the question remains: Why should we?
VIDEOTEX SUBSCRIBERS Growth in the number of customers receiving videotex services from 1980 to 1988, in thousands. Scource: Arlen Communications Inc.
