Traditional Media Struggle For Web Niche

Sydney Morning Herald

Monday November 22, 1999

SANDY PLUNKETT * Sandy Plunkett is a San Francisco-basedcorrespondent. She can be contacted at splunk@ozemail.com.au.

In the new media age of the Internet, the more nimble and aggressive Web portal sites so far upstage traditional media companies. Sites such as Yahoo, Excite, America Online and Infoseek, as well as specialist Internet-only content providers such as computer news site C-NET, have done their best to help foster the image of old media as plodders and laggers in the new economy.

It is certainly true that most of the big media brand names have so far been wandering in a daze between the old world and the new, trying to attract an audience to their own sites built around their familiar brands and failing to see the mass market power of new portals to draw in big audiences and advertising dollars.

There are exceptions such as the German media giant Bertelsmann and the New York-based Dow Jones which embraced the Internet early and smartly. Bertelsmann has pursued a multi-faceted partnering and investment strategy with Web companies and Dow Jones has established its own interactive version of its best-known newspaper asset, The Wall Street Journal.

Some such as US TV network NBC are so deeply invested in the Net across a range of joint ventures and equity plays (such as MSNBC and CNBC) that something is bound to pay off sooner or later.

But, for the most part, traditional media has floundered in Webland and there is still no consensus on what constitutes a successful Web media strategy. But after years of dabbling with the Web, so called Big Media's Internet future may be much stronger than their rival upstart portal pioneers may think.

In recent months, many media conglomerates have been forking out huge dollars to buy their way into the Web's most highly trafficked sites. From Walt Disney company's purchase of 43 per cent of Infoseek to NBC's deal for a 19 per cent stake in C-NET's Snap, a flurry of high-profile deals are sending the message that when it comes to media the Internet is no longer the exclusive realm of the tech wizards.

At least some of the deals done in recent months may prove to be more reactionary than strategic, an attempt by traditional media players to plug holes quickly and regardless of price. But many industry commentators believe that the early lead in new media achieved by the portal sites may be relatively short-lived, despite the fact that many are generating profits while the sites of publishers are still deep in red ink.

The increasing commoditisation of technology, along with the general shift of users overtime away from general-purpose portal sites toward more specialist ``affinity" portals will leave the uppermost positions of the communications revolution value chain to the owners and creators of intellectual property.

It would be a mistake to discount the strength of the media giants at this stage of the Internet game. While the promise of true convergence between old and new media has a long way to go, there is a growing consensus that the portals need the media giants just as much as the media giants need the portals. Maybe even more so. If history can serve as any guide, the large media players with lots of cash and an ability to execute may yet marginalise the Web portal pioneers.

The history of the early days of American radio some 70 years ago bears this out, when a group of techies turned entrepreneurs, battled with giants such as Westinghouse, NBC and CBS, and General Electric, for control of the first mass medium.

In the early 1920s, there were more than 500 eclectic and independent radio stations operating in the US. Most stations ran at a loss due to limited advertising but just like today's Internet pioneers, they thought they were securing a stake in the new future. If the station was popular enough, the theory went, they could find a way of supporting themselves through voluntary audience subscriptions.

But in late 1926 RCA changed the game with the creation of the first wide-scale advertising supported network, National Broadcasting Company. Others such as CBS and ABC sprang from that move. It was the ability of the giants to construct strongly branded, advertising supported, radio networks the equivalent of today's portals which either swallowed or buried hundreds of smaller, innovative broadcasters. By the mid-1930s, 700 of some 850 radio stations were network affiliates.

Those winners of the radio wars in the US, the likes of NBC, ABC (now part of Disney) which have a stake in Infoseek, NBC (via its partnership with Microsoft and its stake in Snap), and Westinghouse (with its CBS Sportsline and Moneywatch sites) are now playing in a new battle on the Web. Their key assets are their brand power, their content power and the pulling power their content can bring.

As the Internet changes from being technology driven to content driven, the assets of the traditional media players would take on a far greater and reinvigorated emphasis to both consumers and advertisers.