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Dean's Digital World - Sources 46

The New Internet: Mergers and Acquisitions

By Dean Tudor

Dean Tudor


"Today in North America, newspapers and televisions and Web sites and magazines are dispensable spokes in the great wheel of the entertainment conglomerates, which measure their merits by the single criterion of share price in the financial markets...The stakes are the number of eyeballs attracted, which is all that matters to advertisers." --- Todd Gitlin, speech at Ryerson Polytechnic University, March 8, 2000, adapted in the Globe and Mail, March 13, 2000.


CONVERGENCE -- is the newest buzz word in computerland... Well, only new for those who haven't been around a while...Ryerson Polytechnic University's School of Radio and Television Arts has had a Converging Communications Centre since 1994, promoting studies into why it was happening and how we can all get prepared for it.

Convergence used to be known as "computer-mediated communications", where the idea expressed was to communicate -- in whatever form -- by computer. Other related terms included "multimedia" (this has been around since 1960) and "new media" (still being used after thirty years, but it's now old hat).

Simply put, convergence is the term of choice for Web sites that combine all the features of newspapers, magazines, radio and television-video: text, graphics, motion, sound, characterized by a quick dissemination of news. And in order to do this, these Web sites must be vertically-integrated: the firm must have its own access routes such as ISPs, its own distribution networks, its own broadbanded dedicated lines for transmission higher than 56K baud, its own content, its own employees, its own Web construction -- a full-service firm... It's all about "branding".

There were very few naturally-occurring freestanding convergence companies. Salon is probably the most well-known. Some people characterize Salon <http://www.salon.com> as a magazine, but that's only for its print content. The main components of its business (and this serves as a model for any convergence firm) is:

* Print Content, with more emphasis on "alternative" writings and "breaking news" and "scoops" in the style of Matt Drudge;

* Broadbanding, with Salon TV and Salon Radio, best viewed via cable and the Internet (although a television show will also be on the US Bravo cable network);

* E-commerce -- the selling of "Salon" as a branded item, along with other goodies compatible to the Salon lifestyle (wake up and smell the latte!!);

* Media Sales, with advertisements for other ventures;

* Technical Projects such as Web site design and network expertise.

Salon, then, goes up against Fox/CNN/MSNBC/CTVNewsNet, and other similar news and magazine services. By the time you read this article, I would not be surprised to see Salon merged or allied with another firm that would fit like a glove. Perhaps a cable firm or network access company, for that would give Salon a natural entry into the broadband stream and give the other company some content and Web expertise.

And that, of course, is the current wave: mergers and alliances. It would appear to be impossible to start up a vertically-integrated company from scratch. It's much easier to change by merger and alliance. Old and new media larger companies are poised to carve up the Internet for themselves, hogging all the positions. Need some examples? Try --

1) America Online and Netscape merged eons ago (or what seemed like eons ago in cyberspace time), giving America Online the premier software tool to access the Internet...

2) America Online and Time Warner, merging the content of the latter with the source of customers and readers of the former...

3) BCE Inc.'s control of Sympatico (from Bell Canada) and alliance with Lycos search engine and portal (Lycos owns 29% of Sympatico), soon to have an IPO...

4) BCE Inc. (customers, access) buying CTV Inc. (content and cable networks)... Other major Canadian players include both Quebecor and Rogers Communications pursuing Groupe Videotron; Rogers Communications has a multi-faceted alliance with Shaw Communications; Rogers AT&T and Excite Canada (jointly owned by Rogers Media and Excite@Home, a US firm) will jointly offer Internet content services over digital phones and other wireless devices.

5) Yahoo! Inc. in an alliance with News Corp. The former gets News Corp.'s content (Fox, newspapers) while News Corp. provides access to Yahoo's Web sites via its satellite networks... Other American alliances include MSNBC cable news channel (NBC plus Microsoft); New York Times plus ABC News are producing daily joint Webcasts; Associated Press joins with online news site CNET to provide news; the Wall Street Journal and CNBC (NBC's business channel) are in an alliance; Washington Post and MSNBC are also sharing news.

6) The Chicago Tribune bought Los Angeles Times, and the new company has a strong regional holding of media outlets in Los Angeles, New York and Chicago. The company is experimenting with turning newspaper reporters into "multimedia journalists" and merging all the media outlets into one newsgathering source. Reporters may write for the Chicago Tribune, be heard on WGN radio and appear on WGN-TV or its 24-hour cable news channel. The reporters are referred to as "content providers" for the parent company, and with the Times Mirror holdings, the providers will go national. The company is actively teaching reporters how to contribute to the various outlets, with no walls between the papers, television, radio and the Internet. The Tribune company now has huge content creation assets in the top three USA cities; they'll be able to lock in the market. Also, about two-thirds of newsrooms (mostly regional and local papers) support both hard copy and Internet copy services, possibly at little or no extra pay for the reporters.

7) KnightRidder.com is a reality. The Internet operations of the second largest USA newspaper group will be a force to reckon with. For reporters, this Internet company offers stock options, just like the dot coms, and for this reason they will continue to attract competent and useful reporters.

8) The post-PC era is here: information appliances (simple devices for accessing Internet services) are multiplying like rabbits. Low cost smart mobile phones, NetTVs, Web terminals, E-mail terminals, and PDAs will allow the mass media to communicate in different but shorter ways with clients or users. "Chunk journalism" has indeed arrived.

In the New York Times Magazine, February 20, 2000, Henry Blodget, a Merrill Lynch analyst, said: "Small Internet media companies that produce magazine-style content will have trouble over the long run, because that isn't what people do online. What people do online is look for information, communicate by E-mail or in chat rooms and interact with a wide variety of content, such as news, games, shopping, pornography or travel."

No government in North America appears to have a policy about convergence: convergence is simply happening. Yet the EU is acting on a report tabled in March, 1999, ("The Convergence of the Telecommunications, Media, and Information Technology Sectors") which examined the economic and social implications of the convergence phenomenon. The report felt that vertically-integrated companies might abuse their market power, and control access to one or more elements of the chain, in order to close convergence to other firms. It further recommended strong copyright protection (do I hear you writers cheer?) and content regulation. This and other studies and comments are at <http://www2.echo.lu/legal/en/converge/converge.html> Who will bell the cat in Europe? In North America?

Just about every media outlet has a Web site: they are forced into it, in order to be a presence, to have a brand. Many sites are clunkers. Some are more converged than others. Television, radio and magazines appear to be relatively happy with putting up content with is mostly entertainment, along with advertisements, and are really just an Internet version of the original firm's work. But it's all happening at the newspaper and the news channels...

Newspapers should be particularly aggressive in setting up Web sites: they are prime candidates for vertical-integration and convergence, and hence, mergers and alliances or even takeovers. An Editor and Publisher survey showed that only 24% of newspaper sites were making any kind of a profit from online services, and 75% of the papers felt they were losing classified advertising to online competitors. Something has to happen, and soon. A study by the Diebold Deutschland looked at the online presence of 150 newspaper publishers in Europe and the United States; it concluded that they were ill-prepared for a future on the Internet, despite a ready reservoir of online content. Diebold warned that the there is a threat to newspapers from well-funded (via IPOs) search engines and online services which regularly regionalize their content. And: younger readers prefer to get their information from the Internet rather than from a newspaper.

Some suggestions at a recent Interactive Newspaper Conference sponsored by E & P included partnering with local businesses, providing a way for them to do online business and for papers to get a cut. Several Canadian newspaper Web sites are being refashioned and relaunched. TorStar is being re-launched as the main site for everything you ever wanted to know about Toronto. Canoe.ca is being spun off with an IPO, to raise money and be independent of Quebecor, which bought it only as part of the SunMedia deal. Thomson is dumping all of its newspapers save the national Globe and Mail, and using the money to relaunch its Internet brand of "Globe" services. Indeed, the newspaper Web sites should be turning into every news junkie's dream...

Of all the media, newspapers have made the most of the Internet. Doing research for this article, I found that efforts by magazines and broadcast have been puny, and they have been relying on whatever newspapers come up with. The Web has made more dramatic changes in the newspaper world than in any other form of media. Here's some of these changes:

* to survive as a print entity (now often called the "dead-tree version"), newspapers must have a presence on the Internet, a brand for the community: if newspapers don't do it, some other firms will;

* deadlines are now continuous, not just once a day (yet remember that papers used to come out several times a day, some with "extras"). Every minute there will be changes and updates for the Web site. This makes E-mail extremely important, especially if papers can sell an E-mail news delivery service to cell phones and pagers and other information appliances. Unfortunately, speed of delivery can often kill news quality: there is still a need to check and verify sources;

* there is the rising importance of the Web that has been spun for 150 years by the "wire services", vitally needed to keep Web sites updated. At the same time, many newspapers are using material from the Internet, such as articles from Salon, APBNews.com (crime), TheStreet.com, Microsoft's "Slate" and other ezines. These items are appearing officially "in print" for the first time, in the normal syndicated way (some are from the syndication company Universal New Media);

* there is more local news and readers are eating this up. Local news is unique. Nobody else has it for a region: it draws readers from afar who want to know about "news from home". Papers need to give people a reason to come to their site. Newspapers need to build powerful local and regional online sites serving communities of interest with news, information, entertainment, e-commerce and other consumer and retail services (such as listing a movie, reviewing it, and doing a pay-per-view download -- all with a series of clicks;

* packaging is different: scoops and exclusives, deep background research sidebars, links to related stories, links to other off-media sources, investigative computer-assisted reporting with its masses of databases, archives, corrections and yanking of stories, video and audio, more documents and reports posted in their entirety, interaction with readers through chat rooms and solicited opinions, E-mail addresses of reporters/commentators. At the same time, hard copy newspapers and magazines are beginning to look a little like computer screens in their design packages (USA Today led the way with its "TV news in print" style, now twenty years old);

* hiring of writers and editors and researchers for online content exclusively such as at TorStar and Canoe. Many of these will come from journalism schools which are teaching online journalism, although some graduates will prefer to move on to "Dot Com" firms with stock options. Such Dot Coms are already hiring experienced journalists and professional librarian graduates, to do websiting and research work. Indeed, these in-house people can help newspapers with ads, classifieds, building community online, much like Salon's vertical integration. Newspapers already refer to this as the "dot com brain drain".

* BUT: of course, Web sites are susceptible to hacking and sabotage. Vulnerability is a key issue here. Media hoaxes of the past may be peanuts next to common parlour tricks and deliberate maliciousness of the near future. Security flaws are quite common, and can do great harm.

Refocussing is becoming more common now. Newspapers are being sold, television chains are being sold, spinoffs of digital activities into standalone companies such as Canoe.ca, Reuters, and KnightRidder.com are becoming regular events. The one-size-fits-all mentality of the mass media is changing toward an emphasis on personalization and customization, to one-on-one loyalty marketing. To survive, media must be known as multichannel publishers (Web, E-mail, CD-ROM, fax, data broadcast, audiotext).

Maybe McLuhan did say it best: "The medium is the message", and we are all converging.

To keep up-to-date in this emerging area, read/participate in the following:

There is a hard copy academic journal called (naturally) CONVERGENCE, and some of it is available also online at <http://www.luton.ac.uk/Convergence/> It is billed as the "journal of research into new media technologies". Typical articles deal with globalization, refashioning old media in terms of new media, and the odd "scholastic" paper such as "Stereoscopy and Pre-Raphaelitism; the Pre-Raphaelites and John Ruskin in the New Media Age". The mission of the refereed journal (from the School of Media Arts, University of Luton, UK) is "to develop critical frameworks and methodologies which enable the reception, consumption and impact of new technologies to be evaluated in their domestic, public and educational contexts".

You can subscribe to a CONVERGENCE discussion group (led by Silicon Alley Reporter and its Digital Coast Reporter) at <http://www.siliconalleyreporter.com/convergence/> and even get it in digest form. - To post to the list E-mail: CONVERGENCE@um1.unitymail.com - To post a job, press release, or event listing to CONVERGENCE contact Linda Miller at mailto: linda@siliconalleyreporter.com

Archives are at <http://um1.unitymail.net/Unity/ctrlpanel/0/6/161>

Affiliated with CONVERGENCE mailing list is indieWIRE <http://www.indiewire.com> the Digital Coast Weekly <http://www.digitalcoastweekly.com> and RESFest <http://www.resfest.com>. Most of the discussions are technical, but this is an easy way to make contacts. Emphasis appears to be on those people coming from a broadcasting background.

For those with a newspaper or print background, there is the ONLINE-NEWS discussion list, which uses Lyris mailing list software. <http://www.lyris.com>. The archive and list settings are at <http://www.planetarynews.com/online-news>. This list is sponsored by Content Exchange <http://www.content-exchange.com>

This digital marketplace for online content creators and publishers also has a free electronic newsletter (began in Fall, 1999) concentrating on "writing for the Web" online content. It grew out of a section of Editor & Publisher magazine. Most discussion is about news content. Some recent articles include writers' clip files on the web, and tips on succeeding as an E-mail publisher. Full details are at <http://www.content-exchange.com/cx/html/newsletter/>

And Content Exchange co-founders Steve Outing and Amy Gahran have launched the E-Media Tidbits Weblog. Check it out daily for the latest news, links, and other stuff in the online content world. <http://www.content-exchange.com/cx/html/pressreleases/pr031300.htm>

For another weekly electronic newsletter, do try NEWS-ON-NEWS/The Ifra Trend Report, which began in July, 1999. This is a summary of global trends, strategies and innovations influencing the future of news, newsrooms and news publishing. (Ifra has 1,700 member publishers and technology vendors worldwide). Upcoming seminars, conferences, workshops, etc. are noted, with themes outlined and contact persons indicated. Subscriptions are free, through <www.ifra.com>.

Dean Tudor is Sources Informatics Consultant and a professor of Journalism and Information Science at Ryerson University. He can be reached at dtudor@acs.ryerson.ca.

Published in Sources, Number 45, Summer 2000.

See:  Other Dean's Digital World Articles

www.deantudor.com



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