For the Week of July 8, 2002

It takes time to adapt. Inventors don't always know the uses to which their inventions will be put. (Marconi saw his radio as a point-to-point technology, not a broadcast one.) Markets must evolve to meet technology. (The first feature-length movie came out 20 years after the first movie houses opened.)

The more revolutionary the technology, the longer it takes for businesses and markets to adapt. The Internet, with its universal connectivity, is such a technology.

It was the idea that the right businesses and markets would all be invented quickly that was the great naïvete of the 1990s. It wasn't the invention, but the assumption that everything based on it would be financially worthwhile, that was the failure of the Boom Time.

The closest analog for the Internet may be TV. It's the one invention whose adoption curve comes closest to mirroring that of this medium. But even in that case it took 5 years of regular broadcast to create the first true TV hit, "I Love Lucy." Milton Berle's "Texaco Star Theater," after all, was merely a burlesque, a stage form adapted to the new medium and broadcast live. Other shows, like those of Jack Benny or Burns and Allen, were radio shows moved to the new medium wholesale. "Lucy," which was filmed and cut weeks before it aired, was truly something new, and ushered in the modern TV age.

Remember, too, that there were ready references for the early TV programmers. I've mentioned two - burlesque (itself an outgrowth of vaudeville) and radio. There was no such preview technology here.

So transforming technology into a transformative medium isn't easy. In fact, I would assert the news business still hasn't adapted to the Internet. Instead old models are simply being ported in wholesale - newspapers, broadcast cable, magazines. For the most part these models have failed to find a profit. The chief attempt to create something new, "Salon," will in time be seen for what it was, the Dumont Network of the Internet.

But there is money being made here. We've found a host of experimenters, one-man bands building individual brands. Some are based on links, others on attitude. What all these individual sites share is one person, in total charge, and with no regard for the old rules. (I'd argue that this site has been too beholden to the old rules and forms - I could be doing much better if I broke some of 'em.)

The new winners are basically pamphleteers. We're 18th century journalists, using the low costs of the new medium the way Benjamin Franklin (and a host of others) did. A one-man brand, dependent on low costs and personal passion, can result in a profitable small business. Most, however, don't use all the Internet can be, because there's so much the Internet can be and we all wear blinders. Some of us are big on links, others on community, still others have a technological axe to grind. We all have limited visions.

What succeeded the pamphlets, in the 19th century, was a host of newspaper businesses , each geared around either a political philosophy, an ethnic identity or an entrepreneur's genius. (The development of Linotype technology , enabling enormous scale, put their competition into overdrive and, in time, ended it.)

I thought of this while in New York recently for PC Expo. I was staying in Herald Square, where a statue of Horace Greeley sits on the south, and the frontispiece of James Gordon Bennett's "Herald" building is on the north. These were businesses that were born of that century and survived their founders (but not the strains of the 20th century, unfortunately). There were literally thousands of others. Some survive today, like "The New York Times," others survive in a different form, like "The Nation," still others were products strictly of their own time, like "Harper's Weekly."

The point is that unlike the 18th century pamphleteers, the 19th century newspapers had staffs and budgets and offices. An entrepreneur hired a writer or two, a typesetter, and then brought in newsboys to distribute the product. The best grew to great size. Many had employees with a style or an instinct to draw readers - Bret Harte, Mark Twain, Nellie Bly. But unlike the case in the 18th century, these people were employees. They worked for businessmen who followed the ethics of business, not journalism.

All of today's "great newspapers" started in this way, with a businessman who had something to prove, and who hired the writers to prove it. All that stuff about ethics and "what is news" came later, after some of the businesses became institutions, bureaucratized, and felt the need to renew themselves in succeeding generations. My own Medill School and Columbia's Pulitzer School weren't named for journalists - they were named for business tycoons.

What has stalled online journalism's progress is that today it's a mix of pamphleteers and people from other media. "Analysts" (and most are no smarter than the people they're covering, or else they'd be running businesses themselves) have stayed focused on those from other media, ignoring the innovators. Thus, the innovations haven't spread, and the non-Internet media have fallen to Earth. The pamphleteers happily remain as small businesses, the other media get the "big numbers" (while grumbling about a lack of profit) and the audience - I assert - isn't served. Neither is the market.

There's a huge opportunity here. A businessman needs to combine the passion of some pamphleteers with the technical discipline to use all this medium has to offer and the financial acumen to turn a profit. Here are some of the things the true successes will have in common:

• They won't focus on the Web site, but their lists.
• They will understand the time value of data - paid customers get the good stuff first -- then push it out for publicity's sake.
• They will know that interactivity with the audience is the key to success, not just talking to them but having them talk to each other, and acting on the publication's behalf.
• They will promote attitude first, not ethics. (Readers don't read ethics, they read stories.)
• Most important, 21st century Internet journalism will use all the technologies at their command - words, sounds, and video, interactive, e-mail, and more.

The great Internet newspapers, in other words, have yet to be invented, and no one presently in the market has the cojones to invent them. Give me the budget and I do (although I may fail - that's why they call it risk capital). Find the budget yourself, and maybe you will succeed, then hire me.

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Shameless Promotion

People are always asking me, what's the fastest route to Internet success? I tell them it's following Rob Frankel. Rob understands branding, and he understands the Internet. Just browse his store and see.

I know, I know. You've got to have money to make money. But if you have a user base, you can turn that into the money you need quickly with Rob's latest service, I-Legions . So what are you waiting for?

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Takes on the News

Technology Without Representation is Tyranny

Here's a shortcut for linking all I've written about ICANN and all I've written about the Copyright Wars. Technology without representation is tyranny.

This is based on what we were taught in school was the cause of the American Revolution - taxation without representation is tyranny. Whether ICANN admits it or not, it is holding governmental power. It can take away your domain, and decide how (or whether) new domains will be created. This is governmental power. ICANN is presently engaged in a struggle with national governments around the world, seeking to extend this power to their handling of Internet resources. (The so-called cc:TLDs are parceled out by governments and many governments want to set rules on how they're given out, as in the .kids.us bill.)

Yet at the same time ICANN seeks to expand its power and become a true Internet government, it eliminates democracy. The statement from the Center for Democracy & Technology puts it pretty plainly. There are "no meaningful checks on ICANN's power," "diminished accountability," and "a pale shadow of promised user representation." It has "a tendency toward or actual exercise of strong autocratic or dictatorial control." At Merriam-Webster's dictionary site, where I found the last quote (it didn't come from CDT) this is definition two under the word "fascism."

In the economy the "government" is the market, and everyone has some power within it. The equivalent of fascism there is monopoly. Even an oligopoly, a monopoly shared among a small number of players, distorts the normal market processes. (If you've put $1 or more into a machine for a can of Coca-Cola, you know what I'm talking about.) An outright monopoly is even better, for the monopolist, and worse for the consumer.

Courts no longer disagree on Microsoft's monopoly power. Intel's market power is almost as strong. It is hard to see the recording industry (or the movie industry, or the broadcast industry) as anything other than an oligopoly. Put these powers together and you have a market distortion that's tough to fight, very tough. Such a consortium can impose "solutions" on the market you might think the market couldn't shake, deriving both monopoly profits and maintaining obsolete business models.

This is what Microsoft's Palladium is all about, according to Infowarrior Richard Forno. It's at the heart of Intel's TCPA technology, according to Ross Anderson. They are among many sounding the alarm over this seizure of the Internet, and the technology market, on behalf of the content oligopolists.

In theory a solution to the Copyright Wars is devoutly to be wished. I'd love to be able to pay a fair wage to all artists, in all media. I'd like to make more money myself. And we can't move forward in any industry until these problems are solved.

But these are problems of business models. They're problems of the market. They won't be solved through the top-down approaches of monopolists or oligopolists. Such approaches will be resisted. They will only make the Copyright War worse, and only drive the market down further. Because technology without representation is tyranny.

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End the Copyright Wars

The copyright wars are becoming bloodier all the time. They're taking down the economy. They're threatening to take down the whole Internet.

The latest escalation is a deliberate industry campaign to hack peer-to-peer networks out of existence. This is Clueless in the extreme. Even if it succeeds in moving casual users of p-to-p software to stop using it, that doesn't mean those people will then "knuckle under" and buy CDs every time they want to hear a tune. The problem is the industry's business model, based upon which all music artists are slaves to a few recording companies, and the rest of us have to pay $20 for a 2 cent piece of plastic. That must change.

The problem (and thus the recession) will get worse before it gets better. Anyone looking for a resolution had to be dismayed by the remarks of Congressman Howard Berman, Democrat of Hollywood. Read this and weep for America: "While p-to-p technology is free to innovate new and more efficient methods of distribution that further exacerbate the piracy problem, copyright owners are not equally free to craft technological responses. This is not fair." Berman was seeking to hold the industry harmless for hacking, for the insertion of viruses into peoples' computers, and for any other damage the industry might do to people or the economy. Berman is an idiot. Terrorism against those you decide are "bad guys" makes you a terrorist. It creates moral equivalence where none existed before.

It gets worse. Microsoft has launched a new legal attack on users with its latest "security update,", turning its Windows Media Player into a Digital Rights Management device that will destroy the usefulness of users' digital files, and using mumbo-jumbo to hold itself harmless from the damage. (Smaller companies are doing the same things, by the way, on behalf of their spyware.)

All these actions do is make people mad. Mad consumers don't buy new stuff. Mad consumers don't drive the economy forward, they drive it backward.

But maybe I can put it in language even the Bush Administration understands. No economy, no tax revenue, no war. If you want to win the War on Terrorism, stop the industry terrorists.

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Running Down a Dream

As proof of the bear market adage that 1+1 can be zero, Alan Meckler's INT Media (formerly Internet.Com) has bought Jupiter Communications for $250,000, and is considering changing its name to Jupiter as well.

This sale was Jupiter's final liquidation, one that brought in $3.75 million for assets once valued at $45/share . Some people I talked to were aghast - how could it be worth so little?

The question I responded with was, did Alan Meckler pay too much? At under $2/share, INTM isn't far from the Mendoza Line itself. INTM's latest 10-Q, which only covers the March quarter, shows it cut over half its total budget and still saw its "cost of revenues" rise to an alarming 67%. It's still bleeding cash. The only good thing it can say is it still has $25 million in the bank.

In other words Meckler is struggling to survive just like the rest of us. His play is obviously to leverage the brand name, eliminate expensive Jupiter analysts in favor of cheaper INTM ones, keep as many clients as possible, and push what's now free Web content off as paid-for "research." (That's what I'd do.)

Will it work? Maybe. But spending $250,000 in one fell swoop doesn't make it easier.

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Clued-in, Clueless

Clued-in is Richard Doherty, who is working manfully this summer to turn-around Congress' intent to destroy technology progress on behalf of the much smaller copyright industries. Heroism is real when cowardice is an option.

Clueless is Reuters' latest "copyright notice." "Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters." Clients, and most servers, cache content as a matter of course. It is a requirement for its use by search engines. This clause is physically unenforceable, and legally ridiculous. If you don't want it cached, don't put it online.

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