For the Week of January 27, 2003
I do get critical e-mail here. Most of the notes say I'm too hard on Republicans.
That's fine by me, because it seems that most reporters, facing a Republican (especially a powerful one), tend to roll over and pant to have their tummies scratched. I'm not so much against Republicans per se (I started my life as one) as against -isms of any sort, especially powerful ones. I'm skeptical of most everything, including skeptic-ism.
But I don't pull any punches, either. When I find someone's actions egregious I say so. Thus nearly a year ago, when word first got out about the FCC re-monopolizing wired communications, I wrote "Michael Powell is a Big Fat Idiot."
It could be he has changed. It could be I was wrong. (I've been wrong before.) Because over the last several months Powell has given every indication of being the first FCC chairman ever who "gets it," and who is capable of both growing and changing course.
My first indication came with the report of Powell's "Spectrum Policy Task Force," which used such terms as "interference temperature" and "regulation by time" to indicate the new scientific concept that "spectrum is an ocean" might actually get into the law.
The last week brought two new revelations. First, Powell seemed to be reversing himself on media ownership rules, telling a U.S. Senate hearing the changes he proposes are modest, in line with recent court decisions, and would not result in a national media oligopoly. . (He was getting plenty of cover for this change-of-heart from fellow Republicans ). Powell also told the Senate new telecomm rules won't deny competitors access to the wired network (a direct contradiction to everything we've heard before).
Now it's possible that Powell was spinning. You get in front of Congress, you say what you think they want to hear. Even if it disagrees with what you plan on doing. But it could be Powell has undergone a real change of heart, that he has, in the parlance of this newsletter, "gotten a Clue."
This was most evident at the CES show in Las Vegas, where Powell admitted that TiVo was his favorite Christmas present. He called it "God's Machine." He talked about sharing TiVo-saved shows with other sets in his house, even letting his sister in on shows she missed.
If you or I said this we would be called cranks, and the law might be called in. If Sen. John McCain or Hillary Clinton said this, the Motion Picture Association of America (MPAA) and Recording Industry Association of America (RIAA) would quickly deliver a stern press release. But it is good to be King. You dump on a sitting FCC chairman with a working majority behind him at your peril. When his dad is Secretary of State, you hold your tongue.
Powell is still a bit hefty, but I'm now much more inclined to send him a Bally's membership than a cheeseburger . Whether he came in, as he said, with an open mind, or whether his mind was changed through investigation or events, he has been saying and doing the right things for a few months now. He appears willing to move the agency where the technology tells it to move, not where those it "regulates" tell it to move. If he can stay to that course, despite what is certain to be enormous pressure from telcos, cable operators, broadcasters, and the content industries, he could be a great FCC chairman.
If it's all rhetoric, of course, and the agency's actions make it a friend of monopoly and opponent of Moore's Law, he's more than a Big Fat Idiot. He's an evil and devious one. The jury's out, and actions will speak louder than words. For now, I should shut up.
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Takes on the News
Last Word on Case
This should be the last article you read on Steve Case and America Online.
Andrew Leonard of Salon offered what I think is the most false and Clueless take on Case' tenure, calling him "either" a brilliant visionary or fumbling clod . I don't know where Leonard has been the last five years, but as a long-time AOL observer I know for certain there's a third option - mega-crook.
In its heyday AOL put out more screwy deals than Don King, each accompanied by its own glowing press release. The deals all stated that so-and-so was paying X million dollars to sponsor this or that part of AOL, and that money was duly reported on the income statements.
But as we now know, from AOL Time Warner restatements, much of that money never materialized. Like the bandwidth sales of the telcos, like the positioning sales of the dot-coms, most of the money was phony. It wasn't cash, it was "consideration." You, dear reader, have billions of dollars in consideration from yours truly. But if you put that on your balance sheet you should go to jail, because this newsletter comes to you without cash, without checks, and without any other form of hard security attached to it.
Then there was the deal's motivation, as I explained at ClickZ after the merger was announced. "AOL thinks it can force Time Warner to build its international marketing, but Time thinks it can make AOL pay for its cable upgrades. Can they do both? Not if the stock price falls - and with this kind of dilution a fall is certain."
Steve Case pumped up his stock price with ad sales, then bought Time Warner with watered stock. Time Warner thought it was smart because it diluted the implied value of that stock by half. But the ratio of value-to-water was 1:10, not 1:2. Most subscribers were paying far less than the reported (then) $20/month subscription rate. The churn on those subscribers was always enormous - the media conspired with Case to grossly over-state the loyalty consumers had to AOL.
What about "synergy," the idea of cross-promoting AOL on TV or print, TV or print products online, and movies on both? Tim Bajarin of Creative Strategies still claims that was real . It wasn't. The real "synergy," as I explained here, was that AOL would try to force Time Warner cable subscribers to buy its service as "Interactive TV."
So we have phony ad sales, phony assumptions about subscribers, and phony plans for synergy based on a phony idea (still popular in New York and Washington) that consumers are sheep, idiots who'll do what their betters tell them to do.
It was about as visionary as a Ponzi Scheme. By those lights, Steve Case was a visionary. And the guy who got stung worse than anyone was Ted Turner. By now he should have been running Time Warner. Instead he got greedy, thought his $4 billion stock could magically turn into $10 billion, and found out after giving away that money he had maybe $1 billion. The con's victim (and we were all victims) doesn't go to the cops because he knows his greed and stupidity were complicit in what happened.
Steve Case will get away with it, all of it. He won't be viewed as a con man by anyone with the authority to make a charge stick. He was just a man of his Time.
Since so many phony dot-coms have tumbled, editors figure it's a great idea to assume Google will too.
The problem is that most dot-coms were phony baloney, while Google is the Real Deal. So this Business Week story is all wish-and-worry, without real substance to it.
Yes, Yahoo is likely to switch from Google to Inktomi. It won't work because Google is better. Users will either get the Google toolbar or just go to the site. Verity's purchase of Inktomi's basic search assets doesn't really expand Verity's market one bit. Verity is in much more trouble than Google - and what the reporter ignored was that Inktomi was dead anyway.
What are the other "threats?" WiseNut, Teoma, and FAST (don't forget Kartoo). They're barnacles on Google's butt. Major Google shareholders are reportedly pushing to take it public, and thus it would "have" to lose its purity, but that's just a wish-and-worry. How about the "problem" of Google having to sell services to corporations through trade shows, and all the problems that trade show attendance entails? Who says you need a booth, and if you do get a booth, who says you need a large one? You hire someone to build that business, and scale their efforts to the sales they generate.
Besides, Google is doing too many things right. Google News is still kludgy (often placing inappropriate pictures next to stories) but that's a problem of the sources. Froogle, its product search engine, delivers good results without (yet) delivering price comparisons. Google is doing everything it can to protect the purity of its search results .
Does Google have challenges? Every growing business does. Is Google in trouble? Not at all.
The business press is filled with hurtin' puppies.
My phone stopped ringing years ago, and the last of my old deals expired (with its magazine) last month. Repeated calls and e-mails to its successor have drawn nothing. It's like they're afraid the victims' bad luck might rub off.
C|Net has laid-off another 80 and the head of Kiplinger Personal Finance says no one is making money . Business mags "seem as if they're just trying to keep going until happy days return" writes The New York Sun. The industry's theme is now the Randy Newman tune Baltimore. "Man it's hard just to live."
To continue with words from our guest analyst, Mr. Newman. "And they hide their faces,
And they hide their eyes, 'Cause the city's dyin', And they don't know why."
I know why. Lies, that's why. Rather than doing what journalists are supposed to do, which is question everything, too many publishers trashed their credibility by swallowing lies whole. Some were lazy, others greedy, still others felt compelled to do it by pressure from advertisers.
Whatever the reason they sold their credibility for a handful of beans. And, as the latest IBM ads make clear, there's no magic lamp, no magic beans, no magic pixie dust, and no business time machine.
What would have worked? Protect your credibility, bank profits in good times, and know that all good times end. Don't waste money on offices, furniture, or food. Remind your readers of the importance of that fact and, when the good times do end, probe the casualty lists for the best of their skeptical reporters you can offer a lifeline. What do you do know? Copy The Register and move new ideas to the Web, where costs are lower, then build your lists for when killing trees is justifiable again.
In Liar's Poker, everybody loses.
Clued-in is AOL Time Warner for taking Walter Isaacson's resignation . Hopefully it's not too late to get CNN back in contention.
Clueless was the so-called "deal" between the record industry and tech lobbyists . All both sides agreed to was not to push for changes in law they can't get. Contrary to published reports the deal was neither historic nor important. And the RIAA is not backing-down from either its legal offensive or its technical harassment of users, including copy-protected CDs. Also, the tech lobbyists they dealt with created the "software license" regime the record companies are copying. It's no more a compromise than is choosing between a wing and a drumstick in a bucket of fried chicken.
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