The Top Ten digital media events of 1994 [ with permission ]

[David Farber <farber () central cis upenn edu>]

The Top Ten digital media events of 1994


by Digital Media staff


This was the year that was; one in the long march toward a different,
digital environment. No individual event signaled the transition from
an analog to a digital reality, but the ten we chose do point to a
decisive fragmentation of the old economy. Battle lines were drawn
and long-standing assumptions about the Way Things Work collapsed
weekly throughout 1994. In 1995, we think you'll see these stories,
presented in no particular order, have a major impact on the
development of electronic markets.


DIRECT BROADCAST SATELLITE DEBUTS


Consumers can't get their hands on these pizza-size dishes fast
enough. Retailers report that they've already sold nearly 400,000 RCA
and Hughes dishes, at around $800 a pop. On top of that steep entry
price, subscribers must pay a monthly service fee ($30) for up to 150
channels and for pay-per-view events. The message is clear: People
want control of their viewing choices and are sick of the cable
companies' steep prices for relatively limited service.


FCC SPECTRUM AUCTIONS


In late summer, the FCC rung up $617 million in revenues from the
sale of narrowband Personal Communications Services (PCS) spectrum.
As the year drew to an end, another $20 billion may be on the table
for broadband PCS bandwidth that will enable everything from voice to
video communications. This category of service will explode around
the turn of the century, but as much as $70 billion in PCS
investments are already in place.


MICROSOFT OFFERS TO BUY INTUIT


Bill Gates dangled $1.5 billion in front of his most vexing rival,
Intuit Inc., makers of the Quicken personal banking application, and
they bit. Now, Microsoft has a virtual lock on the home banking and
transaction market, owning as many as 90 percent of the installed
software base. The software company also cemented relationships with
bankers and bank card companies, most notably VISA, to tie in credit
and debit card capabilities in its Windows 95 operating system. We've
bet an expensive dinner that the Department of Justice will make this
acquisition a difficult and drawn-out process.


THE MICROSOFT NETWORK IS NO MARVEL


The crux of Microsoft's aspirations is its online network, once
code-named Marvel, now known as the Microsoft Network (for legal
reasons). Gates and Co., including new partner Tele-Communications
Inc., which forked out $125 million for 20 percent of the network,
think they have the key to online software and retail sales. But,
with the delay of Windows 95 -- which provides some critical hooks
for the Microsoft Network services -- competitors have a year to
prepare for this formidable competition. We believe the Microsoft
Network will appeal most to newbies, as old-time online folk have
already settled into their virtual neighborhoods.


HOLLYWOOD DOES THE BABY BELLS


Without content a network is, well, empty. That's why the babies Bell
have been spending so much time in Hollywood this year. Conversely,
Hollywood sees interactive networks as a major new source of revenue
from its current and future productions. In August, Ameritech,
BellSouth and SBC Communications Inc. (formerly Southwestern Bell)
signed a memorandum of understanding with the Walt Disney Co., which
will develop interactive services interfaces for use on the telephone
networks. Disney chairman Michael Eisner doesn't see the information
highway as a road paved with gold, so he's holding off on developing
interactive content, but he's happy to be paid for developing these
Bell services. Likewise, Hollywood super-agent Michael Ovitz, of
Creative Artists Agency, will advise two companies formed by Bell
Atlantic, Nynex and Pacific Bell to develop interactive programming
and technologies. CAA clients will likely be connected to the Bells
efforts by Ovitz. Notably, recent studio magnate-wannabe (and, in
fact, magnate de facto) Steven Spielberg, who is one corner of the
as-yet-unnamed Dream Team studio triad with Jeffrey Katzenberg and
David Geffen, is a CAA client.


SEGA AND TCI PARTNER ON GAMING NETWORK


The collaboration of Sega and TCI to create the Sega Channel is the
first real-world venture that will deliver content for home game
systems over cable. It will also be the first to make money with
online game delivery, well before non-trial ITV systems are deployed.
Considering TCI's investment in the Microsoft Network and the Sega
Channel, it's clear the cable company is rethinking its programming
strategies to fit the interactive age.


VIACOM ACQUIRES PARAMOUNT AND BLOCKBUSTER


Billionaire Sumner Redstone has more creative, network and retail
resources in his hand than anyone at the interactive entertainment
table. With Paramount and its subsidiaries, the cable giant leaped
into film production and publishing; Blockbuster Entertainment, which
Viacom snapped up in the wake of the Paramount deal, is an
outstanding channel for all the products -- on vinyl, CD, CD-ROM,
videotape and celluloid -- that Viacom controls.


NETWORKMCI GOES MAINSTREAM


Late in November, the Internet as we know it came to an end. It was
transformed by the introduction of internetMCI, an easy-to-use
collection of browser and shopping services from the nation's Number
Two long distance carrier (see Digital Media Perspective 94.12.01).
Combining its network with Netscape Communications Corp.'s browser
and secure server software, MCI will be the first to offer a bundle
of robust TCP/IP services to the masses, with huge television
advertising support.


AT&T BUYS MCCAW CELLULAR


Eleven-and-a-half billion dollars later, AT&T is the largest cellular
carrier in the U.S. The combination of AT&T's long distance network
with McCaw's extensive wireless network is an opportunity for what's
left of Ma Bell to re-enter local service business (this time sans
wires), and to build a robust nationwide PCS system a half decade
before anyone else. More than a year ago, AT&T executives told us
they expect to offer not just voice and data services to handheld
devices, but videoconferencing and interactive television services
over McCaw's network as well.


SPRINT AND CABLE COMPANIES UNITE TO GO WIRELESS


A joint venture between Sprint, Tele-Communications Inc., Cox
Enterprises and Comcast Corp. plans to deliver PCS services to the
set top box. Sprint's long distance network will provide the links
between regional cable networks owned by TCI, Cox and Comcast.
Consumers will be able to tap the network via handheld and portable
devices around the house that communicate through the set top box
that controls their interactive television system. The cable
companies will also install local wireless network nodes to
complement Sprint's extensive cellular network service to roaming
customers.


________________________________________
           Who They Are, Where to Reach Them


Digital Media Perspective is a twice-monthly electronic newsletter
produced by Digital Media: A Seybold Report.


Editor in Chief      Mitch Ratcliffe  (godsdog () netcom com)


Copyright (c) 1994 Digital Media: A Seybold Report.