 |
|
Strategic confusion, internal politics lead to failures online
By Jim Hu
In the summer of 1998, Walt Disney Chief Executive Michael Eisner visited
the headquarters of Infoseek bearing the promises of a savior: The search
engine would become the heart of the Go Network, promoted on ABC, ESPN,
videotapes, movie trailers, theme parks--everything Mickey's white glove touches. It was an inspiring message for the Magic Kingdom's newest member and online hub. What followed over the next two years, however, was anything
but a fairy tale.
Now: In January announced plans to shut down Go.com and lay off 400
employees. Relaunched the site in March as a gateway for Disney properties such as ESPN.com, Disney.com and ABCNews.com. Sold search rights to GoTo.com.
Now: Laid off 150 employees in January after reducing revenue projections. Saw President Edmond Sanctis and sales executives resign in October. Is trading near $2 per share.
Now: Still has ownership stakes in vertical sites. Recently folded CBS.com and CBSNews.com into respective TV divisions. Has touted success of "Survivor" and "Survivor 2" Web sites in generating traffic spikes. Is seeing MarketWatch and SportsLine each trade around $4 a share. Now: In January eliminated hundreds of jobs in News Digital Media's Fox Web site divisions as cost-saving measure. Like CBS, folded Web sites into TV operations.
So much for the highly anticipated marriage of television and the Internet.
The Disney-Infoseek relationship, which officially ended this month when a new search
engine was chosen to power the latest incarnation of Go.com, underscores
the myriad problems in the major TV networks' efforts to create a presence
on the Web. Confusion over strategy, internal politics, negligence from executive
offices and a fundamental lack of understanding about new media have
contributed to the failure of television's online initiatives, according to
current and former executives from the online and offline arms of various
network ventures. And after some high-profile false starts--most notably by
Disney's Go.com and General Electric's NBC Internet--any moves by the TV
networks online have fallen into virtual paralysis. "It does seem across the media industry that people are entering holding
patterns in the hope of someone coming up with a better economic model" on
the Internet, said Nicholas Weinstock, a spokesman for News Corp., owner of
the Fox network. "The jury's out." For the most part, the networks began their online initiatives by taking one of two paths. Some created divisions that would go public and tap Internet wealth, experimenting with new ways to reach viewers in the process. Others held back and took minority stakes in different companies, hoping to profit from the Internet investment craze when those partners went public. Neither course has proven particularly effective, especially since the
value of almost all online companies has plummeted in the last year. Those
that did attract attention became known more for their drawbacks than for
their advantages or innovations. At bottom, those in the industry say, the networks were never able to
reconcile the fundamental difference between the two media: Television
automatically delivers programming and information to viewers, while the
Internet requires people to ask for information through their own initiative. One former NBCi executive said the confusion has been so pronounced that
online media insiders began calling the company "NBCy"--as in, why did the
network create this online division if it was going to ignore it? If they were confused about the Web, network executives were absolutely
sure about one thing: They all feared the encroachment of Internet media
companies, whose market values soared into the stratosphere before the
bubble burst. "A lot of their strategy was driven by fear and me-too-ism," said one
former NBCi executive. "It wasn't driven by, 'Let's sit down and see if we
can create a company.' I don't think people looked at the ways that it
could be complementary to the core business." Beating Yahoo at its own game
"Disney felt potentially threatened by these growing portals providing more
and more information at a higher level," said one former Disney executive
who spoke under the condition of anonymity. The networks embarked on their Web initiatives in earnest in 1998. That's
when Disney took a stake in Infoseek, which would later become the
foundation for its Go.com portal.
Then NBC bought a sizable piece of Snap.com, a portal developed by CNET
Networks, the publisher of News.com. The network would eventually acquire
community site Xoom.com, fold in NBC.com, and spin out the combination as a
new public company known as NBCi. Meanwhile, CBS began investing in a flurry of Web start-ups, such as
SportsLine, MarketWatch and sweepstakes site iWon, but stopped short of
making any outright acquisitions. CBS.com served as a springboard to the
company's local affiliate station sites but was largely overshadowed by the
Web properties run by its network rivals. CBS merged with Viacom in a $35
billion deal in 1999 and arguably came out ahead of its competitors by
doing less on the Web. Whether it was wise abstention or lack of vision, there's no denying that
CBS escaped the sobering fiscal realities that have saddled the other
networks. In January, Disney announced it would shutter Go.com and lay off 400
employees, including the entire office in Sunnyvale, Calif., that had once
served as Infoseek's headquarters. Go.com now serves as a "gateway" to
redirect traffic to Disney's Web content; as a cost-saving measure, the
site is fully automated, requiring no human staff. That same month, NBCi cut 30
percent of its staff and lowered revenue expectations for 2001 to $100
million from $150 million. CBS, News Corp.'s Fox network and AOL Time Warner's CNN have all reined in
their online operations, giving their TV businesses full control of their
once independently managed Internet properties. But Disney and NBC remain
the loss leaders among their network brethren, as far as the Web is
concerned. One source close to NBC's strategic discussions said the network is
considering all options, including selling the portal, taking NBCi off the
publicly traded market, or pursuing a partnership with another Web property. "We're taking everything we've got, dumping it on the table, removing all
of the preconceived notions, and thinking about how we can get all the
pieces to come together or go apart," said the source, who requested
anonymity. Synergy? What synergy? "It's amazing the amount of brick walls you encounter," one Disney online
source said. "Sometimes we are stonewalled, and occasionally we have to
pull teeth to get TV's help. The much-vaunted synergies of the Walt Disney
Internet Group do not work as well that way." That term--synergies--is one heard with numbing refrain in the
pseudo-language of big business. It means cooperation between
departments that can enhance each other's performance or, better still, cut
costs by eliminating redundant operations.
That was easier said than done, according to those working on the online
end of such business. "NBC said its sales teams would leverage the combination of broadcast and
Internet," a former NBCi executive said, but "there was very little
interaction" because of internal rivalries. "They would get the packages
together, but they didn't want our integrated sales force to see the
clients." Disney sources offered similar accounts, adding that the lack of a cohesive
sales effort was part of a broader confusion about the company's online
direction. "They promoted their non-strategy--the idea that they didn't know what they
wanted to do--and that led employees into a mode of not knowing what they
were doing," Infoseek founder Bensky said. "Did they want to run a search
service? Did they want to create a portal? They would never commit to what
they wanted to do." Disney spokeswoman Michelle Bergman refuted Bensky's comments, saying: "We
looked for opportunities throughout the company on behalf of Go at the
beginning. We were constantly evaluating the best way to leverage the reach
of the Walt Disney Company to promote all our Web properties, including Go." Bergman did, however, add that it has been an "education process" for the
online and offline entities to work together on joint efforts. "I think
we've been doing that since the beginning and constantly figuring out how
to do that," she said. Today, Disney and NBC may be in the worst of all possible worlds where the
Web is concerned: Both are loath to make further investments in their
money-losing operations, but they are also reluctant to abandon the online
properties because they have already spent so much on them--in pride and
public relations, as much as in capital. "Now that we've touched the hot stove, we're trying to figure out when we
jump back into water, how will we make this a sustainable business?" a
Disney source said. "We can't get out. It would be shameful." |  |
|
|
  The TV networks may have scaled back their online initiatives, but that doesn't mean they've abandoned all hope for the Internet. Rather than running their online operations as separate, broadly focused entities, the networks are using Web sites as extensions of hit TV shows. Those that have worked best are ones that lend themselves to online interactivity, such as game shows and reality programs. But executives are trying to repeat the formula with popular sitcoms and dramas. The result, it is hoped, will be the first steps toward fulfilling the elusive promise of interactive TV. Some examples: • Viacom's CBS sees huge increases in traffic to its "Survivor" and "Survivor 2" sites when the shows air. The sites feature exclusive video, chat rooms, photos and contestant profiles. CBS.com's traffic has increased 500 percent since "Survivor" began airing in January. • ABC, which is owned by Walt Disney, sees tremendous online activity related to its hit game show "Who Wants to be a Millionaire?" Viewers can play along with the program through ABC's "Enhanced TV" or play their own versions of the game. • General Electric's NBC has developed companion sites for many of its shows, such as "Will & Grace" and "Friends." The network also developed an online quiz that tests viewer knowledge of its Saturday-night movies. NBC gave away $100,000 in prizes every week, including a check for $50,000. • USA Networks has developed the most natural use of the Web, using its sites to sell products featured on the cable Home Shopping Network. HSN's site generated nearly $50 million in revenue last year. But networks, especially the Big Three broadcasters, face the difficult challenge of creating strong businesses that bridge television and the Internet consistently for a wide range of programming. The TV business is predicated on selling advertising for programs that air at specific hours, for example, while Web surfers go online at varying times throughout the day. "Reality TV lends itself more to contest-type applications on the Web," said John Megahed, research director at PC Data, a marketing research firm. "People want to touch it and be a part of the game show. 'Survivor' is almost a game with predictions, and 'ER' and 'Will & Grace' are more for when you're in veg-out mode." If this line of thinking holds true, the first generation of truly interactive TV programming may not offer the most sophisticated fare. "My personal opinion is you need to turn as much of this stuff into a game as possible," said Andrew Shotland, vice president of NBCi Entertainment, "because it's the easiest thing for viewers to understand."
--JH
The second coming of Infoseek? Disney reinvents Go.com with help of rival CBS beats portal envy, turns on interactive TV TV stations capture local viewers online NBCi predicts profit within a year Disney to shutter Go.com portal NBCi lays off 150, cites advertising slowdown NBCi president, other execs leaving portal company Go.com gets ready for its close-up
| |||||||||||||||||
Walt Disney
General Electric's NBC
Viacom's CBS
News Corp.
"You don't have to own a portal to get people to the destinations you want
them to visit," CBS Chief Executive Leslie Moonves said at Jupiter
Research's Media Forum this month in a 
For media companies, synergy can mean practices such as sharing one
advertising sales force for two or more divisions. "You can create a
product that works across the Internet and television and get bundled sales
opportunities," said Jim Walton, president of domestic networks for CNN.
"And that works best with one voice." 
