Nicholas negroponte, the sage of MIT's Media Lab, wrote in 1995: "I am convinced that by 2005 Americans will spend more hours on the internet than watching television... the media barons will struggle to hold on to their centralised empires."
I am convinced that Negroponte is wrong. Americans now spend, on average, three hours a day watching television and 20 minutes online. Time on the PC is growing but television still dominates people's leisure time and shows no sign of giving way.
Does it matter if another cyber prophet is proved wrong? In this case, it does. The past decade has been a time of great uncertainty for the media business; and the power of prophets is greatest at such times. In the second half of the 1990s, backed up by some heavy pressure from Wall Street, Negroponte persuaded the leaders of the world's media companies to pour many billions of dollars of investment down a digital drain.
According to the Negroponte argument, the PC would take over the role of the television, and the internet would distribute the content which had previously been transmitted over the airwaves. This would turn the media business upside down. Low costs of distribution would allow everybody to become a publisher and broadcaster-hence the media barons' struggle to hold on to their empires. Narrowcasting would take over from broadcasting as the internet allowed content-producers to target their output to particular groups. Advertising would therefore become more valuable.
The impact of the internet on the media industry would-the theory went-be greater than the impact on other consumer businesses. Companies selling clothes, or flowers, or groceries, could take orders over the net, but they still had to send round a man in a van to deliver the goods. The goods that the media business sells, by contrast, can be delivered over the internet. So the costs of producing and distributing CDs, books, films and television programmes would be wiped out, and the whole industry would benefit.
It sounded convincing; and the market rewarded companies investing in dot.coms. Never mind the costs; never mind the lack of revenue (let alone profit). For two years, until the mini-crash in March 2000, it was hard for a chief executive to resist. Even Rupert Murdoch, notoriously suspicious of cyberspace, eventually threw some money at the internet.
The big media companies, partly out of fear of start-ups, partly out of excitement at the opportunities they were told that the internet promised, poured money in. But soon it became clear that things weren't as simple as they seemed.
Music, for example, is easy to deliver over the internet. What the music companies have failed to do is to work out how to make money from it. A year and a half after they formed a joint body-the Secure Digital Music Initiative-with the consumer electronics and software companies to develop a common encryption system, they have still not achieved a workable system.
Pictures have the opposite problem: they are difficult to deliver over the internet. There are all sorts of problems of speed and reliability-the biggest is the capacity of most people's connections. Most of us have narrowband connections. Broadband connections, which can (sometimes) provide the capacity for a decent video experience, have been deployed much more slowly than people expected. In the US, where these things are further advanced than in Europe, only 4 per cent of households have broadband connections.
Then there is the problem of making money from websites. Jupiter, an internet consultancy, describes the internet as a "zero-revenue business for traditional media companies." Most newspapers, some magazines and some entertainment sites started with a subscription model, but most have abandoned it. The only big businesses which have stuck to subscription are the Wall Street Journal and a large number of pornography sites.
Nor is advertising rolling in. Advertising on the web is growing, but most of it is not going to the media business. Of the $1.9 billion spent on online advertising in the second quarter of 2000, most went to consumer and financial sites. Only 12 per cent went to "new media" sites. Start-ups are folding. Digital Entertainment Network, one of the most glamorous, filed for bankruptcy in June, having run through $57m. Pop.com, an entertainment site announced with great fanfare in October 1999, backed by Steven Spielberg and by $50m from Paul Allen, Bill Gates's former partner, folded in September without starting.
For the big media companies this is all a mixed blessing. The threat to their control that Negroponte predicted has faded. But their own new media investments are looking bad. NBC, the envy of the industry for its new media investments last year, floated them in December 1999. Nine months later, they had lost more than 90 per cent of their value. In the nine months to the end of June, the Walt Disney Internet Group lost $844m.
Very likely most of the world will have reliable broadband connections one day and Negroponte's vision will become reality. But that is a long way off. In the meantime, startling amounts of money are being lost. The media companies' online strategies are in a mess. And, curiously, although the failure of online retailing has been much reported, the failure of online media has not. n
