NYT Magazine, Sept 24, 1995 How the Propeller Heads Stole the Electronic Future The silver-haired media monopolists follow their 500- channel dream. They haven't reckoned with the 500 million channels of Netscape and the Internet. By Steven Levy. If you want an arbitrary date for the burial of the 500-channel dream, Aug. 9, 1995, will do just fine. On that morning, the public had its first crack at buying stock in the year-old Netscape Commumcations Corporation, which makes software that helps people navigate the Internet and set up "sites" that Net surfers can visit. What happened next is already the stuff of high-tech legend. The offering price of $28 per share shot up within minutes to a vertiginous $75 until finally settling at $58, a price that valued the as-yet-profitless company at well over $2 billion. A month later, it was trading at about $53. The initial news reports focused on the instant millionaires at Netscape, including a 24-year-old computer programmer, Marc Andreessen, who emerged from the stock offering with that all-important first $58 million. But the real significance of the event was not that another bunch of propeller heads had joined the ranks of the super-rich. Aug. 9 marked the moment when Wall Street finally realized what had been becoming increasingly apparent to computer users: a set of highly technical but reliably standardized communications protocols known as the Internet had established itself as the real key to the electronic future. That future would be made not by silver-haired telephone- and cable-company executives in Denver, New York and Washington, building an empire around a golden goose called pay-per-view television, but by companies like Netscape and their customers. In short, the end of the 500-channel dream. This was a myth constructed by the masters of the media, people like John Malone of Tele-Communications Inc. (T.C.I.), Ray Smith of Bell Atlantic and Sumner Redstone of Viacom. They believed that the television set would extend its domain from the center of the entertainment universe to the worlds of commerce and information. Despite their promises that the new era of digital media would be marked by increased competition, they assumed that their companies would keep their hands on the valves of a limited information pipeline. But for consumers, the dream offered only two differences, really, between what the public has now and what will be available in the future. *The same programming but more of it*. Instead of getting 50 or 60 alternatives when you plopped down in front of the tube, you'd get a lot more. Five hundred was the number that stuck in people's minds. *So-called interactive programming*. The interactivity comes in makng choices: pressing buttons to choose programs and, above all, to buy things. The living-room television would be a cash register of sorts, enabling Dad, Mom, Junior, Sis and probably even the faithful dog Astro to buy more programming -- and buy more everything, from pizzas to Dustbusters. The operators of those systems, like T.C.I. and Time Warner, would act as gatekeepers, deciding which entertainment channels, pay-per-view events, banks, retailers, publications and data bases would reach consumers. There were tremendous opportunities to make money, not only from monthly fees and pay-per-view charges but also from percentages of every transaction. And then there was the wealth of information about consumer buying habits generated by the aggregation of buying choices made by pressing those buttons. This, too, would be sold and bartered. For the past few months the silver-haired guys have been arranging expensive technology tests in places like Orlando, Fla. They have been wooing Congress for favorable regulations. They have been frantically merging and making alliances. But meanwhile, a different vision of the media future has begun to form -- totally under their radar. It moved from the academic and scientific communities, then to the business world, then to politics. As it grew and grew, it suddenly became clear that this new vision had the potential to pull the plug on the 500-channel dream. This is the Internet and its most interesting subset, the World Wide Web. It is based on unlimited channels of communication, community building, electronic commerce and a full-blown version of interactivity that blurs the line between provider and consumer. You don't need an Arthur Andersen report or even a cyberpunk science fiction novel to envision how this new model of the future will work. Millions are already participating in it. Its nascent form -- albeit with often sluggish performance and frequent system crashes -- has spread like digital wildfire. In short, the information superhighway, font of a thousand bad metaphors, is already here. But it's not about sitting on a couch and pressing a button to order "Dumb and Dumber." It's about Web surfing, open systems and freedom. Why did the stock market go bonkers for Netscape, a year-old company that not only operated deep in the red but also warned in its prospectus that it did not intend to make any profits "in the foreseeable future?" Only one reason: the Internet If the 500 channel dream on the TV screen is the old future, the new one is the Internet on the computer screen. Think of it as a combination book, radio, magazine, mailbox, conversation parlor, bulletin board, billboard and, one day, television set. Install what is known as a browser program -- the most popular is Netscape's Navigator -- and you're cruising the World Wide Web. Your screen is a selection of signed baseballs up for auction, a tour of the Louvre, a zine (a self-published magazine) on the life of a teen-age girl in Canada, a multimedia repository of General Electric's public relations documents, the complete text of the Congressional Record. Millions of possibilities await you, and getting to them is easy. Anything can be wired to anything else on this World Wide Web (thus the name) by moving the cursor to a highlighted word or image with an embedded link to another location. Web travelers do not just travel by links, of course -- they can go directly to any Web site. The interesting thing about the sites is their equality. Like phone numbers, or addresses on letters, these addresses have no favored positions; in terms of gaining access to homes, ABC, Disney and Sears have no inherent advantage over Joe's Video or the corner pizza parlor. (For help in knowing what's available, people are already adopting the first of a new breed of electronic guide services, like the popular Yahoo Web site, a sort of Baedeker's of the Net.) At first, Web traveling seems like a fascinating but perhaps frivolous diversion. But then you consider the next step -- commerce. Secure creditcard transactions are already possible, the ability to charge for time spent on a link is currently being implemented and companies like Visa, Mastercard and newer entities with names like Cybercash and Digicash (and, yes, Microsoft) are concocting Net-based technologies that work just like cash. And then you begin to realize why some farsighted people in the media industries are terrified of the World Wide Web. Every home is potentially a video conferencing center, every independent film maker is potentially a widespread broadcaster, every business is potentially a global marketer. A single twisted idea and a rudimentary sense of layout can transform a voiceless outcast into a cult publisher. Now that's interactivity. The 500-cable-channel tests are just the beginning of a long process. The Net, meanwhile, has millions of people on it, now. It will take a decade or so to upgrade the Net to carry high-quality video services, but most everything else is feasible now and better suited to the desktop than to the TV room. You can't easily read a newsletter or a bank balance on a television set that's 20 feet away. So by the time the cable and telephone companies get their systems in order, millions of Americans will be riding the I-way from their dens and offices, not their living rooms. Sure, eventually the electronics of computers and televisions will be indistinguishable, but by then the road to information nilvana will have been laid -- and the ethos will be that of the Internet. In that ethos, the people who provide you the pipes to move information have no say in what content moves through those pipes. They collect no information on their consumers' buying habits, and they certainly do not get a piece of the transactions that occur over their wires. The guys in the middle -- those with the 500-channel dream -- will thus be cut out of the best part of the action. The masters of the media have taken notice, and lately they've been hedging their bets. Still, they have yet to grasp that the Internet can never be merely another profit center in their dreams of empire. Their power is based on monopoly, on controlling distribution. But the Net is built to smash monopolies. Instead of a gatekeeper, users get an open invitation to the electronic world and can choose whatever they want. "If there is a market for 500 channels," says James Barksdale, Netscape's president, "imagine the market for 5 million, 50 million, 500 million!" Now, this new vision doesn't portend poverty for the media masters. There's still a place for movie studios, television producers and music publishers -- the Disneys of the world -- in this new, content-driven universe. The phone companies will provide Internet access to the masses. And the couch-potato style of television will probably always be with us. But it won't be business as usual for the media masters. It's entirely possible that beginning novelists, musicians and even film makers will choose to distribute through the Web. And it's almost inevitable that one day soon, a John Grisham, an R.E.M. or a Roseanne will grasp the advantages of ditching the media company and selling directly to the consumer. A year ago, people were buzzing about the proposed (and eventually aborted) marriage of Bell Atlantic and T.C.I. Now people are talking about Disney and Cap Cities, CBS and Westinghouse, and Ted Turner and some other television network. But if the World Wide Web shatters the current paradigm of distribution, the channel capabilities of cable systems and even networks will be severely devalued. Anyone will be able to set up a new channel or storefront on the virtual highway, for free, asking permission of no one and accepting income directly over the wire. This is why John Perry Barlow, co-founder of the Electronic Frontier Foundation, calls the current vave of media realliances "the rearrangement of deck chairs on the Titanic." The iceberg, of course, is the Internet. ---------- Steven Levy is a columnist for Newsweek. His last article for the New York Times Magazine was "The Unabomber and David Gelernter."