It wasn’t the pizza that got the juices flowing at the Pierre. As the age of interactive media finally dawns, business people realize they are biting into something very tasty. Measuring this market is a fool’s exercise now: estimates range from $4 billion to $14 billion by 1995. But it’s going to be big: a gold rush, a revolution or, as Goldman, Sachs likes to call it, a “communacopia” of untold riches. And so far, it’s a free-for-all. If you’re involved with any of the hundreds of companies now flirting with interactivity, the new age holds promise, and not a little peril.
At the moment, the emphasis is on promise. Tele-Communications Inc., or TCI, the country’s largest cable operator, was one of the big newsmakers last week. TCI chief executive John Malone, one of the most aggressive in the new industry, said that TCI will spend $2 billion to create an electronic “superhighway” linking hundreds of communities through a nationwide fiber-optic network by 1996. Days later, TCI, with partners Time Warner and videogame maker Sega, announced the launching of a Sega Channel, which will allow kids in several thousand homes this fall to pull games such as Sonic the Hedgehog right onto the TV screen at the push of a button. By early next year, the channel could be available nationwide. And The New York Times reported that Time Warner and Silicon Graphics, the company that supplies many of Hollywood’s favorite special effects, are talking about a joint venture for interactive technology that would make your TV set a virtual video store. (Neither company would comment.)
There’s plenty more of this in the pipeline. Public Broadcasting Service this week will join Domino’s Pizza, JCPenney and Publishers Clearing House as partners with a Reston, Va., company called TV Answer. Beginning this fall, TV Answer’s $500 Personal TV Unit will allow TV users (no longer just “viewers”) to order a pizza or a sweat shirt, or comment on PBS programming. By this time next year, Time Warner says, it will have “enhanced” cable boxes in 4,000 homes in Orlando, Fla., offering, among other things, video on demandlike having a Blockbuster store in your living room. (NEWSWEEK is now publishing CD-ROM titles on a regular basis; The Washington Post Company, its corporate parent, owns cable systems.)
People used to joke about this being “a zero-billion-dollar industry,” says David Nagle of Apple Computer. “People are no longer saying that. They’re looking at business opportunities.” In fact, they’re scrambling. “Get involved now,” warns Martin Nisenholtz of Ogilvy & Mather Direct, or “it’ll be too late. . . to stake out a dominant role.” Some companies are way ahead. The regional phone companies, known as Baby Bells, are racing the cable companies to lay the fiber-optic network that will make up–and control–the “superhighway” infrastructure. Microsoft, Intel and General Instrument are reportedly near an agreement on joint technology, employing Microsoft’s popular Windows program, for an interactive TV-set-top system. Bill Gates’s new company, Continuum, has been buying up the rights to computer storage for whole museums worth of paintings. Alongside-or in joint venture with-the giants, other companies are maneuvering for a piece of the action, whether it is to build the necessary black boxes, “smart TVs” and remotes that will manipulate some 500 channels, or the software and programming to run on them.
But revolutions, by definition, are fall of uncertainty. And the interactivity business has already had fizzles and flops dating to the 1970s. More recently stockholders have had a rough ride with Mountain View, Calif.based Interactive Network Inc., whose subscribers can play along with “Jeopardy!” or make a call on a football play. Despite the backing of such companies as Gannett and NBC, investor confidence in Interactive has flagged, and its stock has lost more than half its value since late last year.
But interactive media is so compelling because its potential is so huge. While entertainment is the first frontier, the applications and impact seem limitless. Interactive media will soon make quaint the idea of a separate industry called “telephones” or " broadcast." Calling on the government for a coherent communications policy, Wertheim Schroder analyst David Londoner likened the situation to the rise of the railroads, utilities or highway system.
The high-tech cornerstone for all this is today’s digital reality. Almost anything, from an encyclopedia to a baby’s sigh, can be translated into digital signals-as music is on a CD-and transmitted. The essence of interactivity is that disparate humans can interact with each other-and vast amounts of digitized material-from anywhere. Clearly, interactive media involves more industries than it leaves out. “Multimedia is not a thing,” says Lucie Fjeldstad of IBM. “It’s a mixture of technologies that you have to sprinkle, like pixie dust, over your marketing and services and manufacturing and development.”
The multibillion-dollar question: how will all of that pixie dust come together to create the digitized superhighway conjured up by everyone from TCI’s Malone to Bill Clinton? The highway analogy suggests a universal system where roads intersect smoothly and work by similar rules. But interactive communications will deal many wild cards complicated by the enormous speed at which technology moves these days. Some experts warn that too many different “smart” boxes will collect dust on TV stands. Others worry that the big players will set standards too quickly, stifling innovation or shutting out competitors. To imagine the pitfalls, just remember the Betamax VCR and multiply by 100.
The biggest wild card is, naturally, consumer appetite. It’s impossible to predict how many hours a day Americans want to sit with remote in hand, and how many trips to the library, ballpark or mall they want to eliminate. Many analysts warn against a gold-rush hysteria. “People throw around the term ‘revolution’” too much, warns Denise Caruso, editor of Digital Media. But as fax machines, computers-and cellular phones have already demonstrated, it can hurt to fall behind in a technology arms race. Besides, lots of people are just having too much fun.
