MUST READ- Opinions please!!!
Someday, someone will make a great fortune by
exploiting the interplay of television and the
Internet. Will it be Gerry Laybourne? With the
help of some powerful friends and some deep
pockets, she wants to create a new medium for
50 million female viewers.
The Convergence Gamble
By Tom Post
Geraldine Laybourne—veteran cable television
executive and born-again entrepreneur—knows
the power of storytelling. Especially when it
comes to her own accomplishments. She likes to
tell the one about building a fort, stick by stick, in
her yard at age 6. She worked at it 12 hours,
finishing up at 10 p.m. with the help of a flashlight.
"My father looked at me and said, 'God save the
world,'" she recalls. "It was the first time I knew
there was something in me that just wouldn't let
go."
Laybourne, 51, is now trying to build something
rather more ambitious. Her Oxygen Media is a
multimedia company, aimed primarily at women,
that pursues the ever-elusive goal of
convergence—combining the entertainment
power of television with the interactivity and
specificity of the Internet. "Five years from now
we'd like to be in 50 million homes with a cable
network and to be part of women's daily lives
on-line," she says.
She has found some powerful believers, raising
something in the neighborhood of $100 million in
cash and property (Web sites and libraries of TV
programs). She's landed a cable commitment
from Tele-Communications, Inc. and an offer to
raise big bucks from Morgan Stanley. Walt
Disney Co. and America Online Inc. have taken
undisclosed equity positions.
So have talk show host Oprah Winfrey, as well
as Marcy Carsey, Thomas Werner and Caryn
Mandabach—the team that created The Cosby
Show, Roseanne and 3rd Rock from the Sun,
among others—who have agreed to provide
original programming. "I felt it was time after all
those years that TV has used me, for me to use
it," says Winfrey. "I'd like to use it to do what it
should do: be of service, help women."
Mighty friends or no, Laybourne will need all the
help she can get. She is treading where the giants
of media and technology—Time Warner, Bell
Atlantic and Microsoft, among them—have
already stumbled (see sidebar Broken Circuits ).
Someday—it could take a decade—you will be
able to get movies on demand, choosing from a
library of thousands of films, instead of going to
Blockbuster. You'll be able to watch a live
special on your favorite rock group (or string
quartet), download its CD for a fee, find out when
and where it's performing next, zero in on a
seating plan and buy a ticket. You may even be
able to wander the virtual aisles of a clothing
retailer, virtually try on particular brands and
styles and place your order for a custom-made
suit.
Very cool. But that someday scenario will force
major disruptions across myriad
industries—video rentals (an $8 billion business
last year), music ($12.5 billion), TV advertising
($52 billion) and more. New players will emerge;
old standbys will have to adapt to the new
realities or die off.
That vastly changed media world will come in fits
and starts, incremental steps that in some cases
will be made by newcomers like Oxygen. This is
what tantalizes Laybourne: If she can carve out
even a tiny slice of the huge sums at stake, she
might build a billion-dollar business in little time.
She has probably improved the odds by
narrowing her pitch to women who want to take
charge of their lives—and have money to spend.
The interactive future will be about
narrowcasting, in her view.
Now back to reality. So far, no one has solved
the most basic drawback: Most people regard TV
as an entertainment box and the Internet as a
separate place to get information or to buy things
like books and airplane tickets. Whatever the
gadgets to blend the two—high-speed modems,
Microsoft's WebTV, something else—the public
isn't ready yet. Meantime, early customers will
have to shuttle between the boob tube in the
living room and the computer in the den.
But what if the gadgets were just a little better?
Imagine that your PC and TV were blended into a
single instrument with a big screen, a conventional
remote control and a keyboard. You sit in the
living room watching a cable TV talk show aimed
at women. A commercial break advertises a
getaway vacation to a health spa in the
mountains. Now you grab the keyboard and with
a few clicks have a sales brochure sent to your
home—or maybe even book a room at the spa,
plus an airline reservation.
Laybourne can't spell out the details of this
interaction, because no one can. "We don't know
exactly what convergence will look like," she
says. "But we know the Internet is going to
change the passive, one-way nature of TV." She
also knows she won't get very far with interactive
software alone. A million Web sites offer that. So
she wants to own the show that captures your
attention to start the process.
What this scenario needs is a $500 television with
some PC-flavored processor chips and modem
chips built into it. That cheap all-in-one device
may be a few years away. In the meantime
Laybourne envisions, for starters, a simple
integration of two media, which she calls
"synchronous Webcasting." In other words, the
simultaneous broadcasting of programs on cable
TV and the Internet, with one medium feeding the
other—something like the strategy of MSNBC, the
TV and Web joint venture between Microsoft and
NBC.
Long before she figures out convergence, though,
Laybourne must vault over some high hurdles.
For one thing, there's already a women's
channel—Lifetime—that reaches nearly every
U.S. household wired for cable. No small irony
that Laybourne oversaw Lifetime in her last
corporate job, as president of Disney/ABC Cable
Networks, before quitting to start Oxygen last
May. Glaring fact number two: There are
colonies of competitive Web sites out there that
already serve women (see sidebar It Takes More
Than an Ivillage...).
No matter. Oxygen, based in New York, San
Francisco and Los Angeles, is still planning to
unveil its Web sites on May 1. The cable channel
is due to arrive Jan. 1, 2000.
Call it a gamble of $400 million or more. That's
what Laybourne has budgeted for programming
and marketing over the first four years. To help,
Morgan Stanley will do a road show to raise a
large sum from a few strategic
partners—including other media companies—to
give Oxygen a valuation above $750 million after
a first round of financing. Laybourne will need
every cent. She's counting on small revenues
initially from the Web sites and nothing at all until
next year from TV advertisers and cable
operators.
Laybourne has beaten the odds before. With just
a master's degree in elementary education from
the University of Pennsylvania and a feel for what
children's television ought to be, she started a
production company in 1979 with her husband,
Kit, a filmmaker. She approached a little-known
cable network called Nickelodeon with a
pilot—and landed a job.
Over the next 16 years she helped build Nick
into an asset for its new owner, Viacom, that
today is worth about $8 billion. She had no
trouble convincing her boss to let her take
chances. "Gerry was very articulate in expressing
her need for resources," recalls Sumner
Redstone, Viacom's chief executive. "I had so
much confidence in her, I can never remember
saying no to her."
Nickelodeon succeeded because Laybourne
gambled on mold-breaking shows like Rugrats
and The Secret World of Alex Mack, which
didn't talk down to kids. The programs
celebrated the fears, foibles and triumphs of
ordinary children—and hooked them with
unsentimental humor. "She turned what was a
'spinach' channel, something kids should eat, into
a 'pizza' channel, something kids wanted to eat,"
explains Robert Pittman, president of AOL, who
was Laybourne's original boss at Nick. Now
AOL is a partner in her latest venture, swapping
cash and three Web sites devoted to
women—Electra (career issues, mostly), Thrive
(health) and Moms Online (parenting)—for a
piece of Oxygen.
Laybourne is counting on the fact that American
women are a rich target for advertisers. They're
starting new businesses at a faster rate than men.
New technology is making it easier to target
women, who are flocking to the Internet in
ever-increasing numbers. Women are media
hounds, with one notable exception—watching
cable television.
The opportunity to fill that gap sold TCI—the
nation's largest cable operator, which last year
agreed to be acquired by AT&T. So far TCI is
Laybourne's only commitment. It will eventually
carry the Oxygen network to 80% of its 10
million or so subscribers, but will provide only 3
million when Oxygen launches next January. "It's
a very important channel for half of my
audience—women," says TCI President Leo
Hindery. "I looked at the programming
opportunities and thought this was a horribly
underserved portion of the population."
That may come as a surprise to the folks over at
Lifetime, the 15-year-old cable channel owned
by Disney and Hearst Corp. A mix of
made-for-TV movies, magazine shows and
recycled sitcoms and dramas, Lifetime reaches
72 million homes. Last year its prime-time ratings
rose to 13%—enough to rank it number one in
delivering the critical category of women to
advertisers. "That doesn't sound like an audience
that's underserved," says Meredith Wagner,
Lifetime's senior vice president of public affairs.
"We're the leading television resource for women.
Oxygen is still just a concept."
Right enough. And it's at the conceptual level that
Laybourne claims she will make her biggest
impact.
So what will it look like? This gets a little
tricky—partly because the company's a little
paranoid about giving away secrets, partly
because its ideas are very fluid.
Laybourne is still working out a basic format for
combining the Net and TV. Turn on the tube for a
program on, say, how new divorcées or widows
are coping with their changed financial
circumstances. Later, go to a Web site for more
detailed information on mortgages, managing cash
flow and the like. Talk with experts on-line who
can offer tips on a budget and links to financial
institutions. Picture a similar experience for shows
on breast cancer or starting a business.
The advertising possibilities are tremendous—if
you can trap viewers with decent programming
and get them to stay for the commercials, or
switch to their PCs. Oxygen is hoping to change
the way women shop on the Web. "If you serve
them well, they will pay," says Lawrence
Wilkinson, Oxygen's vice chairman and strategic
noodler. He speaks intriguingly about customizing
the on-line experience of buying. Irksome,
repetitive purchases, like dishwasher detergent or
panty hose, would be reordered from a menu that
remembers what brands the viewer bought
before. The most enjoyable 20% of
shopping—whether it's for clothes or a
vacation—would come from a more intensive
data feed from the cybermall.
The plan for TV programming is a little more
advanced. Laybourne & Co. envisions a day
divided into various blocks instead of individual
shows. A three-hour morning block, called The
Hive, will present a variety of features about
health, parenting and personal relationships.
Between noon and 2 p.m. Working Lunch will
offer management advice for women
entrepreneurs and corporate executives, and tips
about personal finance. Tribes, a block from 4 to
6 p.m., is aimed at teenage girls. In the early
evening a comedy block will draw on original
programming as well as sitcoms from the
Carsey-Werner library as they become available.
From 8 to 10 they'll run movies on Boudoir
Cinema.
Says producer Marcy Carsey, "Our intention is
to communicate with audiences in ways that
haven't been done before—to have on-camera
personalities reflect the heart and soul and
diversity of the viewers."
Hypothetical example? "Imagine handing out new
digital cameras in various cities to teenage girls
and asking them what their Saturday night is like,"
says Tom Werner. Focus groups have been a
rich source of ideas for programming. "We had
one suggestion for a show called Back Fence,"
says Caryn Mandabach. "A place where you
could exchange all kinds of ideas—everything
from your worst blind date to your best boss."
The first year will probably look a mess. "We
have to try all kinds of stuff and fail—the same
way we did at Nick," says Laybourne. Adds
Werner, "I think if we're clear about our
intentions and make mistakes the first year, the
audience will forgive us—as long as we respect
them."
Oprah Winfrey will make a significant
contribution, first on the Internet, then on the
cable channel. In a series called Spoken Word,
she will voice-over some of her favorite passages
from literature and life, animated by graphics.
She'll also take a leading role in an ongoing
Oxygen survey that examines how women view
politics, the financial world, their roles in society,
their personal lives and the new media. "I'm the
most illiterate person when it comes to the
Internet," Winfrey says. "We could create a
whole show about me learning the Web."
But first Oxygen must convince cable operators
to carry the channel. Laybourne says she needs
20 million subscribers by 2001 to make a sizable
impact. The 3 million subs from TCI are a good
start. But there's a catch: To get those 3 million
subs, Laybourne must find an additional 5 million
on her own by next January.
Laybourne doesn't think it'll be hard to find other
takers. She's held discussions with a dozen or so
big cable operators. Of the five or six cable
executives FORBES reached, many sound excited
by Oxygen, eager to find space on the few
remaining analog channels—eventually. "We will
consider signing a contract before Jan. 1, 2000,"
says Ajit Dalvi, senior vice president for
programming and strategy at Atlanta-based Cox
Communications, which has 3.8 million
subscribers. "But we will not commit distribution
without knowing more about her programming."
Meantime, there's the May 1 deadline. That's
when Oxygen plans to cut the ribbon in
cyberspace for five Web sites, two of them—on
relationships and entertainment—entirely new.
(Oprah.com debuts Aug. 1.) Since acquiring
three sites from AOL last fall, Oxygen has been
feverishly upgrading them with new content and
navigational tools.
There's no shortage of women's sites already out
there, from an upstart like CyberGrrl to the more
established Women.com and HomeArts (which
recently announced a merger). Laybourne wants
to roll over them all. Oxygen claims its sites
attract nearly 2.6 million unique viewers a month,
versus 3 million for Ivillage.com, a pioneer of
Web communities of women. But it's a very
tough way to make a buck: Ivillage has yet to
earn a cent.
Oxygen will launch its Web sites with the help of
an innovative device—a computerized
"information wallet" from American Happy Ware,
a small Burlington, Vt.-based software outfit.
Buzzy, as it is known, is sort of a multimedia
Palm Pilot on your computer screen. Open up its
distinctive round icon and you've got a
notebook-shaped window that can personalize
and store all kinds of information—music, video
or text. It's easy to download and manipulate
data from the Internet or a CD with just the drag
of a mouse. The info wallet comes minimally
formatted, but can be customized and serve as a
search engine, an organizer, an address book, a
Rolodex, a calendar and a program manager.
You can duplicate Buzzy as many times as you
want and send it to friends. It's stored on your
PC. The feature is free to Web users—and, as
Gerry Laybourne points out, a potentially huge
draw for advertisers. Assuming Oxygen can
overcome users' privacy concerns, the info wallet
could be exploited by advertisers for an unusual
array of narrowcast pitches. A small step on the
long and rocky road to convergence.
How soon will the Web blend seamlessly into the
television? What will the fused medium look like?
Laybourne is too cautious to predict. "If you ask
me what makes me nervous, it's that the world's
eyes are on us and expect us to create miracles
right away," she says. "We can't." That's more
honesty than you'll get from most digital
visionaries.
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