The Internet's first news brokerage


Speech of Bill Densmore, president of Newshare Corp., of Williamstown, Mass., to the America East Newspaper Operations and Technology Conference, Hershey, Pa., March 26, 1996. (available at:

I decided to drive from Massachusetts to Hershey yesterday because in this hypertext, hyperspeed environment, an occasional six hour drive is a marvelous opportunity to reflect on facts, figures, announcements and fluff. And armed at the beginning of the drive with an appropriate supply of chocolate Easter eggs to keep me alert, I proceeded to boil down six hours of thinking into 45 minutes using one of the most handy pieces of compression technology available an audio cassette recorder.

A few weeks ago I thought I would offer a consumer's guide to online technologies. But I challenge anyone to keep up with the pace of new releases in the area of payment systems, audience measurement, web site management, personalization and multimedia integration. Thus I decided to offer instead one view of where all the technology is leading us, and why it may be important to consider your business model first and your technical needs second. I'll talk about the hourglass and the cylinder. And in my final five minutes, I'll plug what we're doing at Newshare Corp. just a bit.

The task of evaluating technology is indeed daunting. The Internet, unlike corporate computing of the last half decade, is not a one vendor platform. You don't have to get Windows NT to put your newspaper on the Web. The latest survey shows that Microsoft's server sofware solution is way, way down off the chart in terms of its penetration 0.93 percent according to the Netcraft survey. The No. 1 server, with 32.4% of the marketplace, is from a programming collaborative that isn't even incorporated the Apache Group. And the free, public domain software that originated at the University of Illinois, the NCSA server, has 24.6 percent of the server software market. This is one place where Netscape doesn't control the market. Netscape is No. 3 and 4 with 11.2 perent for its Commerce Server and 7.35 percent for its Communciations Server.

Apple introduced last moth for $11,000 a Power PC server box that will run IBM's flavor of UNIX. The Internet was conceived in the Unix environment and while that presents some challenges because of the many flavors of Unix, there is an abundance of trained, young technical people coming out of the nation's universities and colleges who are Unix "hackers." Using the Internet, you can get just about any technical support question you have answered by posting it to a Newsgroup, where real fellow users will reply. Consider so called authoring tools for converting information from proprietary newsroom front ends to the WWW. A year ago, there was almost nothing available. Today Microsoft has declared it will bundle that function in the next versions of Windows 95 and NT. This is the functional equivalent of being able to take word processed copy and being able to convert it into bracketed typesetting codes with point and click simplicity of a function box embedded in a word processing program. After all, HTML codes are really the typesetting codes of the next century and they're inside brackets!


A lot of people have focused on whether the newspaper industry will be able to meet the challenge of the coming era of "fat pipes." That question misses one point the newspaper industry is no longer all that distinguishable from media in general. Most major publishers are not just printers. They own broadcast and cable properties, outdoor advertising and, most notably Tribune Co. and Knight Ridder significant new media holdings. If you assume that the leadership of our industry still has ink in our veins, then you understand what an adjustment it has been to see typewriters and Linotype machines become the functional equivalents of boat anchors. For the newspaper application, I would suggest large, centralized presses will be equally as valuable as nautical underpinnings in the next one to two decades.

Will the information consumer of the next century be satisfied reading, viewing or hearing the same information product as his next door neighbor when there is an easy and inexpensive way to obtain something home delivered conforming more precisely to his or her personal needs? Unless we are all the victims of extreme hype, it is clear that consumer opportunity will be available with the kind of bandwidth soon available in the average American home from cable, telephone and direct broadcast satellite purveyors.

The transitory missing link is good quality, color printers that can knock off during the night something as vibrant as a four color copy of Newsweek or Time minus the ads and sections you aren't interested in and have it ready in the out bin when you wake up. With low resolution color printers already in the $300 range, you can image that the technology will deliver that degree of sophistication sooner rather than later.

Already, if you don't mind reading your news on the screen, you can get your "daily Newshare" from a variety of vendors such as Individual Inc., Knight Ridder's Newshound, Profound, DowVision, Pointcast and before next year, we hope, Newshare Corp.


And so if you accept the eventual reality of this scenario, you have to conclude that it may no longer be cost effective ramp up a centralized printing press every night, employ pressmen and truckers, route delivery people expend ink, gasoline, paper and other resources pay maintenance, in order to move multiple copies of the same thing to individual houses under tight deadlines, when what you could do is digitally move individualized editions to each home over a pipe the expenses of which are shared with many other information vendors. The savings in labor and renewable resources will take a big slice out of the average newspaper's direct expense sheet.

To be sure, books and catalogs which have a shelf life and don't require an expensive overnight delivery system will continue to run on web offset presses going into the next century. So there is no danger that Gutenberg's creation is headed for the scrap heap in general. It will just not make sense for time sensitive information which consumers will come to expect will be personalized, not mass produced.

Infinite personalization does not mean that consumers want to become their own editors. There will always be a front page of the Philadelphia Inquirer. But far more people will be reading it via cyberspace in 20 years than are reading it on ink and paper printed in Philadelphia. For those consumers who want to have a product that is potty trained who like to be able to move around with it they will produce it on a home printer.

So what does all this mean for the newspaper industry. Hopefully it means that 20% to 30% of your in house cost structure will go off your books in the next century. There will still be printing and delivery costs, but those costs will be shifted to the Quicken and Microsoft Money balance sheets of consumers, and will be allocated across many publications. Because consumers will buy their own erasable or recyclable paper, lease or buy their own printer and buy their connection to the Internet or some other broadband technology.

The newspaper industry has an opportunity to sell or rent those products printers, paper, connectivity to its users. If it doesn't, other vendors will step in. So to preserve our revenue stream, we have to learn how to deliver a package of services including all those services . . . lease printers to subscribers . . . bundle Internet access internally or via a third party back shop.


All this boils down to maintaining a customer relationship which rises to the historical level of trust and ubiquity that the local daily newspaper has enjoyed in most of this century.

One final word about revenue streams, and then I'd like to talk more about that customer relationship. This disaggregatio of services means that your revenues may actually go down in the years ahead. But this doesn't have to mean your profit will, too. That's something to keep in mind when you worry about cannibalizing your print product. Why shouldn't you cannibalize your print product if you can use fewer resources and a better profit margin on smaller gross revenues? Is there something inherently good about being a $1 billion company rather than a $500 million company if you still end up with $100 million in gross profit?

Those profits will only be maintained through the retention of a customer relationship. There are powerful forces trying to take that away from newspapers. It is what many of the vendors at this conference are trying to help you maintain and improve.

In the coming digital world, the functional monopoly of the local daily newspaper with the very high barriers to technical entry is a thing of the past. Take a look around. Your local competitor may be the local Internet Service Provider that sprang up a year ago, or the regional Baby Bell, or Microsoft, or another newspaper chain that thinks you're leaving something on the table in your local marketplace or even the marketing saavy housewife who can afford $100,000 for some computers, a few reporters and some salesreps.

Retaining customers requires offering them maximum choice with minimum hassle. One thing the Internet offers today is lots of choice. One thing it most definitely does not offer is little hassle.

Who are Internet users and what do they want?

Internet users are still a mere 3.6 percent of the U.S. population, according to a 15 month FIND/SVP American Internet User Survey, made public in January. It is the most authoritative and recent of many surveys which identify the demographics of those users. Eventually it will be the demographics of America, skewered a bit on the high side. Right now Internet users are nearly 2:1 male (although that's changing fast), averaging age 36, college education, average household income of $62,000 a year in short a very attractive demographic for advertisers.

What do there want? There have been fewer studies and this is harder to measure. The product most online consumers want is information more than goods. The FIND/SVP study found that 80 percent of the respondents said they were downloading news and general information; 67 percent sought information about about hobbies and leisure; 66 percent probed special interest groups; 61 percent downloaded software; 60 percent wanted info in education and training; 57 percent sought info on music and intertainment and 47 percent wanted product information. Only 16 percent said they were satisifed with their ability find anything on the Internet.


So the newspaper industry has a marvelous opportunity to take advantage of this medium because we have a major subset of the product that consumers want and an historical facility for finding and presenting information in a useful fashion. So it makes sense that a user centered Internet system would bind users to someone selling information. Not someone selling money, as in an E cash company; and not someone selling goods, as in an electronic mall or storefront.

The London stock brokerage firm Durlacher said in a report noted January 15 by the Financial Times that in the future, charges will be applied for content accessed rather than for the cost of moving material from host machine to user. That shift, Durlacher warned, poses a grave threat to telcos, who are used to billing for time. But it is an opportunity for the newspaper industry. An especially when predictions are that the online business information market alone, which totaled less than $120 million last year, is forecast by SIMBA Information and others to reach, in conjunction with CD ROM sales, $14 billion or more by 1999.

The World Wide Web is an interactive medium. What do we mean by that? We mean that the web has the capability of allowing two way communications among and between information consumers and information vendors. You might say that has always been true of newspapers. If you've worked in a newsroom you know there is plenty of reader feedback when you make a mistake in an obit or if you get the wrong restaurant's name when reporting a health code violation. And there is a recognized method of user feedback called the letters to the editor page.

So it's an interactive medium. That's not new. What is new are the forms in which feedback takes place, and the significant shift in control over process toward the consumer and away from the vendor. In a web based publication, users don't passively consume. They actually create it to their needs by the navigational paths they choose. More significantly, users can exchange knowledge and views not only with the publisher but with fellow consumers. Witness the overwhelming popularity of "chat" areas on the online services, and the proliferation of at least 10,000 subject specific Newsgroups on the Internet. That is interactivity of a type that a printing press or a broadcast cannot offer.

So in the online is an environment where everybody is a content producer as well as a content consumer. We like to think of this as the difference between passive interaction, as in traditional media, and active interaction in next century media. It is feedback which instantaneously alters what is being communicated.


This sort of paradigm shift can be expressed with a chart that we call the hourglass vs. the cylinder.

In the 20th Century, information has moved as if through an hourglass. No matter how many information providers or users, there was always a technological pinch point that forced for economic reasons an editing process the speed of a modem, cost of adding pages, or limited hours in the broadcast day. And a natural force call it "gravity" made it difficult for the consumer to send information back up the hourglass to the information provider.

In the next century, information will move about as if in a cylinder. Now bandwidth the "fat pipe" is no longer the most significant constraint. The real constraint is peoples' ability to digest the huge volume of information coming down the pipe. So users have to join more than ever with editors in deciding which information they will receive.

Actually, the cylinder should be displayed on its side. Because there is no longer any reason to depict the information provider as "higher" than the information consumer. In fact it won't be at all clear much of the time who is the consumer and who is the provider, since those roles can reverse as easily as they do during a present day voice telephone conversation.

We've heard over the last 20 minutes or so about the general trends in technology, and how they might be requiring us to reconsider our news delivery business models. And I think that is the key to focus on the business model, not the technology. And I can illustrate with a brief anecdote.

About three years ago I joined about 12 other members of the New England Society of Newspaper Editors for a 10 day professional exchange with editors in St. Petersburg and Moscow in what had just become Russia. We were guests of the St. Petersburg journalists' union. On one day we visited the offices of a new weekly paper. I remember being struck by two things. The first occured when we walked into their cramped offices in an old section of St. Petersburg. Arrayed about the little rooms was a collection of up to date, Macintosh pre press pagination and desktop publishing equipment. It was evident that our Russian counterparts were making good use of it. The publication was snappy and clean. We were expected to be advising our Russian counterparts on how they might do their jobs better. It was evident they were ahead of many of us in the application of the latest technology.

On the other hand, having just emerged six months earlier from a socialist environment where newsprint prices, subscription rates and profits had been set or retained by the government, it also was evident the owners had no clue what business model was going to allow them to prosper or at least survive in free Russia. What they had taken to doing at this stage was relying upon essentially foreign venture capitalists to fund their operations while they figured out whether they could make it on advertising or subscriptions and what their cost structure would be.

It struck me as I drove down here yesterday that the new media operations of America's publishers are in much the same boat as those Russian editors. There is abundant and rapidly maturing technology in all of the key areas. Most problems of interactive publishing that are technology related are going to be solved rapidly. There are open standards, many vendors and efficient propagation of ideas.

What seems completely up in the air is what business model or models are going to fund all this. There are at least three basic options. Completely sponsored publication, subsidized by advertisements or a marketing budget; subscription based models; and the third is the single copy model, where users pay for things "by the click."


The WWW is where television was in its infancy where there was no way to make a subscriber association between a television viewer and the programming source. And therefore it was thought that the only way to fund television programming was with advertising. That worked really well throughout the '60s and even into the '70s, until a little idea born as a technology solution to a technological problem cable started to enforce a new paradigm on television.

Cable got its start in little towns in America, far out from metropolitan areas, where viewers wanted to be able to get a better television signal and were willing to pay for it. But as cable began to wire the big cities and satellite technology advanced, smart programmers realized they could charge cable operators for programming and that if the programming was compelling enough, the operators could charge their subscribers for a premium channel.

Well, that let the genie out of the bottle. That was the start of the market segmentation of television. Broadcast television remains very profitable, but it is now strictly a mass market medium. And broadcast television will suffer in the era of disaggregated content that we are entering as "fat pipes" allow point to point communication.

So to reiterate. Television started as a sponsored model and has evolved to a hybrid model that is both sponsored and subscription.

Now it is also possible to buy programming on a pay per view, "per click" basis both from your cable company, if it has a programmable system, and by going to the neighbor videocassette store and renting a movie. Now who would have predicted in the '60s that somebody would pay $2.50 to rent a movie for one night when they could get it seemingly for free on television? The answer is that what you pay $2.50 to view at a video store, because of the economics of the marketplace, is now typically more recent or higher quality entertainment than what you can view on advertising sponsored broadcast television. And the viewing of it can be personalized to your schedule. And that's why people are willing to pay for it whether it is delivered digitally by your cable company direct to your home or whether you have to physically pickup a cassette tape.


The Internet's WWW will evolve in exactly the same way once an enabling techology makes that possible. In television it was first cable and then the VCR. In the telephone industry, much earlier, it was a universal billing settlement system which allows us to make a call from a phone connected to AT&T to another phone connected to MCI or Sprint and have the connection go through in a few milliseconds. Most of us are old enough to remember when making a long distance call even 15 miles or so would involve an intercept operator coming on the line and saying, "Your number please." The technology was too primitive to allow the background transfer of your number for billing purposes. Now we even have universal Caller ID, for better or worse. Look at how casually we now pick up the phone and make a long distance call for which we are billed "by the bite" or "by the touch."

When you go to the supermarket, you don't purchase your groceries by subscription because you don't have to modern food distribution has made it possible for you to pick items one at a time and pay for them individually. In the 18th century, you bought in bulk and pretty much the same thing the farm family down the road bought if you didn't grow it yourself. It is axiomatic that once the technology makes "a la carte" purchasing easy and cheap, some segment of the consuming public will demand it. Some others will still perhaps prefer to buy in bulk.


If you look around, you can see the everything free, subscription only and pay per click business models already operating in electronic information delivery.

The free model is what's most evident on the WWW right now. With vast free information from by Steve Outings' latest count 800 or more newspapers up in the last year, only now are some papers gathering the resolve to figure out how to start charging for it.

The consumer online services have for years built a user base although in two out of three cases arguably with no operating profits charging a subscription and delivering "all you can eat" service up to some hourly minimum. Of AOL, Prodigy and Compuserve the one which has shown undeniable profits was the one which had a hybrid subscription and per item charging model Compuserve.

The third model, also a hybrid, is skewered toward "charge per click" and has been very successful for the proprietary, business information data aggregators such as Dialog Knight Ridder Information Services, DataTimes, Dow Jones News Retrieval, West Publishing, Lexis Nexis, Information Access Co. and a half dozen or so others. So there is plenty of evidence that consumers will pay for things "by the click" if they want them badly enough.


The perception is that consumers won't pay by the click on the Internet and the reason for that perception is that so much of the information on the Internet is largely undifferentiated. You can find wire service reports at dozens of sites; you can find national news at maybe hundreds of sites; you can find government information all over the place. But what you won't find is some of the specialized information that's been sold routinely for years by the proprietary aggregators. And the reason you won't find it is there has been no adequate business model for charging for it.

That's changing. As of perhaps six to eight months ago, pioneered by such enterprises as First Virtual Holdings Inc., Netscape Communications Corp., Open Market Inc. and a handful of other vendors, you can now establish a web site where you can readily subscribe your users and at the very least charge them a flat monthly rate and vend them information, keeping track of what the user views and when. Increasingly in the more sophisticated web site management programs you can aggregate a la carte, per click charges to individual pieces of information and charge those periodically to a credit card or other credit facility.

So the WWW business model has been advanced to the stage of what the traditional telephone market would look like if each of the Baby Bells and independent telcos had their own billing systems that didn't interoperate with each other. You can imagine how you would feel about that if you had your service from the State Long Distance Telephone Co. in Elkhorn, Wis., and couldn't call 40 miles to Milwaukee without opening up a second account with Wisconsin Bell. But that's where things stand today on the Internet. What's needed is a one bill, one password system that works across multiple, independent Internet publishers that allows those publishers to share users and information easily and profitably.


I've tried over the last 40 minutes to lay out in a general way the technological and business challenges of the World Wide Web as we enter the next century. Now in the last five minutes, I'd like to describe what we have been doing at Newshare Corp. over the last year and offer it as one possible business model to consider.

Newshare Corp. has funded development of the Clickshare Access and Payment System because we think what's needed is a distributed user management system which authenticates users and enables subscriptions or micropayments down to 10 cents across multiple Internet servers.

Here's a graphical depiction of how Clickshare works. Think of Publisher A as an Atlanta newspaper and Publisher B as a Boston newspaper. And imagine for a moment that both of these papers have web sites and that in each case they enroll users for $5 a month and allow their own users "all you can eat" access to basic news resources for that price. Now lets suppose a baseball fanatic in Atlanta wants to read a Red Sox pregame workup and finds a link to the Boston newspaper's story at the Atlanta web site. Click . . . the reader goes to the Boston site. But here the Boston server, in the present world, says "Sorry, access prohibited please subscribe." The user, faced with paying $5 for one article and starting a second ongoing $5 a month relationship just skips the article and the Boston paper loses a sale.

Now consider if both newspapers were running Clickshare Web Server Software and were Clickshare Publishing Members. Repeat the scenario. Now the Atlanta readers request goes out with a digital calling card. And that card, read by the Boston server, says, "This user is a Clickshare enabled user and has an account at the Atlanta Clickshare member." The Globe sells the article for, say, 10 cents at wholesale. The reader gets his article with no additional password or challenge. At settlement time, Clickshare Corp. applies a 10 cent charge to the Atlanta newspaper's clearing account and pays the Boston newspaper 8 cents, keeping 2 cents as a transaction fee. The Atlanta newspaper to charge its user whatever it wishes. It could pass along the 10 cents, apply a 20% retail markup to 12 cents, or bundle the Boston story as part of a premium subscription package. Clickshare does not set pricing at the user level because it doesn't own the user the home base publisher does.

We think our system, up and running last week in trial implementation, provides three essential requisites for jump starting Internet information commerce:

This, by the way, does not mean that the site that's selling information has to know the name or any private demographic information about that user. It only needs an anonymous ID number of the purchasing user. And that's the way our Clickshare service is set up to respect user privacy and store the user's name only at the user's home base publisher, not with any central database which we control.

Newshare Corp.'s Clickshare affiliate is thus offering a standard with which publishers can share users and information in a way which profits all. It is unique technology which starts with a business model: enabling a free market for digital information.

Thank you for your attention.



Newshare and Clickshare are service marks of Clickshare Corp.

Copyright, 1995, Clickshare Corp. All rights reserved.

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