|On January 29 in New York, approximately 200 information industry executives
attended the SIIA Information Industry Summit, titled "Meeting the New
Challenges." The event was sponsored by the Software & Information
Industry Association's (SIIA) Content Division, and it addressed key strategic
issues identified by the SIIA's online business, e-publishing standards,
and digital rights working groups. As such, it attracted companies that
publish, distribute, or develop technologies for online content as well
as financial firms that fund the industry. It also attracted the senior
management from these companies. Nearly 75 percent of the attendees were
at a vice president level or higher in their organizations, and 35 percent
were CEOs and other company heads.
Peter Simon, chairman of the SIIA Content Division, opened the summit
by giving the audience background information about the SIIA and an overview
of the program. Following remarks and introductions by SIIA president Ken
Wasch, West Group's Michael Wilens gave the keynote speech and used the
Slinky Effect, the Double Bubble, and the Three-Body Problem to explain
what happened to the Internet economy last year and what could be learned
from it. Wilens was followed by a panel of financial experts who presented
a rather dismal outlook for funding in 2002.
The next panel included executives from traditional information companies
and Web start-ups who discussed what they did to cut costs and survive
last year, as well as what their strategies will be going forward. Lunch
speakers speculated on the future of the Internet and attempted to shift
the program to a positive note. They were followedby an afternoon panel
that reviewed new options for packaging and selling content. Finally, the
program closed with a solutions showcase that presented content-focused
technology selected by an SIIA advisory panel on the basis of innovation,
promise, and readiness for the market. This showcase provided further signs
that life may be returning to the industry.
In his keynote, Wilens reminded the audience of the ways in which the
Internet has radically changed information technology in a very short time.
He said the Web not only revolutionized online distribution by eliminating
the advantage of proprietary platforms and creating standards for technology
and business, it also energized product development. As a result of the
development of new technologies during the Internet boom, product cycles
increased from 3 years to quarters, months, or even weeks. "To remain competitive,"
Wilens advised the audience, "businesses must get even closer to their
customers and plan increasingly shorter time frames."
Wilens used three visual images to illustrate other important lessons
that could be taken from the expansion and implosion of the Web economy.
The first was the Slinky Effect. He compared the early adopters of technology
to the leading edge of a slinky and the bulk of users to the trailing edge,
which holds off until the last minute and then jumps all at once. The industry,
he said, focused too much attention on the front, which moves more frequently,
rather than the back end, which moves in a much bigger jump and has a bigger
impact on profits. His advice to the audience was to use the front for
directional guidance, but not to lose focus on the back. He used the example
of Third World countries: They jumped from no telecommunications infrastructure
to ubiquitous cellphones, with no interim step.
The Double Bubble economic model occurs, Wilens explained, when risk-adverse
customers (i.e., the trailing edge of the slinky) buy the same product
twice on different media and create a revenue bump. When they finally accept
a new technology, revenue from other media declines as it did in 2001.
Wilens also advised companies to stay flexible and not shut off options
by predicting any farther than 34 years out. He described the interaction
of content, technology, and distribution in the information industry as
a Three-Body Problem and noted that the trajectory is impossible to calculate
when three or more objects interact with each other. Browsers affected
the development of content unpredictably, he noted, as did broadband distribution,
and technology will rule the broadband fight over wireless, cable, and
wired line. What is critical, he said, is to be able to respond rapidly
to change when it occurs.
The Money Market Outlook
Wilens was followed by a panel of financial analysts who discussed
"Outlook for Capital '02: What to Expect from the Money Markets." The consensus
seemed to be "not much." Ed Paisley, managing editor of The Daily Deal,
moderated the session, which included Paul Noglows, an analyst with JP
Morgan H&Q; Pat Kenealy from IDG Ventures; and Howard Tullman, who
has founded nine successful companies and financed another eight businesses.
Overall, the panelists agreed that 2002 would be another year of triage.
It won't be that much harder than last year, Kenealy said, but significant
improvement shouldn't be expected before 2003. Kenealy explained that the
"back end of the snake is tied" and money is primarily being used to shore
up previous investments. Noglows also noted that valuations are becoming
more realistic now and Internet companies are expected to reach profitability
within 6 months or lose funding. However, the panelists agreed that when
money does get freed up, it will go to new opportunities rather than the
Internet's "wounded ducks."
Although he felt it was difficult to be more pessimistic, Paisley said
that Internet businesses were losing less money and that investments would
still be made in enabling technologies, proprietary information, and combination
paper and Web solutions. Tullman advised entrepreneurs to have domain expertise
(i.e., don't go to school or learn the business on investors' money), to
not reinvent the wheel or do something cheaply that shouldn't be done at
all, and whenever possible to reuse or deploy modular investments. During
the question-and-answer period, the panelists offered additional advice
to the audience about content investments. The distribution game is over,
according to the analysts, and publishers were advised to go where the
eyeballs are now. They were also told that crummy technology is OK if it's
easy to use, but crummy content is not. Kenealy also encouraged verticals
in niche markets—customized products and solutions that allowed disintermediation
or direct access to information by customers.
After this rather bleak financial outlook for 2002, a panel of executives
from information companies described how they survived the downturn last
year and what their strategies would be going forward in a session entitled
"Rethinking the Information Company: Gaining from Adversity." Moderator
Lee Greenhouse, president of Greenhouse Associates, positioned the speakers
to his right, from traditional to Internet start-up. Included were Lisa
Mitnick, a senior vice president with LexisNexis; Dan Schimmel, president
and CEO of OneSource; and John Wickersham, chairman of NorthStar Travel
Media. Martin Nisenholtz, CEO of New York Times Digital, and Jack Lynch,
CEO of BigChalk, represented the nontraditional companies in the group.
Despite the diversity of company types, there were more similarities
than not in theirsurvival strategies. All had either established B2B subscription
revenue or acted early in 2000 to diversify their business models. At the
same time, they cut costs by reducing personnel and eliminating nonessential
businesses. Sales efforts were redeployed to solutions selling, or from
the consumer to the business market. Productivity and other efficiencies
were achieved despite the cuts by investing in infrastructure.
In the case of BigChalk, a digital learning site, Lynch noted that the
company had changed its complex B2C2B model to an institutional-based subscription
model and had acted early in 2000 to curtail its growth and shrink the
company significantly. Nisenholtz said New York Times Digital had also
acted early, and as a result isn't down on therevenue side. It reduced
its head count by 40 percent and eliminated redundancies by working more
closely with its newsroom. He felt that this coordination along with infrastructure
investments actually improved the quality of the Web site and increased
NorthStar Travel suffered revenue lossesfrom the downturn in travel
ads in 2001. However, like Lynch, Wickersham reduced staff and adjusted
the company's business model to refocus on the corporate side of the business
rather than direct consumer markets. NorthStar Travel also made infrastructure
investments as it moved production from Reed Elsevier, resulting in more
In contrast to the nontraditional businesses, OneSource and LexisNexis
only needed to make tactical adjustments to their long-term strategies
to maintain profitability last year. Schimmel noted that OneSource's business
has always been focused on subscriptions from Fortune 500 companies. The
company's strategy was to drop its investment in the lower end of the market
and restructure the sales force to focus on targeted verticals. Like OneSource,
Mitnick said that LexisNexis had already moved to a subscription model
and wasn't hurt as much asother traditional online services by drops intransactional
revenue. She also felt the company was protected by its diversified markets.
As some sectors contracted, she said, others grew, including risk management,
the federal government, and law enforcement. LexisNexis also made an investment
in salesand was able to take advantage of the downturn to pick up market
In general, the panelists viewed their position as survivors in a positive
light. Theyfelt there was less competitive noise in their channels now
and more opportunity to take market share. They also see now as a great
time to make acquisitions and hire talented people. Mitnick noted that
LexisNexis plans to hire 200 employees in the next year and considers it
an opportunity to bring in new, innovative talent. LexisNexis will also
invest in its global infrastructure and content that touches customers.
OneSource expects to invest in customer service, content integration,
acquisitions, and new technology solutions in advance of the market. Nisenholtz
noted that there are very few pure-play dot-coms left and that New York
Times Digital is focused on becoming the best journalistic product on the
Web. It plans to diversify its revenue models this year and use the Web
to drive print sales. NorthStar will develop new tools for travel agents,
and BigChalk will use XML and other Web technologies to reduce its cost
In all, it's an encouraging sign that these companies plan to invest
in infrastructure, content, and product development going forward. The
crossbreeding of dot-com and traditional cultures could also produce some
interesting results if conservative companies with money—like LexisNexis—start
addingnew and innovative talent. It could also improve their ability to
heed Wilens' advice to shorten product cycles and respond rapidly to change.
The Next Stage of Evolution
During the luncheon program, participants were treated to a panel of
visionarieswho discussed "Internet Redux—What's Next for the Net?" The
session was moderated by James Kollegger, CEO of Genesys Partners, and
included William Day, CEO of About.com; John R. Patrick, president of Attitude,
LLC; Jim Rutt, former CEO of Network Solutions and CTO of Thomson Corp.;
and Amy Harmon, a technology writer for The New York Times.
Kollegger noted that in the last year the Internet had not only been
hit by the perfect storm, but visited by the four horsemen of the apocalypse
as well. Nevertheless, the panelists were all optimistic about its future
and viewed the Web as still in an early stage of development. Some of the
key drivers they expect to affect the next phase are wireless portability,
peer-to-peer access, user empowerment, and the ubiquitous growth of communities
serving specialty niches.
Rutt opened the discussion by placing the Web at the "end of the beginning."
He likened the Internet to a new ecosystem opening up and compared it to
both the Cambrianexplosion 500 million years ago when phyla came into existence
and also to the introduction of the PC in 1982 when many new forms (i.e.,
applications) were created. The basic categories are laid down early, he
said, followed by an explosion of species that overpopulate them. Eventually,
Darwinism takes over and one winner per niche emerges.Dominance, he said,
is typically established during climatic changes such as an ice age, or
in the case of PCs, when the switch from DOS to Windows took place. His
advice to participants was to configure their strategies to take advantage
of coming climatic changesthat will affect Web dominance, such as broadband,
portability, and new classes of user interfaces—such as voice and mental
telepathy—that may replace the mouse.
Patrick also described the Internet as only 3 percent of the way to
its potential and felt that it was not being fully exploited by companies
to improve their customers' experience. How often, he asked, do you have
to phone a company during business hours for information that should be
accessible from its Web site? He believes both Internet portability and
customer empowerment will change the game. Day took a long-term view and
pointed out that the Internet continues to grow and people are spending
moretime on it now than on traditional media such as TV, print, etc. Harmon
also noted the growing importance of communities, peer interactions, and
trading on the Web and stressed that publishers should capitalize on these
trends rather than fight them.
When asked what was next, all of the panelists thought that wireless
access would play a major role in changing the Internet, especially when
combined with instant messaging. Right now, Patrick told the audience,
the Internet is where your PC is. In the future, it will be where you are.
Harmon pointed out that many companies are waiting for the third generation
of wireless to act. However, she said, transaction-based notices, such
as a bank deposit clearing or other notifications, such as airline flight
delays, are of high value to users and do not require much bandwidth. There
are also unregulated communities springing up that are expanding the range
of wireless by linking and sharing access.
Both Rutt and Patrick thought a stable form of user identity or digital
authentication would also be needed to allow content to flow freely across
services and devices as well as to avoid copyright problems and viruses.
Overall, it was interesting to speculate on the applications and services
that might be developed once users can access information or send messages
by mental telepathy from anywhere on the globe or while performing any
Content Slicing and Dicing
The last panel discussion of the day, "Content E-Commerce: New Approaches
to Packaging and Selling Content," broughtthe audience back to the more
immediate concern of how to facilitate broader distribution of content
and focused on delivery, protection, and pricing issues. It was moderated
by Scott Edwards, SIIA's vice president of Anti-Piracy and Content Programs,
and featured Robert Bolick, McGraw-Hill Publishing's vice president and
director of new business publishing; Thomas R. Diaz, senior engineering
manager for Adobe Systems' eBook Development Group; Brad Gandee, ContentGuard's
XrML Standards Evangelist; and David Sidman, CEO of Content Directions.
Sidman opened the discussion by making a case for assigning Digital
Object Identifiers (DOI) to all content. The DOI is an unique identifier
that, he said, empowers the slicing and dicing of content by providing
permanent routing to it on the Internet and eliminates broken links when
URL addresses change. According to Gandee, XrML standards also support
the free flow of content by providing a mechanism for the owner to get
paid. XrML embeds rights information at the document or object level and
thus allows usage rules and business requirements to go wherever the content
goes. DOI registration is available now through Content Directions, Sidman
noted, and is currently being adopted by the scientific journal sectors.
XrML and Onyx standards are also available, he said, but a layer of integration
might be needed. Diaz reported that Adobe is currently developing such
a layer and is designing systems that use both rules and DOI. He also said
that the underlying digital rights management systems and technology are
now both functional and secure.
Bolick represented the publishers' perspective on the panel and provided
examples of business models that McGraw-Hill Publishing has used to sell
content on the Web. He pointed out that, using DRM, the company has successfully
sold subscriptions of medical texts on the Web that have not hurt its print
sales. A timely book on post-traumatic stress was also successfully marketed
and sold to consumers as an e-book after the September 11 attacks. The
key to making money with e-books on the Web, he believes, is getting more
titles up so users have more choices. However, he also noted that more
investments in digital asset management systems are needed because production
and distribution systems are still not optimal for re-purposing.
The program closed with a Solutions Showcase that reviewed eight solutions
selected by an SIIA advisory panel on the basis of content focus, game-changing
potential, stability and promise, readiness for clients, relevance to business-professional
information markets, and balanced distributionacross the supply chain.
They coveredeach sector of the create-package-distribute-use content supply
chain and fell into two categories: 1) solutions to reach and keep customers
(accessibility, value-add, personalization, enterprise integration) and
2) solutions to achieve operational improvements (monetization, protection,
The following solutions were described by representatives from each
OuterForce Systems—A production-process-management system for media and
professional publishing that integrates resources and work flows
Sealed Media—A digital rights management solution that offers persistent
protection via client-side technology at the point of consumption
ExactOne—A data access and integration solution that allows real-time access
of data from internal and external sources as well as integration of disparate
Clear Forest—An information-extraction engine that adds automated XML tagging
of events, facts, names, etc., to unstructured data and provides analysis
and navigation tools that illustrate relationships and link documents|
Context Media—A content asset management solution that allows publishers
to aggregate, package, and deliver digital assets
Digital Owl—Information management application services for managing licenses,
distribution, and usage tracking of premium information within a corporate
Next Page—Peer-to-peer business networking that facilitates communication,
collaboration, and file sharing across organizations
NewsStand—An Internet delivery solution that offers digital content to
subscribers in its original context and provides DRM protection, customer
billing, and support
Signs of Life and Rebirth
Early on in the program, speakers referred to the audience as "survivors"
and set the tone for what would follow. It conjured up an image of dazed
victims trying to understand what hit them, searching through the ruins
of the dot-com explosion for signs of life while making plans to rebuild
more intelligently—not unlike the city where this program was being held.
By the end of the day it seemed clear that the knowledge, technology, and
talent needed to rebuild the industry are, in fact, available. Moreover,
eventhough funding won't improve until next year, the survivors seem willing
to make investments they need to grow their businesses. Another positive
sign is that Internet and traditional companies seem to be learning from
one another. Internet companies are adopting subscription business models
and traditional companies are implementing Web technology solutions. Success
may come from the crossbreeding of these cultures. So when the slinky jumps
again, the industry could be ready and positioned on the right step this
Linnea Christiani is a content-licensing and business-development
consultant with 15 years' experience in the information industry. Her e-mail
address is firstname.lastname@example.org.