HUMPTY DUMPTY HAPPENED.
WHERE DO WE GO FROM HERE?

BY NANCY MAYNARD

The financial status of new media resembles real estate development in the early 1980s, when tax laws supported huge debt that fueled extravagant building. When tax laws changed, however, the original business assumptions no longer supported the big, expensive projects, many of which went bankrupt. Most were purchased out of receivership at amounts supportable by new market realities, and they went on to do quite well. Information technology is somewhat like that now. A vast amount of money has built a system that does not function at full capacity and has limited commercial value, at least for consumer information.

The result is an online information system that has developed unevenly. In that sense, the original designation for the Internet -- the information superhighway -- may have been right after all. Much like the building of the interstate highway system, pieces of the system are complete, though not all. It was fairly common in the 1960s to speed along a sleek paved road and then get dumped onto a main street for miles in a county that hadn't yet raised its construction funds.

In the online world, there is a similar contrast in rates of development. There is, for example, a great amount of content but no uniform access to broadband, high-speed connections.

One thing is certain -- the interstate system was built. So was the Internet. To put it another way, even after dollars pumped the system up and then abandoned it, things didn't go back to the way they were. Too many things about the way news is put together and consumed by the public have changed in the digital age. Humpty Dumpty happened. Things can't be put back together the way they were.

When the World Wide Web burst onto the scene, one economic problem was paramount: How could one stream of revenue pay for old media and build new media, all at once? The quick answer: tap the capital markets to provide the necessary dollars.

Most of the money went into building mass audiences through advertising, largely in existing publications. In effect, dollars for new media were spent mostly in old media to reinforce the traditional mass-media model for news. As a result, investment in developing a true business model for the Internet was limited.

So where are we?

An increasing number of media companies now see what they believe to be the migration of occasional newspaper readers to free Web sites. So once again plans are under way to charge for access to these sites, plans that have failed in the past. But no comprehensive research has been undertaken to determine what the public values enough to open its wallet to consume.

Many news organizations charge a few dollars to retrieve stories from digital Web archives. But an efficient system of small payments for discrete Web use is yet to be put in place. Would that be a preferable model?

It may also make sense to think about Web fees using the cable television model: a basic connection service, paid sites, premium pay-per-view options, upgraded connections, etc., with the Internet provider collecting the money and distributing it back to information partners. Are such arrangements more acceptable to users? Are they efficient in a world of competing Internet services? Do media companies lose control of their customer relationships as a result?

About half of American households are now wired to the Internet. Mass-media audiences continue to fracture as the public finds itself with endless choices of where, when, and how much news, information or entertainment it wants.
With choice has come a distinct new pattern of news use for the wired set -- one different from the patterns on which traditional news grew up. For many Internet users, news is not a daily diet of morning newspaper, evening newscasts. It is, instead, a system of daily snacks and weekly feasts. Online users watch more cable news for the headlines, but they forego the daily network recaps. They don't read every day, but they do read at greater depth several times a week.

Convergence of reporting and distributing the news has not diminished, despite cutbacks in major media Web units. Tampa, Chicago, Dallas, and Los Angeles are among cities in which any news story is available in the newspaper, on broadcast or cable networks, and on the Web site. When and where the readers or viewers want it. A repeal or relaxation of the newspaper-television cross-ownership rule would make such practices commonplace.

And so even though some print journalists -- and some dot-com victims -- doubt it, Humpty Dumpty is gone forever, and the crossroads we are at will prove to be a unique highway for the future.