Will Gates Crush Newspapers?

Microsoft increasingly competes against almost everyone in this room for readers' time and advertising dollars. If you don't consider it a competitor today, in this increasingly digital world in which we live, all I can say is, 'Wait.'

-Arthur Sulzberger, Jr., Publisher, The New York Times, introducing Bill Gates at the Newspaper Association of America convention, April 1997

We are challenging old and established businesses like newspapers, travel agencies, automobile dealers, entertainment guides, travel guides, Yellow Page directories, magazines, and over time many other areas . . . We must devise ways of working with them or winning away their customers and revenue streams . . . We must be aggressive.

Nobody ever accused Microsoft of lacking aggressiveness - not the competitors who regularly claim it's trying to crush them, nor federal regulators who've hectored the Seattle software behemoth for years over alleged monopolistic practices. And lately it's journalists who are hearing the ominous footsteps of Microsoft chairman Bill Gates behind them as he strides inexorably toward becoming a media baron for the twenty-first century. He already controls the vital organs of most of the world's computers - which has made him the planet's richest person with a fortune of about $40 billion - and he is now shifting part of his legendary laser acuity from the medium to the message. Among his media beachheads:

¥ In July 1996, Gates joined forces with NBC News (after failing to forge an alliance with CNN) to create MSNBC, the all-news cable channel with an online capability that lets computer users explore, on demand, the news stories they're interested in. It's now available in 38 million U.S. households and attracts about three million page-views a day.

¥ This past June, Microsoft made its largest single investment - $1 billion - for an 11.5 percent stake in Comcast Corp., the nation's fourth-largest cable system operator. That dramatic move boosted the prospects of virtually the entire cable industry, whose stock prices had been languishing for years.

¥ By the end of this year, the Microsoft Web site Sidewalk - offering a wide menu of local arts and entertainment listings, restaurant reviews, and tourism guides - will be available in twelve cities. Sidewalk will roll out to most of the U.S. as well as to many markets abroad. So far, it's in New York, San Francisco, Boston, Seattle, and the Twin Cities, and is headed for Chicago, Denver, Houston, San Diego, Washington, and Sydney, Australia.

¥ Last year, Michael Kinsley, former editor of The New Republic and resident lefty on CNN's Crossfire, created Slate, an online news and views magazine for Microsoft, covering politics, the arts, entertainment, and social issues. Roughly 100,000 people a month now read it in its various formats.

¥ Through a company he owns called Corbis, Gates has been compiling from many sources the world's largest digital archive of photos and artwork for licensing to newspapers, magazines, book publishers, and catalogues, as well as to electronic media. Founded in 1989, Corbis has amassed more than 20 million images.

¥ In April, Gates paid $425 million for WebTV Networks, a maker of set-top boxes that allow people who don't own a computer to explore the World Wide Web via their television sets. The move is aimed at attracting millions more customers to Microsoft's various Web sites. WebTV recently signed agreements with a wide array of content providers that will make it a significant competitor to the online sites of newspapers and magazines.

Those ventures and others are symptomatic of a culture shift that will transform how people get their news, and much more, in the third millennium. Its full import hasn't yet sunk in on most U.S. households, not even the 40 percent that own computers, nor on many newspaper and magazine publishers, cable and broadcast network proprietors, and advertisers whose businesses will be affected profoundly. That shift, however, is now the turbine that drives Microsoft, a company that Eric Schmidt, boss of Novell, a competitor, calls "the most powerful economic force in the United States in the second half of the twentieth century." At the World Economic Forum in Davos, Switzerland, last February, Gates acknowledged that as part of his software empire, he is now embarked on creating a major media presence.

His intentions date at least to 1994, when he told his top executives that a "sea change" in Microsoft's mission was vital. The company would, from that day forward, redirect all of its strategic planning toward the Internet. No longer would Microsoft be only a software company. Just ahead lay the seductive world of media and the messages that media, including newspapers, deliver: news, entertainment guides, travel advice, shopping tips, movie timetables, reviews of books, plays, movies, and restaurants, stock prices, and help with financial planning. Gone was the notion that the much-hyped and misunderstood Information Superhighway would somehow emerge from the scallop shell of "interactive TV" being pushed by cable and phone companies. Nope. The future lay in computers; their synergy with the Internet would lead to the pot of gold at the end of the cyber-rainbow.

Lying directly in the path of the newly tasked Microsoft juggernaut were the newspaper and magazine publishing industries. It was as clear as the nose on Joseph Pulitzer's face that virtually everything a newspaper contains can be offered more efficiently on computers hooked into the Internet and the World Wide Web. That combination may eventually be one of the most effective productivity tools ever devised, not only for publishing but for hundreds of other businesses as well.

If, in the future, tens of millions of computer owners all pay tiny sums ("transaction fees") every time they tap into the sorts of news, features, and life-style guides that newspapers traditionally have offered; and if they also use their computers for travel reservations, shopping, banking, and stock buying; and if Microsoft owns most of the software and platforms that make such transactions possible - then the calculus will be in place for a business that could produce princely returns.

To that stew, add classified advertising, which many newspapers depend on for about 30 to 40 percent of their revenue. In 1996, before Sidewalk began its big rollout, Gates wrote in his bestseller The Road Ahead that the newspaper business "will change fundamentally" when more people are hooked to the Internet, and that "much of the newspaper advertising base could be in jeopardy." And in a famous 1993 memo titled "Road Kill on the Information Highway," Nathan Myhrvold, Gates's chief techno-strategist, wrote that newspapers are in "probably the worst situation of any form of print media" because readers would soon learn they needn't "wade through the fine print" of classified ads "in search of the car, home, or job that they want."

Myrhvold has been perfectly candid about Microsoft's intentions, saying that the company hopes to get a "vig" or vigorish (a bookie's term for a broker's fee) on every Internet transaction that employs Microsoft tools. That unending income stream - as computer users buy travel tickets, cars, clothes, real estate, insurance, and virtually anything else - will carry Microsoft deep into the $70 billion local advertising market. Microsoft executive Pete Higgins told The Wall Street Journal: "As we get to the turn of the century and beyond, we see this being a multibillion-dollar business."

Media titans like Rupert Murdoch cast a wary and worried eye on Gates. The News Corp. chairman told a conference of corporate chieftains in June: "News and entertainment is changing its delivery system totally. We have to stay on our toes to make sure Bill Gates doesn't erect a tollgate in every house."

I asked PaineWebber's whiz media analyst Christopher Dixon to assess Murdoch's remark. "It's not a tollgate," he answered. "It's much more insidious than that. You can go around a tollgate." The more accurate metaphor, he figured, would be a company that earned a five-cent royalty every time somebody set type. "Gates is trying to make sure that he has a proprietary position in controlling the tools that allow you and me to access information. And that's profitable by definition. How would you like to own the printing press?"

Enter Sidewalk, offering many of the same features that local newspapers do, but no classifieds - not yet. Forrester Research, a media analysis company in Cambridge, Massachusetts, estimates that by 2001, newspapers will forfeit $1.5 billion in local ads to various online services and another $3.6 billion from discounts caused by the overheated competition. A Forrester executive thinks that Microsoft and others will seriously erode local papers' classified ads, which alone represent a $15 billion market.

Right now, only about 19 percent of U.S. households are hooked up to the Internet, but that figure is expected to jump to over 40 percent by 2001. And Gates's heavy wagers on WebTV and Comcast could bring to the party millions of people who'll never buy a computer. Then that 40 percent figure could go much higher very fast, much to Gates's advantage. The house-to-house battle between newspapers and various online services for the loyalty of local consumers will be hard fought. If Microsoft prevails, Gates "will be getting his slice before the pizza you order is delivered to your door," as one reporter put it.

Gates has been at pains to assure journalists that he's not out to bump them off, that Sidewalk is not a Sidewinder aimed at their hearts. He told the Newspaper Association of America in April that "newspapers are in a very strong position" in any battle for online audiences. "People want depth. People want high-quality content . . . . Brand recognition is a very important thing that newspapers bring to all these aspects, I believe, particularly in areas like classified ads." He then chilled his audience, unintentionally, with a dash of cold comfort: it will be at least a decade, he estimated, before most classified advertisers will shift their ads completely to the Web - a dislocation that would, of course, mean sure death for print newspapers.

Meanwhile, Sidewalk may "overlap" what newspapers do, Gates said, "but it's not core overlap. We're not doing local news, we're not doing classified, and we're seeing where this technology can go." So newspapers "shouldn't get overly paranoid" about Sidewalk, said Gates, and he added: "If somebody starts hiring local reporters, okay, then you should get worried. Then they probably are trying to duplicate [what you do]. I dare somebody to do that. It just wouldn't make any sense."

Robert Ingle, president of Knight-Ridder New Media, hoisted his hand and was recognized by moderator Arthur Sulzberger. As he understood it, Ingle said, hiring local reporters is exactly what Sidewalk is doing.

Gates: No.
Ingle: You're staffing each of these sites.
Gates: Not with reporters, no.
Ingle: Well, it's a thin line between people who collect listings information and reporters.
Gates: Boy! Do reporters know that they're just list gatherers?
Ingle: Are critics reporters?
Gates: A critic [overlaps with] what we're doing, and what's in the newspaper. Certainly, you have the movie listings and what their times are and things like that . . . . Sidewalk intersects with that, don't get me wrong.
 Ingle: Selling advertising and directory listings is very, very closely akin to classified advertising . . . .

Sidewalk may become an avenue into other Microsoft Web sites such as CarPoint, an online service where car buyers can, in effect, kick the tires of any make or model, read reviews, peruse prices, and then buy their choice from any one of thousands of dealers around the country at special discounts. On other Microsoft sites like Expedia, Investor, and Cinemania, users can make travel arrangements, keep track of their financial portfolios, and study movie reviews. Says Robert Ingle about CarPoint: "Is it classified advertising? Perhaps not in the traditional context. Is CarPoint going after the automotive listings business? You bet. They've run ads in the automotive trades that basically say, 'Mr. Car Dealer, you can put your entire inventory on CarPoint for less than the cost of one newspaper ad.' Is that competition with the newspaper industry? Sure as hell seems to be."

Naturally, Gates's other argument - that Sidewalk will never do straight journalism - meets with incredulity in newspaperdom. Ingle told me: "They've got their national bases covered with MSNBC and MSN [Microsoft's competitor to America Online]. And this is their local effort in which they sign up advertisers for listings links and display ad links."

A related viewpoint comes from Fred Tuccillo, director of New Media for Long Island's Newsday, a unit of Times Mirror. When Microsoft says it's not interested in creating newspapers, "they're speaking very narrowly." They're saying, "We're not going to have domestic and foreign bureaus and cover the White House and send correspondents to China." Even so, adds Tuccillo, Sidewalk users could still get world and national news - along with local events and guides - by being just a click away from MSNBC and its online capability, thus having at their fingertips, literally, a one-stop, electronic Home Depot for most of their information needs. And many time-pressed readers will settle for such a news diet. That, says Tuccillo, does represent a threat to newspaper readership. Besides, "Look at the number of fairly experienced editors they've hired away from newspapers." Currently, Microsoft employs an estimated 300 journalists in its various media-related operations such as Slate, MSNBC, and Sidewalk.

Two contrasting versions of Microsoft's journalistic intentions - and its news staffing - come from within the corporation itself. Microsoft's John Neilson - thirty-five years old, vice president of the Interactive Service Media Division - sits in his smallish office in Redmond just outside Seattle and muses about Sidewalk and other Microsoft fiefdoms in his domain:

"We have a particular view of journalism." He calls it "service journalism" or "utilitarian journalism," aimed at helping people make life-style decisions and locate goods and services, via the Internet, more efficiently than they can in any other way. What Microsoft does not intend, he emphatically insists, is that Sidewalk cover local news, politics, crime, sports, and other matters of parochial interest that are the traditional turf of newspapers. "It makes no sense at all for us to get into that business. We are geeky people who produce databases," not journalists who cover the news. Yes, Neilson admits, Sidewalk has hired journalists - mostly critics in the areas of arts, entertainment, and restaurant reviewing. Recently, several journalists at Sidewalk New York quit when they realized that the site was a database for tabulated listings and not a vehicle for newspaper-style news and features.

But elsewhere on the Microsoft campus - in a corner office just off a large, bustling newsroom - sits Merrill Brown, former Washington Post reporter who's editor-in-chief of MSNBC's online news operation. He has just conducted one of his twice-daily conferences with a score of his editors on the stories they'll pursue in the day ahead. His job, says Brown, is to work closely with NBC News in New York and Washington, and MSNBC in Secaucus, New Jersey, to give online users a richer understanding of stories developed by programs like NBC Nightly News and Dateline NBC - including "personalized news" of specific local interest that those Web fans can't get on broadcast TV or cable.

On election nights, for example, MSNBC offers continuous results of every statewide race in the country, available on demand and updated moment by moment. For other big stories such as the death of Princess Diana, the tobacco controversy and the campaign finance investigations, Brown's computer jockeys in their Redmond newsroom create features to let Web users "drill down" into those subjects for a better fix on what they mean. It adds up to a "vibrant package," says Brown, "that no other medium can create."

He is expansive about MSNBC's journalistic mission. "There are journalists here with backgrounds at places like Time and U.S. News who share an excitement and passion for wanting to figure out how to use this technology to make news make sense for folks." (Others like CNN, ABC News and USA Today are busy at the same task.) It's a little like the earliest days of TV news, Brown says. He wants to "create a legacy as grand" as that one. "We have a chance to invent something just as important. And it is being invented; they've given me no rules."

Pete Higgins feels sure that computer-distributed news inevitably will grab a significant share of the audience because it's even swifter than, say, CNN's Headline News or all-news radio, where the news wheel has a twenty- to thirty-minute turnaround. "Heck, why wait? I want it now! I don't have time to wait!" Yet why does Microsoft want to be in the news business at all? "It fits with the goal of the Web life-style," Higgins said. "You will do it every day." But to play in that game, Microsoft needed a large worldwide news organization - so we partnered with NBC."

NBC says it's pleased with the deal, even though MSNBC so far has attracted only minuscule audiences - a reported 30,000 viewers at any given moment. On the Internet side, the company let go about forty contract employees in September. I asked Tom Rogers, president of NBC Cable, what his company really expects to gain by the partnership. His answer: the TV world and the computer world are "clearly converging." And since NBC is "the largest producer of television news on the planet" and Microsoft the preeminent software maker, "we're hoping that by putting these two skill sets together we can navigate the convergence waters and create a brand name in news and information" that's not merely a cable channel or Web site but which "over time integrates text and data into video in a compelling offering." The "real game" here, Rogers maintains, is to make MSNBC the "leading brand" in integrated TV/online news by the time computers and TV sets are seamlessly wed. "If we can do that, we've created something huge."

MSNBC is a key building block in Gates's effort to extract revenue from the Internet. With a humongous budget targeted at that goal, he is placing bets all over the table - besides MSNBC and Sidewalk, on Slate, Comcast, WebTV and more. Gates understood that the broadcast and cable industries are just now moving uptown and across the tracks to the Land of Digital TV - a fancier neighborhood where Gates, Microsoft, and the whole computer industry already live. In other words, Gates can look out the window of his office on the second floor of Building Eight on the Microsoft campus and see the world coming his way like a sweetly aromatic cloud. He may reasonably conclude that if he plays his cards astutely (and he was a crafty poker player at Harvard before dropping out), that cyber-rainbow may well end where he sits.

Of course, Microsoft's new vision might be flawed at its root. Many years may pass before most people depend on computers to conduct their daily lives. Newspapers, especially, may refuse to roll over and play dead but fight back with their own online editions, as more than 600 papers in the U.S. are now doing.

One major counteroffensive is the recently formed New Century Network, a consortium of nine leading news companies: Advance Publications, Cox Enterprises, Gannett, Hearst, Knight-Ridder, The New York Times, Times Mirror, Tribune, and The Washington Post. According to Lee deBoer, its c.e.o., the group's mission is to serve as a national network to pool and sell advertising for its members' Web sites, and - through a service called NewsWorks - to offer daily reports on world and national events, as well as links to 150 affiliated news sites. NewsWorks draws on the resources of all nine member organizations.

"We're on the model of ABC, CBS, or NBC," deBoer says, "and trying to apply it to the Web." Sidewalk, he says, is Gates's effort to build a local doorway into Microsoft's other "content brands" (CarPoint, Expedia, et al.) "and I don't think anyone believes it will stop at arts and entertainment. Sidewalk will just continue to roll out. And I think they're realizing that the newspapers are going to stand up and not take this lightly."

 Microsoft has already rolled out a journalistic product that wanders freely among the world and national issues that Gates has asserted are beyond his company's capabilities. That product is Slate Michael Kinsley's online magazine. Kinsley feels free to shine his light wherever his curiosity leads him. When Slate, was starting up, he suggested to his employers that an ideal first topic would be "Is Microsoft a Dangerous Monopoly?" Many at Microsoft grinned nervously, and were sure he was joking. But there it was, in Slate's earliest issues, big as life: a heated colloquy conducted via e-mail by a hand-picked covey of foes and friends of Microsoft (including Bill Gates's second-in-command, Steve Ballmer) on the company as an alleged menace to free markets.

In his dark, cluttered, cubbyhole office at Microsoft, Kinsley - sporting an incipient beard, and wearing a collarless red shirt and tennis shoes - calls any suggestion that Microsoft inhibits his editorial independence "an almost totally bogus issue." There's a year-and-a-half track record of them "not messing with us in the slightest," he says. Besides, the number of occasions in which he faces a conflict of interest because Microsoft owns Slate is "infinitesimal" compared with Time's family situation with Time Warner. "We don't write about software very much, but whenever Time runs a book review, a movie review, almost anything, they're bumping up against conflict." Besides that, insists Kinsley, Slate increases the number of discrete voices in the press, whereas CNN, by changing ownership, is now just one more vocal chord in the throat of Time Warner, the world's biggest media company.

But don't some of his old pals from New Republic and Harper's days feel that, for a journalist, going to work for Microsoft is akin to defecting to North Korea? No, they're mostly envious, Kinsley says; criticism comes mostly from "the Microphobes of the cyberworld and the sort of press ethicists who are always looking for something to worry about." Why then did Microsoft want an online magazine in the first place? It's a "great experiment," he answers; nobody knows what's going to work on the Internet. Why not give it a try? "I assume that was their attitude, and that's the right one."

Slate attracts about 45,000 regular readers to the site. It attempted briefly to charge an annual subscription fee but the results were dismal, so the magazine's only revenue stream is advertising - which Forrester estimates to be between $1 million and $2 million a year. Articles in Slate cover the waterfront - politics, crime, art, music, the economy - and are written by leading journalists, litterateurs, and academics: Arthur Schlesinger, Jr., Joyce Carol Oates, Michael Beschloss, Louis Begley, Michael Lewis.

James Fallows, editor of U.S. News & World Report and a longtime cybernaut, sees Slate as "essentially a kind of prestige product, very high class journalism [and] a boutique publishing operation" that so far is not paying its way. If Microsoft sticks with it over the long run, Fallows says, it will indicate how much that kind of "intellectual prestige" and "respectability" are worth to it in monetary terms.

Corbis, by contrast, once again raises the spectre of Bill Gates using his bottomless resources to dominate an important marketplace. He was quick to understand the importance of photo and art illustrations, and how to derive profit from them in the digital age. Created by Gates in 1989 as an entity completely separate from Microsoft, Corbis, with a staff of about 350, has grown into the world's largest digitized archive of photos and other images for licensing to newspapers, magazines, book publishers and catalogues, as well as to electronic media.

Corbis's holdings are astonishing. They include the 16-million-item Bettmann Archive, a visual library that illustrates the entire history of mankind, from cave paintings to photojournalism; photos from the collections of United Press International, Reuters, and Agence France-Presse; museum collections from (to name just a few) the State Hermitage in Russia, the Royal Ontario in Canada, the National Gallery in London, and the Academy of Natural Sciences in Philadelphia; archival images from the Library of Congress, the MIT Architecture Department, the Medford Historical Society. In addition, dozens of free-lance photographers roam the globe taking fresh pictures for the Corbis stockpile. Last November, Gates told the American Society of Magazine Editors: "If you want a photo to illustrate a textbook or news story," just punch up the Corbis Web site and type in keywords to learn what's available and how to acquire the rights clearance. "In a few minutes you can get exactly what you want."

By far the most dramatic symptom of Gates's entry into media is the $1 billion he invested in June in Comcast, instantly making him a cable mogul with a stake in information and entertainment programming, in how it's watched by cable subscribers, and in the technical tools for delivering it. He sees more clearly than most that, as cable and broadcasting go digital in the years immediately ahead, those broadband highways will offer Microsoft a whole new continent for exploration and the potential for perpetuating the company's dominance of the software business.

That's because high speed access to the Internet - especially via cable TV instead of over telephone lines - is a vast, untapped revenue stream, the exploiting of which can be a major new boost to Microsoft's bottom line. Bet-a-Billion Gates has plunked down a very large chip on the cable industry, a grand gesture that's expected to galvanize other multiple-system cable operators to ratchet up their services accordingly.

I asked Pete Higgins about the underlying strategy of buying into Comcast. "It gives us a seat at the table for participating in the technological advancement of the cable business," he said. "It helps us to understand it, participate in it and drive it in a way we couldn't otherwise." The press and various analysts have tried to turn the deal into something it really isn't, he claims - "some big media play. But it's really a technology play for us."

Collectively, those new potentialities - combined with Microsoft's world domination of computer operating systems - unnerve people predisposed to think of Bill Gates as Godzilla and Microsoft as the evil empire that's out to take over the planet. No other businessman or corporation, outside the tobacco industry, has been the object of greater vituperation, some of it overwrought.

Starfish Software's Philippe Kahn, the French-born founder of Borland International, who lost that company in a clash with Gates, once said: "Gates looks at everything as something that should be his . . . . It can be an idea, market share, or contract. There is not an ounce of conscientiousness or compassion in him. The notion of fairness means nothing to him. The only thing he understands is leverage." In its issue of April 1996, Wired magazine offered a useful Baedeker to the Web called "On Hating Microsoft," steering readers to scores of sites that detail the real or suspected depredations of the alleged Seattle slasher. A young software engineer named Max Metral told The New York Times Magazine: "The reality of the software business today is that if you find something that can make you ridiculously rich, then that's something that Microsoft is going to take away from you." And James H. Clark, chairman of arch-competitor Netscape, recently said: "Microsoft is fundamentally an evil company."

Underlying much of this sort of emotive condemnation is the presumption that, as Jeff Chester, executive director of the Washington, D.C.-based telecommunications-policy watchdog, the Center for Media Education, puts it: "Digital transmission of information is going to dominate and replace the current system of media," and that suits Microsoft's long-range strategies. Microsoft should pledge that it's committed to the spirit of the First Amendment, he says. "We are really handing over, I fear, control of our journalistic and media enterprise to these digital entrepreneurs."

Others fear Gates because they are sure he is far more interested in pure commerce than in anything that could be called journalism - news and information being just one more can of beans on the crowded shelves of his electronic supermarket, one more proof that Microsoft wants to be, as Andrew Jay Schwartzman, president of the Media Access Project, puts it, "everywhere in every element of the new information society." It's a company that "doesn't do journalism as an end" but as a brightly hued, eye-catching lure - like Slate, perhaps, and Sidewalk and MSNBC - that might land a big fish way downstream. Gates isn't sitting there saying "I want to be a worthy competitor to Time Warner," Schwartzman believes. The grail is microcash - millions of computer transactions for ten cents, fifty cents, a few dollars, that will accrete effortlessly when future generations are living the Web life-style and routinely conducting their affairs (buying, selling, communicating), with Microsoft software and operating systems ashe indispensable tools.

For all the pummeling that Microsoft takes for its raptorial behavior and corporate insatiability, a few voices in the wilderness defend its style and substance. Randall E. Stross, for example, a San Jose State University business professor, spent three years studying Microsoft close up for his book, The Microsoft Way - which is so friendly that visitors to the Redmond campus are sometimes urged to read it. Either Gates is the antichrist and Microsoft's success comes from "deceptions, outright lies, legal trickery, and brute-force marketing," Stross argues; or the company has "benevolently" sponsored the computer revolution, and all of its unimaginable riches are a "just reward" for the boons it has bestowed on the public. Stross unsurprisingly supports the latter view. If other companies were more like Microsoft, he suggests, the country would be better off.

When I asked him to defend that view, he said that Microsoft's bad press comes partly from our need to have villains and partly from the company's mishandling of its public image. "A lot of the derogatory language used in the press to describe Microsoft has been extreme." No other company inspires such wrath, and yet "Microsoft is not R. J. Reynolds." Its product is a very innocuous one, Stross says, but reporters find it easier "to write a story about the dark, sinister outline of a dominating Goliath" than about the less lurid "everyday benefits" that millions of people derive from Microsoft's products.

A similar view comes from Jerry Berman, executive director of the Center for Democracy and Technology, who coordinated the coalition of First Amendment activists that successfully fought for the overthrow of the Communications Decency Act, which was aimed at protecting children from Internet smut, but which was judged by the Supreme Court to infringe the rights of adults. It was a case that addressed some vital interests of journalists, and Microsoft was a key plaintiff. "Not many companies have stepped up to the plate in support of free speech and privacy on the Internet," Berman says. "They have been a leader."

One heartening prospect: so far, nobody has suggested that Gates aims to be a media tycoon on the model of William Randolph Hearst, Robert R. McCormick, or Rupert Murdoch, with a political agenda to promote. His sense of mission, unlike that of Ross Perot - who once tried to buy out Gates when the Seattle upstart was a twenty-three-year-old baby mogul - includes no ambitions for elective office.

Indeed, Gates is a bit fuzzy about his party preference, although he grew up in a prominent Seattle Republican family. He mused to biographers Stephen Manes and Paul Andrews back in 1992 that the difference between the Republicans and the Democrats "is rather small indeed," but that "I'd probably be a Democrat . . . . I don't focus a lot of time on it." Earlier this year, asked by John F. Kennedy, Jr., in George magazine about his politics, Gates said, "When it comes to issues of how business is treated and managed, I wouldn't subscribe to a lot of Democratic views." But on social issues, he said, "you'd find me very much on the Democratic side."

In the same interview, Gates was asked if his own views will color the content of the news he provides "the way Rupert Murdoch has set the Fox News Channel up as an antidote to the perceived liberal bias of the establishment press." Gates said it's "dangerous and perhaps inappropriate" to do that, and he was "surprised" that Murdoch could retain quality journalists. "I'm very careful to keep my political views separate."

Gates has, in fact, dipped his toe in the waters of good old-fashioned print journalism, starting with a newspaper route when he was growing up in Seattle. These days, he writes a syndicated newspaper column that retails his views on how the emergent Information Age is coming along. It appears in about 130 papers worldwide.

As an interviewee, however, he is famously thin-skinned whenever a reporter mentions the anti-trust actions brought against him by the government or his legal tiffs with other software companies. In March 1994, for example, CBS News's Connie Chung was taping Gates in his office for her Eye to Eye program, and alluded to a court case in which Microsoft had been sued for patent infringement by a small software company called Stac. The jury had found Microsoft guilty and awarded Stac $120 million in damages. During the interview, Chung quoted a remark by Stac's president, who had told her: "A lot of people make the analogy that competing with Bill Gates is like playing hardball. I'd say it's more like a knife fight."

Gates, roused to indignation, said to Chung: "I've never heard any of these things." Then, turning to an aide who was standing out of camera range, he said, "I'm done."

"Can I ask you one more question?" Chung said.

"No, I don't think so," Gates answered, rising from his chair and pulling off his microphone. He berated Chung angrily for quoting the offending statement, then strode from his office into an adjacent room and declined to come out until Chung had left the premises. Eye to Eye aired the interview in May 1994. (Gates was "unavailable" to be interviewed by CJR for this article, or to answer e-mail questions submitted to him.)

I asked Pete Higgins how well or badly the company is covered by the press. The forty-year-old Seattle-born Higgins is one of the nine-member ruling junta - called, familiarly, "BEC: "Bill and the Executive Committee" - that runs every aspect of the company's activities. Is there a mindset among many reporters and editors that Microsoft is irrevocably nefarious and Gates the omnipotent Prince of Darkness?

 On balance, Microsoft is fairly covered, Higgins responded, but a portion of the reporting is "just ludicrous." Some press people "think we walk on water, and we shake our heads here and think, 'Why do they believe that?'" At times, the press strings together truly random decisions in Microsoft's corporate strategies, and detects a cunning master plan where none exists, Higgins claims. At other times, Microsoft's outright blunders receive similar wrongheaded analysis. "It's hilarious. There are times when we make a mistake, when we screw up completely, where I happen to know it was pure incompetence! And they concoct a plot out of it." He laughs at the recollection. "So - deviousness or incompetence. Take your pick."

James Fallows offers a different spin: Microsoft and Gates really need to be seen in the context of the continuing concentration of ownership in the news business. Gates is "one of the great managerial geniuses of our time," but one who has shown not the slightest sense of noblesse oblige that some press barons of the past at least tried to fake. Fallows doesn't fault Gates for his naked ambition. Weighing Microsoft's repeated assurances that it's not out to shanghai classified advertising, Fallows asks, "Why on earth not?" But he'd be more comfortable if there were competitors "with the same zeal and power."

He also detects a hint of paranoia and insecurity inside the legendarily monolithic Microsoft culture. For the last fifteen years, he points out, it's been a series of bloody skirmishes on the battlefields of Cyberia: Microsoft against IBM, against Lotus, against Netscape, against Sun Microsystems, against Oracle, and against an army of pesky guerrillas lying in the weeds waiting to ambush the company and its legions of pocket-protected, nerdy code-writers - many of them millionaires. Not to mention the hand-to-hand combat with the Federal Trade Commission and the Justice Department. As a result they're afflicted, deep down, with what Fallows calls "a Roman Empire-type nervousness. The Romans were great but they were overthrown." In the dark of the night, he thinks, Microsoft mutters to itself: "The second we believe what everybody else says about our invincibility is the second we can be vanquished."

One of Gates's most active critics is Gary Reback, a Palo Alto attorney who has represented a number of Microsoft's competitors. He put it this way to me: "With Sidewalk, and a lot of other ventures they're in, they don't need to put all of the newspapers in America out of business completely. But, by taking away their revenue stream, they'll do the same thing they've done in the software industry, and that is to marginalize the newspapers - with the result that the papers won't be able to pay journalists the salaries they need, nor will there be money for heavy duty investigative reporting." As a consequence, he believes, newspapers will lose influence. "This is an enormously important issue." It would be hard to overstate what's at stake, he claims, and points out that Microsoft's treasury allows it to go into a market and invest money indefinitely until the competition is run off.

James Wallace, a senior reporter for the Seattle Post-Intelligencer, has written two books on Gates and Microsoft: Hard Drive and the more recent Overdrive. When I asked him for an assessment of Microsoft's intentions, he alluded to Gates's repeated assertions that newspapers have nothing to fear from what Microsoft is doing. "But on my own paper, we've lost several people to Microsoft," he said. "The other newspapers have too. Microsoft is just beginning the content phase of the company." So far, he believes, journalists shouldn't be overly worried, "but there are a lot of companies who thought they had nothing to fear from Microsoft that are no longer in business."

Microsoft is not the "bogeyman," Pete Higgins insists. It's a "technology provider" to newspapers more than a company that overlaps what they do. Papers should "embrace the Internet aggressively" and see it as a great new way to interact with readers, as well as to speed up internal operations. They have nothing to fear unless they fail to act, said Higgins, but if they do get into this ballgame, "they have some incredible skills and assets to bring to the effort."
Newspapers do have a formidable headstart in the online news wars. The best of them have strong reader loyalty and cogent brand identity, as well as experienced editors, reporters, columnists and business writers who are well plugged in to their communities. What they don't have, individually or collectively, is Microsoft's legendary war chest - $9 billion in cash at the last counting, with zero debt - and its preeminence in software.

 But Microsoft's challenge clearly can be a positive thing for journalists. Many newspapers continue to resist "cannibalizing" (as they put it) their print versions by giving away, free of charge, their content online. To them, Mark Mooradian, a senior analyst at Jupiter Communications, advises: "Seize the day! Either you are going to cannibalize yourself or somebody else is going to cannibalize you."

Some city magazines, in self-defense, have refused to take advertisements for Sidewalk, a tactic which, Mooradian insists, "totally misses the point. Take the money and build your own service with it." Everyone in journalism needs to understand that creating online editions is no mere sideshow, no video arcade version of the real thing. Says Newsday's Fred Tuccillo: "This is taking your core business into the next century."

Pondering the vision of Microsoft as a software King Kong morphing dangerously into a media Goliath, we may posit, finally, that the future of news, information. entertainment, and life-style transactions in the new era depends on a handful of facts and assumptions.

¥ The facts: As mentioned, about 40 percent of U.S. households now have computers, and 19 percent are plugged into the Internet, although only about 11 percent ever use it on a regular basis. For many users, extracting information from the Web is a time-consuming, agitating exercise that quickly induces bewilderment and impatience. Online advertising last year was a paltry $300 million, but may rise to $4.3 billion by 2000, which would still be a wart on the posterior of the newspaper/magazine industry's current $27.5 billion. The Internet as a mass medium is roughly where radio was in 1920, where television was in 1950, and where cable was in 1970 - in the incubator. All of those, you may have noticed, are now ubiquitous.

¥ The assumptions: Computer penetration will continue to rise in the home, and with it the percentage of households routinely using the Internet. Even folks who don't own computers will be roaming the Web via their cable connection and devices like WebTV. Since computers of the near future will be faster, more powerful and virtually instantaneous, the agitation factor in Web use will be gone, and getting one's news, conducting transactions and gleaning life-style information by that means will be second nature. As the capacity of computer pipelines (i.e., bandwidth) into the home increases, computers and television sets will be interchangeable devices, and all news, information, entertainment, and services will be available on demand, fully interactively, at the click of a mouse.

Meanwhile, as Pete Higgins puts it, "We're seeing one of the great outpourings of entrepreneurialism imaginable, maybe ever." Bill Gates and Microsoft will take every edge, exploit every advantage, and spend all the hard cash necessary in the effort to establish dominance in the Information Age.

Will Microsoft ultimately crush newspapers? The answer seems clear: only those papers that fail to respond to the challenge will be at risk. Journalists must navigate the arduous passage from the old world to the new by aggressively staking their claims in this emergent online landscape. That will require new skills and new priorities, but the children of Gutenberg everywhere will prosper or atrophy on how well they make that transit.

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