AOL, MS turn page in publishing plans

Hoping to establish themselves as media publishers as well as technology companies, Microsoft and America Online planted more seeds in the online content market.

In addition to Slate, its recently launched online political magazine, Microsoft today announced Mungo Park, a Web-based travel and adventure publication due to launch this fall and staffed by professional explorers and travel writers. It's also working on a project code-named Cityscape that will create local guides for major American cities, including dining guides, entertainment information, and possibly local news. This is not even to mention its hugely popular line of reference CD-ROMs, such as the Encarta encyclopedia.

With the help of the Tribune Company and its newspaper and television affiliates, AOL announced today that it is also going local with Digital Cities, a series of local guides for 88 cities comparable to Microsoft's publishing venture.

AOL will spin off Digital Cities, an in-house service started last fall in a handful of target markets, into a nationwide provider of local news, weather, traffic, sports, and other information in 88 areas. The Tribune Company will have a minority stake in the Digital Cities venture and use its current newspaper operations to help AOL launch services in Chicago, southern Florida, and Hampton Roads, Virginia. Access to local Digital City news will be free to AOL subscribers.

Both companies want to be able to produce as well as deliver original content to the growing readership of professional online news and information services.

"There's a potential for building billion-dollar media franchises directly on the Web," said Adam Schoenfeld, president of research company Jupiter Communications. "It's an opportunity we haven't had since the dawn of television."

As the last of the proprietary online services to stake out Internet turf, AOL in particular is attempting to augment its dwindling online services revenue with new offerings.

Other Internet-only companies--like the search engines--are also entering the local markets. Yahoo, for example, is leveraging its well-known directory services into regional guides carrying news and other local information, starting with a directory for the San Francisco Bay Area.

And while some of these ventures were treated with skepticism at first--as in, what does Microsoft know about the news business?--the established media ventures now know they can't afford not to take the technology companies seriously. "You have major newspapers admitting they have to play ball with Microsoft, saying, 'We have no choice,'" Jupiter analyst Patrick Kean said.

But that doesn't mean that Microsoft or AOL is definitely on its way to becoming the NBC of the Web. "It's a question of promotion and marketing. That's the $3 billion question. These people often get enthralled in producing content and don't realize you have to keep it fresh," Kean said.

Although the lack of printing or distribution costs makes Web sites a bargain compared to traditional print publications, the new ventures aren't cheap. AOL estimates that it will take an investment of $100 million to get Digital Cities off the ground. The Tribune Company is expected to take a 20 percent stake in the venture.

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