COMMENTARY--Hopefully this marks the beginning of the end for an idea that no one ever truly explained well.
NBC has no illusions about the Internet anymore. The market value of NBCi (Nasdaq: NBCI) rose more than 40 percent this morning after NBC offered to take the beleaguered stock off the public's hands for a couple of bucks per share.
"The sharp declines in the Internet advertising market convinced us that it didn't make sense to pursue a portal strategy," NBC's chief financial officer Mark Begor told the Associated Press.
It never did.
This isn't a case of after-the-fact wisdom, because some folks questioned the point of NBCi from the day the deal was announced between NBC and Xoom.com.
NBC didn't care. It wanted a Web portal, so it bought one, hoping to build around the online community of Xoom.com and the Snap.com network created by CNET (Nasdaq: CNET). I happen to work for CNET these days, but that wasn't the case when I criticized the NBCi concept at its inception; at the time, some readers accused me of bashing a competitor. I wasn't doing anything of the sort, because Snap.com never competed with ZDNet.
Even had I been so inclined to bash rivals, it wouldn't have taken away from the fact that what I said then still holds true today: This broadcast-Internet marriage thing is overrated.
Television networks decided they needed broad Internet portals, but they never asked why. They were motivated by fear instead of reason.
TV already had the mass market. Nearly everyone has a television in their home. It's hard to improve your reach when it's already close to 100 percent.
Not only does the Internet fail to offer a bigger audience, but it also can't to deliver a product of comparable quality. Television networks long ago mastered the craft of giving people what they want. If TV didn't appeal to people, most communities wouldn't have become one-newspaper towns, and radio shows like "The Shadow and Captain Midnight" would still be among the most popular broadcasts.
Maybe, just maybe, mass market TV can make money from the Internet if the medium at least showcased television content. Unfortunately, Internet video looks primitive even at broadband speeds, unless you enjoy watching images in a 4-inch space. And it's a lot more work than channel surfing with a remote control.
Web sites have their appeals for niche markets. Sports fans, stock traders and techies can never get enough information, and the Internet helps feed their hunger. You can easily complement ABC's "Monday Night Football" and CNBC's "Power Lunch" through statistics, chats with other fans and extended stories online. News junkies that frequent CNN probably get something out of CNN.com.
On the other hand, how much value does the Internet offer "60 Minutes" or "Frasier"? The Web will neither co-opt nor improve the experience. For most of what TV offers, the Internet is nothing more than another marketing vehicle for an industry that already is the most wide-ranging medium in the world.
Some TV executives apparently forgot their own strengths when the commercial Internet emerged and scared them into pursuing broad portal deals. Networks felt the need to be everything to everyone online. Media moguls saw the initial success of Yahoo (Nasdaq: YHOO) and America Online and wanted to emulate them, not realizing that those two companies already won before the TV guys entered into the game. In any case, Yahoo's victory looks hollow at this point, and AOL Time Warner (NYSE: AOL) remains an open case.
Make no mistake, the Internet is a big deal. Despite the dot-com demolition, going online has obvious advantages for manufacturers and retailers, who can always make use of another distribution channel, especially one that puts them in closer contact with customers.
Among media companies, print publications can find Internet uses. Even the most widely circulated newspapers have a small audience compared to the overall crowd online. The Web and e-mail offer ways to lure readers who won't pay for The New York Times or Newsweek.
But the Internet will not displace any industries, not even television. For the most part, Internet businesses don't stand up on their own, and certainly don't deserve to be separate, publicly traded entities. Web sites and e-mail newsletters are subdivisions of a corporate empire, particularly in television. Few people ever thought Dell.com should be spin-off stock from Dell (Nasdaq: DELL). Yet many folks figured NBCi made sense separate from NBC.
The stock market finally forced Disney and NBC to face reality. CBS (and subsequently Viacom) was smart enough not to pursue a broad portal deal, although the company still has to figure out what to do with Marketwatch and Sportsline if those stocks dip much lower.
As for the names that often popped up back when Internet merger rumors were thrown around like confetti, Fox parent News Corp. (NYSE: NWS) now looks very savvy. USA Networks (Nasdaq: USAI) looks awfully lucky; Barry Diller should thank CMGI (Nasdaq: CMGI) head honcho David Wetherell for killing the Lycos deal.
The big loser in this shake-up--besides, the shareholders of NBCi, Go.com, et. al--might be Yahoo shareholders. They've been hoping for a network takeover so badly that YHOO shares shot up last week after a previously bearish analyst upgraded the stock largely because of the buyout possibilities.
That's hopeful speculation--and a pleasant dream for people who own Yahoo stock. But it appears that TV executives are waking up. 22GO