The smoke and mirrors around the topic of interactive television make multimedia’s buzzword status pale in comparison. On the heels of several significant announcements during the past few months, as the various industries line up to dive into the fray, it seemed like a good time to assess just what all the fuss is about.

Based on what you’ve been reading to date, you likely believe that all the action around interactive TV is the commencement of a sunny future for us all — big money, big markets, big players to be made.

In reality, since no architectural or regulatory framework exists for it yet, almost nothing about interactive TV is actually true today — except that a lot of companies have bet the farm on this particular vision of the future coming to pass.

But what exactly is interactive TV? This story, first in a two-part series, attempts to bring more of this incredibly complex story to light. It also hopes to deliver some much-needed structure to the debate. In Part I, we define the layers that comprise what’s generically known as “interactive TV.” Part II, to be published in the June issue, will discuss the deals themselves and the deeper issues that need to be resolved.


Ion, a new multimedia publishing company, officially opened its Los Angeles office in March. Since then, the four-person company has announced a publishing deal with rock superstar David Bowie, negotiated a deal with actor Dennis Hopper to feature the actor in a future CD-ROM project, and is in discussions with RCA Records to publish a CD-ROM sampler of the music giant’s recordings.

If we didn’t know better, we would almost believe that finding content for interactive CD-ROM titles was on par with shooting fish in a barrel. In reality, the only similarity between the two is they are usually both messy.

What has kept Ion from slipping in the bloodbath is part timing — “multimedia” and “interactive” are daily news these days — and two parts people. Ion was founded by four individuals who each hold expertise in at least one essential area of the interactive multimedia publishing game.

• I/O
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3DO and Macromedia; CDPD; EA and CTW; Lucas’s new JEDI; investing in Spectrum Holobyte; Motorola invests in Virtus; Media Vision makes titles; Kaleida delays; Papanek to Time Life; SRI studies video; new Paramount titles; IMA finds new interest in standards.

Digital World ’93

Separating the buzz from reality

You may not have believed it possible, but the phrase “interactive TV” has actually pulled ahead of multimedia in contention for Buzzword of the Decade.

Based on most of what you’ve seen written about interactive TV so far, you might assume that ITV takes multimedia technologies and puts them online, in a manner of speaking, allowing TV viewers to interact with programming in a slightly modified version of how people interact with their computers today. This may someday be true, and is in fact what some companies are banking on, but it certainly isn’t going to be here by Christmas.

In fact, since no architectural or regulatory framework exists for it yet, almost nothing about interactive TV is true today — except that a lot of companies have bet the farm that this vision of the future will come to pass. Even more than multimedia, interactive TV has become synonymous with big money, big players, big markets and a sunny future for us all based on ubiquitous digital technology.

Bringing order to chaos. Because so many have put so much at stake, the subject deserves deeper examination than it’s had to date. This two-part series will bring more of this complex subject to light and some much-needed structure to the discussion.

Part I, which you’re reading now, will attempt to define the various types of interactive TV as the phrase is used today. Part II, to be published in June, will discuss the deeper issues: the “private vs. public network” question, pay-per-view vs. open access to information, regulation and the “conduit vs. content” argument, security and privacy, using the HDTV model to set standards, deep-think about “dream applications” and commercial potential, and a nightmare scenario or two.

In addition, it will detail specific interactive TV efforts and deals, including the Time Warner Orlando project, Viacom’s Castro Valley project, the Microsoft-GI-Intel deal, the various combatants for the settop decoder market, and companies such as IBM and Silicon Graphics that are aiming to provide turnkey interactive systems.

Let’s hear from you, too. Since this topic is too big for any one person or industry to figure out alone, call or E-mail us with questions you’d like to see answered, companies, technologies and/or deals we need to know about, or your comments about where interactive TV is headed.

A caveat: announcements and deals are being made at such a furious pace that we cannot possibly include them all. We expect that this story will actually be a serial — or if past events are any indication, more likely a soap opera — that we will chronicle regularly.


Though the distinctions may be somewhat arbitrary based on how they’re implemented, interactive TV as it is discussed today mostly separates into four layers. At the bottom is what some like to call “fake interactive,” or dynamic broadcast television. The second is true interactive, analogous to multimedia as we know it today, and including true video on demand. Third is interactive services. Fourth is video telephony.


Fake interactive, or dynamic broadcast, is the only kind of so-called interactive TV that’s possible right now given today’s technology and regulatory infrastructure.

In its most basic implementation, programming remains in its current analog form. The illusion of interactivity is created by using a stream of control data running in parallel with the existing programming as it is delivered into the home.

A special unit, usually a controller box plus remote positioned atop the TV set, allows the viewer to dip into the data stream; based on viewer input, the control data can then manipulate or change what appears on the TV screen (thus the term “dynamic”).

This can be done in a variety of ways. In early 1992, the Federal Communications Commission under chairman Al Sikes, now head of new media and technology for the Hearst Corp. (and speaking at next month’s Digital World conference), allocated a section of the public airwaves for “interactive video and data services,” or IVDS.

Virginia-based TV Answer, an early interactive TV vendor that just signed a deal with the Public Broadcasting Service, uses IVDS radio signals as both feedback loop and the means to overlay information on existing programming. PBS will use the system to help its fundraising efforts, and to augment its educational programming (see “TV Answer begs the question,” Vol. 1, No. 9, p. 17).

Interactive Network Inc., based in Mountain View, CA (which just narrowly avoided financial disaster via a significant investment from cable giant TCI), uses radio signals for screen overlay and the existing phone network as the feedback loop for its system.

Direct broadcast satellite (DBS) systems in development today use a standard phone line as their feedback loop (though they will deliver digital video). Other cable-based systems are experimenting with using the coaxial cable itself to send control data upstream, much like input from a keyboard controls the screen of computers today.

The dynamic broadcast paradigm, no matter how it’s implemented, is perfectly suited to the first required application for interactive TV, and one that could make it wildly popular right out of the chute: an online TV programming guide that’s able not only to show previews and synopses, but is also likely to sport an easy VCR programming feature that does all the dirty work.

Beyond program guides, most systems in this paradigm are using the control data to provide screen overlays for sports and game-show play-along, for song lyrics atop music videos, or to allow viewers to request information from participating advertisers.

Where’s the revenue? Although vendors claim wild viewer enthusiasm for these systems (we’re skeptical), it remains to be seen how providing sports statistics or song lyrics, or even the chance to play along with Vanna White or Joe Montana, might drive a significant revenue stream.

An equally critical caveat is that intellectual property laws forbid screen overlays without express permission of the rights holder, generally barring the door for new product categories based on creative use of overlays. The potential for rights holders to demand a king’s ransom for an overlay are likely to make these types of applications more expensive than viewer demand warrants.


Moving to digital video delivery changes the scenario significantly. Today’s capability to fit six digital channels into the same bandwidth as one analog channel (with compression technology only expected to get better) will create more lucrative early opportunities for dynamic broadcast TV beyond the need for TV program guides.

The convenience offered by these primitive systems is likely to significantly open the pay-per-view market. Though the technology is not yet in place for true video on demand, channel compression will allow service providers to start a movie every five minutes if they control sufficient channel capacity.

Good for home shopping. Unlike today’s pay-per-view systems that require customers to place a phone call, dynamic broadcast systems can use their various types of response loops to do online billing authorization via remote control, sans human intervention, thus opening a new level of shopping and transaction-based services not before possible within a single medium. (The security and privacy issues raised by such transactions will be addressed in Part II.)

Some rudimentary multimedia-type programming may be possible with a dynamic broadcast system as well, using what’s called “streaming interactivity,” which uses channel compression to simultaneously broadcast a number of streams of related programming from which the viewer can select.

This concept was the basis for Warner New Media’s Megillah project a couple of years back (see Vol. 2, No. 6, p. 16). In one implementation, parallel streams of video were used to allow viewers to dip in and out of different camera angles of a live basketball game and get statistics on certain players; the game in progress was always available at a touch of the remote.

Another prototype was a discography on the band Fleetwood Mac, again using “live” action at a concert as the central stream. Fans could dip into parallel video tracks of different band members being interviewed about their history, high points of other concerts, best-selling records — more information than anyone is likely ever to want about Fleetwood Mac, but a fascinating approach to interacting with existing programming.

Similarly, the Vidéoway interactive system from Canadian cable system Groupe Vidéotron demonstrated an interactive news broadcast where viewers had the choice of watching a broadcast in its normal, serial fashion from start to finish, or using the remote to select a more indepth report on one of the headline stories of the day. The settop box acts as the traffic coordinator for which story stream the viewer selects.

Dynamic broadcast, especially using IVDS, may see a fair bit of action during the next couple of years, especially from terrestrial TV broadcasters who want to provide some degree of interactive programming without moving to a fully digital system, and who aren’t able or willing to use the cable network with its built-in, high-bandwidth response loop. (Don’t forget: cable may “pass” 95-plus percent of the homes in the U.S., but only 60 percent subscribe.) It’s a relatively cheap and easy technology to implement, and the FCC has already allocated bandwidth to enable these types of services.


The next layer of interactive TV can be called “true interactivity,” and will enable viewers to initiate simple requests to view discrete media objects and receive responses based on those requests. This provides access to true video on demand, or VOD, and to online multimedia and/or video games. Unlike dynamic broadcast, which requires no investment in infrastructure (i.e., fiber or coax) and very little participation by existing broadcasters or cable system operators, achieving true interactivity requires investment and planning.

First of all, VOD and multimedia/games are bandwidth pigs and whether the service provider is a telephone or a cable company, they are very likely to require installation of some new conduit — either fiber from the cable headend to the neighborhood or home, or a new copper or fiber wire in the phone network — in order to provide adequate performance (“adequate” being significantly better than CD-ROM titles today).

Transaction processing. If games and movies will be pay-per-view and not subscription services (which is likely), they also require sophisticated online transaction processing systems, or OLTP, like those that banks, retailers and phone companies rely on today.

OLTP provides not only the meter, but also conducts the authentication process (i.e., I am who I say I am, and I can pay) and authorizes transactions between the service provider and the customer. Not insignificantly, OLTP systems also provide what’s known as “fault tolerance” to keep the network up and running under virtually any conditions.

As this is an all-digital TV system, a settop box will be necessary both to decode and decompress video and audio signals in real time, as well as to provide the process control for paging through online TV guides, interacting with multimedia titles and playing games. If vendors are serious about making the online game market a real one, then the settop box must also be able to render interactive 3D graphics in real time to provide realistic game play to the Nintendo generation.

Virtual VCR. It is in Level II of the interactive TV system that the “virtual VCR” concept can be implemented. Not only will viewers be able to pause, rewind or fast-forward a “broadcast” movie, but they’ll also be able to do what one service provider calls “reverse time shifting,” or paying extra for redelivery of programs they missed. (Hopefully this will also include yesterday’s broadcast of the “Kenneth Cole Shoe Hour” on the shopping network; more on that in Part II). Reverse time shifting could prove to be a financial bonanza for broadcasters who charge a premium to those of us who are too busy, lazy or forgetful to preprogram our VCRs.


Although VOD provides a new means of delivering (and charging for) existing, discrete entertainment titles and products, one of the most captivating promises of interactive TV is the transformation of the TV set into a window on the expanding world of information.

Ride ’em, cowboy. In much the same way that online jockeys can find nearly any person or piece of information they want via online archives and information services, the viewer in this next level of interactive TV will be fully in charge of what shows up on the screen.

By the time this day has arrived, the number of channels delivered via cable, phone lines, satellite and cellular will likely number in the thousands and we will no longer be able, let alone willing, to get the information we need by consuming information passively.

An information profile. With the possible exception of watching headline news of the day, we’re likely to build and store profiles of the specific kinds of information we want to see delivered onscreen — what news topics we want to track, new movie and music releases, when and where certain items are on sale, who’s in town for book signings or concerts, etc.


This is a significant step past video on demand, as interactive services of this nature are much more akin to information publishing than they are to entertainment. (If you’re looking for a reason that Microsoft cofounder Paul Allen is interested in America Online, you just found it.)

In Level II, the “true interactive” system, it’s feasible that much of today’s delivery model would remain intact: virtually all the on-demand programming will originate with the cable service provider, who either owns the programming outright or has negotiated a royalty agreement with the rights holder.

As there are relatively few rights holders providing mass-market entertainment — Sony, MCA/Universal, Time Warner, Paramount, etc. — and all have existing distribution deals with cable operators, the only technology that really has to be implemented for Level II TV is an effective metering system (as outlined above) to track who is watching/playing what.

Creating a monster. But Level III’s provision of customized information products to individual consumers is a far more formidable task. In order to deliver information fast enough for consumer satisfaction, Level III TV would require the deployment of thousands or even millions of information servers (in some models, these information servers will serve as this decade’s analog to the personal computer software business in the 1980s), operating over a high-bandwidth, extraordinarily fast, fault-tolerant, open international network.

It would be highly unlikely that a search-and-retrieval system of this capability would be confined to one transport medium; in other words, this isn’t likely to be a “cable” or a “phone” network. What’s more likely is that consumers will subscribe to a service and expect that it be delivered over any existing network — cable, telephone, cellular, personal communication networks, direct broadcast satellite, or whatever else develops.

Expanding choices. Why? For one reason, entertainment and news programming, which is at the core of TV viewing today, will become only one of the services delivered “through the TV,” so to speak. Plenty of people will take advantage of the convenience of the television as information service center. But as a ubiquitous digital information network becomes more firmly entrenched, customers won’t care where the service originates, and will demand their information on whatever network serves the communications device at hand, whether that happens to be a powerful computer sitting atop (or built inside of) the TV set, a personal digital assistant, a desktop or laptop computer or a portable game machine.


The requirements to set up and maintain such a system are both costly and technically awesome:

• A standard architecture for full interconnection and interoperability between cable, wireless and telephone networks to deliver information.
• A standard for interoperability between televisions and computers, independent of display type and screen resolution.
• A standard for digital video compression that is open and not controlled by any system vendor.
• A standard method for querying the network for information.
• Highly sophisticated OLTP systems for billing, user authorization and authentication.
• Crackproof data security and integrity, to prevent theft of intellectual property and the misappropriation of customer information.
• Serious virus inoculation software (you think it’s bad now, just wait).
• A sophisticated data-tracking structure for billing and service inquiries.
• Agents to search out, purchase and retrieve information without human intervention.
• Storage and/or printing facilities for “time shift” viewing of information offline.
• “Media servers” with vast storage capacities.


With a network of these proportions in place, the final frontier for interactive TV is the capability to turn the television network(s), whatever they happen to be, into a fully symmetrical, two-way link: in other words, telephony and/or video teleconferencing.

It ain’t necessarily so. The three largest cable companies — TCI, Time Warner and Viacom — have made no secret of the fact that, as TW’s Geoff Holmes said at a recent conference, they believe they’ll be “the next phone company.” Although it’s not hard to believe the cable industry’s ability to plow forward in many other areas, telephony is a bit shakier, since developing a good telephone network is a nontrivial technical challenge; and telephony is, for many good reasons, a massively regulated business.

Operating under what’s left of their regulatory yokes, the regional Bell companies are working fast to get up to speed on video delivery, so they can provide better video telephones and start to sell quality videoconferencing services to businesses. Their job is relatively easy: get more bandwidth via whatever means necessary — fiber optics, better compression, etc. — so they can add video to the two-way data stream they’re already adept at transmitting and switching.


The cable companies seem to believe that they can buy technology solutions to these problems and be in business providing full, two-way interactive services. They don’t yet know that telephony is a far more complex industry than theirs of broadcasting one-way, analog information. Money can buy expertise but it can’t buy culture, and cable’s lack of telephony culture might prove more expensive than the industry expects.

The cost of infrastructure. First of all, never underestimate the cost of infrastructure. Time Warner’s big-time digital cable system that’s being deployed in Orlando is fiber-based, which gives it plenty of bandwidth for video telephony. But two-way connectivity — especially of multiple data types — doesn’t come cheap.

Orlando will supposedly use AT&T’s asynchronous transfer mode (ATM) switches, which can handle two-way transmission of video, audio, text, voice, etc. This is exciting, as everyone believes that ATM is definitely the way of the future, but there are plenty of reports that ATM products aren’t quite ready for prime time even within the telco community. Anyone who remembers what happened with the Signaling System 7 software a few years back — a bug took down an entire long-distance telephone network for hours at a time — will realize that cost is not always monetary. One or two network crashes, when alternative services exist, are likely to dampen cable’s ardor for a fully switched, digital telephony network.


But the sorest point of cable’s transition to a telephone system is customer service, its lack of which is legend. Grumble as many of us do about the amount of hoop-jumping it takes to get a simple PBX installed, the telephone system in this country is remarkably reliable both in provision and reliability of service, and in its ability to bill customers accurately for services rendered.

This kind of reliability is the result of decades of infrastructure building and problem solving for analog voice services, and more than a decade in the switched digital data market. Cable has experience only in unswitched, uni-directional, analog video, and thus is fooling itself if it believes it can “be the phone company” any time soon. Expect to see some competition for local service using wireless equipment, but cable isn’t likely to be a strong contender for telephony — video or otherwise — for quite a while.


So it comes down to this: What’s been passing in the national press for “interactive TV” isn’t really TV at all. Once we move past Level II, the notion of TV as we know it today becomes almost quaint. With the entry of interactive services, we are really talking more about a ubiquitous digital information network than simply about moving pictures. In this context, the “TV” actually diminishes in importance, becoming one of many in an expanding universe of communications devices and information receptors.

With that in mind, we encourage you to broaden the way you think about interactive TV. As you’ll read in Part II, there are many compelling reasons to be sure that no single network or industry is allowed to corner the market, especially not during its gestation period. We need to be inclusive, not exclusive, and shape a network that takes advantage of the strengths of cable, of phone companies, of cellular, of satellite, and that provides access to as many users and entrepreneurs as possible. If we do it right, we can say we helped shape the most significant advancement ever in human communication. Let’s not squander the opportunity.

Denise Caruso

Next month: Time Warner’s Orlando project, Viacom in Castro Valley, what Silicon Graphics is up to, the various combatants for the settop box market, the commercial and social potential (both negative and positive) of digital interactive TV, and more. Contact dcaruso on MCI Mail, AppleLink or America Online with input, responses, requests, etc.

New publisher begins with a balance between technology and content

Ion, a new multimedia publishing company, officially opened its Los Angeles office this past March. Since then, the four-person company has announced a publishing deal with rock superstar David Bowie, negotiated a deal with actor Dennis Hopper to feature the actor in a future CD-ROM project, and is in discussions with RCA Records to publish a CD-ROM sampler of the music giant’s recordings.

If we didn’t know better, we would almost believe that finding content for interactive CD-ROM titles was on par with shooting fish in a barrel. In reality, the only similarity between the two is they are usually both messy.

What has kept Ion from slipping in the bloodbath is one part timing — “multimedia” and “interactive” are daily news these days — and two parts people. Ion was founded by four individuals who each hold expertise in at least one essential area of the interactive multimedia publishing game.

From its inception last June the company included experts in content, technology, design and marketing — a balanced combination that is still uncommon within many of the large, let alone small, interactive publishing houses in existence today.


Ty Roberts, Ion’s chairman of the board and the catalyst for the company, learned the hard way that he couldn’t become a multimedia publisher alone. Roberts, who has helped found two successful computer software companies and is an award-winning music software and interactive game designer, has been interested in creating a multimedia publishing company for several years. He found, however, that technological muscle alone couldn’t pry open doors to the entertainment community.

While Roberts was spinning around Los Angeles unable to connect with content people (also known as “artists”), John and Ann Greenberg, who are entrenched in the music and film communities of Los Angeles and have Rolodexes any new media publisher would be glad to possess, had decided that “multimedia was the next thing.” They began hosting “multimedia dinner parties,” inviting multimedia insiders to dinner to learn more about this new medium.

It is not as strange as it sounds. Both the Greenbergs have had an ongoing involvement in digital music and interactive video technology. John, a musician and producer who has worked with They Might Be Giants, Lionel Ritchie, members from the Red Hot Chili Peppers and Oingo Boingo, got involved in computer music shortly after the arrival of MIDI. He became dissatisfied, however, with what technology was doing to music and began exploring what was possible with technology in the interactive music market.

Today Greenberg, now the CEO of Ion, sees himself as a conduit between the entertainment community and Silicon Valley. “I can explain what is possible in this medium to people in a way they understand,” John says. “Down here most of the people within the industry don’t know the computerspeak, and many of the people in the North don’t have the entertainmentspeak. If somebody explains a technological concept to me, I can work it out, but most of the people in this town are lucky if they know how to turn on a fax machine.”

Ann, now Ion’s VP of marketing, most recently worked as director of marketing at the Edward R. Pressman Film Corp., the independent company that produced Badlands, Wall Street, True Stories, Conan the Barbarian, Bad Lieutenant, Reversal of Fortune, Talk Radio and Hoffa. Her background is not in marketing or public relations but in architecture and experimental film — two areas that she says demanded a certain understanding of computer technology and the potential for interactivity.

Bringing in the artistic vision. Eventually a mutual friend introduced the Greenbergs and Roberts and, together, they approached Lou Beach, a well-known graphic designer and artist who has designed album covers for Atlantic, A&M and Virgin, to help them develop the Ion look and a compelling human interface design. He accepted and about a year later — this past March — the four them officially launched Ion.

Each member of the group has made substantial investments — both in money and time — in Ion. (They have also received some outside funding from private sources.) And while there is not a lot of cash left at the end of the day to pay themselves, members of the team say they have turned down venture capital funding as well as investment offers from “big names in the entertainment community,” rather than align themselves too early with the wrong type of partner. According to John, they are looking for an equity partner “who understands content and can create content.”

Location, location, location. Beach and the Greenbergs are based in the Ion office in Los Angeles, “which is where the personalities and lawyers are,” according to Roberts, while he remains primarily up north in the San Francisco Bay area, “which is where all the technical know-how is.” Despite the difficulties of holding meetings over the phone and shipping Syquest portable hard disks back and forth overnight for content review, as well as the cost of plane tickets between the two locations, the Ion team has managed to line up some potentially amazing content deals and deliver demo discs and interactive prototypes on deadline.


The first title to appear with the Ion label is an interactive David Bowie disc featuring the music video for the first single to be released from Bowie’s Black Tie White Noise CD. The disc, which will initially be bundled with Apple’s PowerCD, is expected to make its commercial debut this summer when the Apple three-in-one (CD audio, Photo CD and CD-ROM) player ships.

In addition to the linear music video, the CD will contain a behind-the-scenes interview with Bowie and his band members, as well as a collection of Photo CD images taken during production of the single, Jump They Say. As the user flips through the electronic picture book, Bowie narrates.

Exploring simulated worlds. The interactivity comes in the form of navigating through a simulated environment that mirrors the environment of the music video. Ion has access to nine hours of outtakes from the video shoot for Jump They Say to create the environment, plus they used 3D modeling packages on the Macintosh to create rooms and corridors that reflect the style of the retro building used for the video shoot.

Consumers can visit different rooms in the building, including “a video editing studio,” where they can mix their own version of Bowie’s music video using five different tracks. To prevent intellectual property nightmares, Ion says the program has no facility for allowing people to save their mixes off the CD-ROM.

The Bowie disc will also contain a sampler of music from various Bowie albums, from which the user can play excerpts. It will also have a “TV room” that contains a “virtual PowerCD player with discs stacked next to it.” You can “insert” the discs into the player and see trailers of other titles available for PowerCD.


Ironically, it was Roberts’ reputation in the computer industry that paved the way for Ion to get the publishing deal with Bowie. Bob Goodale, Bowie’s business manager, called Apple because he wanted to get Bowie involved in this new medium. Apple recommended he call Roberts. The two met and Roberts showed Goodale digital music videos he had helped produce for Todd Rundgren, The Residents and Michael Penn. (These QuickTime movies appear in two of Apple’s QuickTime Developers CDs.) Goodale liked what he saw and requested that Ion create a “Bowie disc demo.”

To produce the prototype, Goodale gave Ion access to some of Bowie’s recordings from the Low and Lodgers albums as well as videotaped interviews and images from that time period in Bowie’s life. (Unlike many recording artists or Hollywood figures, Bowie actually owns the rights to his own content.) Goodale gave them a month to produce a short, interactive piece on Bowie’s life during that time. When the team presented the demo to Goodale — on time — he said it was the first piece of interactive rock ‘n’ roll that he had seen that had merit.

Bringing back the good ol’ days. The key to the team’s success, according to Roberts, is understanding the needs of music consumers. “We are interested primarily in the visual aspects of this medium,” says Roberts. “An album used to offer a visual feast, but today with CDs the record industry is giving people less images to look at, less information. We believe the record companies are going in the wrong direction. We want to bring those visuals back — to put MTV on our discs, because people want to buy those images.”

David Gales, vice president of artist development at RCA Records, agrees. The self-proclaimed “Mac fan,” whose primary responsibility is “discovering new ways to market RCA products,” had been trying to find out “what synergy could be found between the music industry and the computer industry.” He says he began to discover the possibilities when he met Roberts — again, on the recommendation of Apple Computer — about a year ago. (Gales was eventually responsible for RCA recording artist Michael Penn’s appearance on the second Apple QuickTime CD.)

Since then, Gales says he has kept track of Ion’s progress. “We are very interested in this new medium,” says Gales. “And what we are trying to do is use the skills of the folks at Ion to do some exploratory projects, to cast nets. We are very impressed with what the Ion people can do, and we hope to do a great many projects with them.” Ion is in negotiations with the RCA record label to publish interactive music discs based on RCA’s vast content library.


While the team’s first few titles will primarily involve repurposing existing content, all the members agree that Ion’s charter is to publish original interactive content —for any commercially viable platform. “When we started this thing, we realized that simply producing these titles is not what we were looking for,” says John. “We started with the notion of a publishing company and that’s what we want to do — literary titles, music, cutting-edge underground products.”

The first original title is expected to feature actor Dennis Hopper. Although the script is still in the early stages of development, Ion says that it will rely on Hopper’s pop icon status as well as his vast skills as an actor, photographer and art collector. The title will be an art piece, not a game, according to the team.

Ion is also reviewing scripts that were originally written for the motion picture industry but have not yet been bought by a studio. The company says it is working with the writers on these projects to see if they might be able to turn them into viable multimedia projects.

Film industry leery of change. At some point Ion would like to develop interactive film projects, but the group believes they will have to approach the studios through the back door, so to speak, since studios are traditionally leery of change. For instance, Ion would first develop an interactive title for distribution within the CD-ROM market and then sell the whole package to a film company.

To date, the motion picture industry has been less receptive to Ion than the music business. “The large film studios,” says John, “let us come in, present our ideas and then they decide they want to build the title in house. They are more interested to know if we want distribution deals, whereas the record companies are more open to our ideas because of the success they have had with CDs.”

Since Ion’s first release will be distributed through the PowerCD bundle deal, the company has not formalized a distribution program. Members of the company say they plan to distribute additional titles through a CD-ROM mail order channel, which has proven to be a successful venue for titles developed for the personal computer platforms.

“Our philosophy is that it may be too big a deal to create our own distribution system, but it is part of the vision,” says John. “If certain partnerships develop, then we will do distribution differently. But if that doesn’t happen we will deal with distribution project by project.”


Perhaps one of the most interesting aspects of the Ion business model is how the team is attempting to structure its relationship with its legal counsel. As Roberts stated earlier, Ion hired entertainment lawyers based in Los Angeles. (It is the same legal firm that represents film director James Cameron and Randy Jackson, who founded an interactive multimedia company called TMM.) Finding a firm that understood what new media is, according to John, was quite an adventure.

Digital parlor tricks. “We would go to these law firms and a parade of hungry eyes would follow us,” says John. “They wanted to see ‘Digital Parlor Tricks.’ It’s been quite an odyssey to educate people in this town.”

Ann believes Ion should be compensated for that educational process by deferred legal fees and is in discussions with Ion’s counsel about such a possibility. “The legal matters really interest me,” says Ann, whose parents head up the American Law Firm Association, a cooperative of more than 100 law firms. Lawyers, she says, are benefiting from their clients forays into the new media market as much, if not more so, than the clients are benefiting from their counsels’ legal prowess.

The value of a good education. “We are a wealth of information for a law firm,” she says. “They can learn the [interactive media] ropes from us. As we cut our deals they learn, but we are not getting a consulting fee for all the education time we are putting in.

“You want a lawyer who understands this technology but who will not use it to expand his client base with your information,” says Ann. “For example, if I cut a deal with Apple Computer for a bundle and that information is not proprietary within my law firm, it cuts my competitive edge.”

Ideally, Ion would like to find a young lawyer who is enthusiastic about this new medium to join the company. “The older lawyers see this medium as another way to fry the egg — repurpose the content,” she says. “The young lawyers see it as a whole new egg.”

Eyes on the prize. Lawyers are not the only group that needs to sacrifice some of its typical fees in order to learn more about the industry and help it grow, according to Ion. At this point in the game everyone in the content business has to realize that they are not going to walk away with a huge advance. “We are not talking about a $20- to $30-million-dollar motion picture here,” says Ann. “Titles that will get done today will be done cooperatively.”

“If we are going to develop our CD-ROM titles, it’s because this is a viable market, but that does not mean it is a commercial market,” she adds. “If you can get people understanding more that this is an interim market, then we are more likely to get the deals done we need to today to make this a commercial market later. It’s a time to work out the technical nightmares, the legal nightmares — a time to get feet wet.”


Ion is a model for a publishing house of the next century. It is what members of the team identify as a “new entertainment label.” And although the four-person startup is unproved in delivering product, it has shown itself adept at understanding this emerging market.

The group has technical know-how, an understanding of content, and more importantly, a few firm publishing deals. It has made connections into the entertainment community that bode well for future products. In addition it is attempting to set a precedent for a lawyer-client model that works within the confines of today’s nascent multimedia publishing market. (We wish them luck on that one.)

Time to deliver on that potential. For the company to grow beyond what it is today — a small fish in a small pond — it must produce a library of interactive titles that not only captivates the commercial CD-ROM market of today, but expands it.

The upcoming debut of the David Bowie disc bundled with Apple’s first consumer product, the PowerCD player, which is expected to cost less than $500, should help them jump-start that process. (We hope it is not relying too heavily on high performance, since the PowerCD — designed and manufactured by Philips — is a very slow CD-ROM drive.)

If Ion produces the disc on time, it will be one of the first companies to publish an interactive music CD-ROM from a recording artist of Bowie’s stature. The company’s window to cash in on that cachet, however, is small. Several other multimedia publishing houses will be delivering CD-ROM titles from famous musicians, including Peter Gabriel, hot on the heels of Ion’s Bowie disc debut.

Not a one-trick pony. For Ion to differentiate itself from the emerging interactive publishing pack, it will have to maintain that edge. And to do so the company will need to add more staff — technologists and artists who can work on simultaneous projects and deliver product on time, so that the core team at Ion is free to do what it does best: acquire content, negotiate deals and create the vision. Ion also needs a business manager who understands issues such as multimedia distribution. Although distribution is a non-issue for the company’s first title, it will become an important one when Ion tries to enter the commercial market on its own.

At this point Ion has all the possible advantages necessary to ensure its success — not the least important of which is that it has captured the attention of several media giants, such as RCA Records, that are looking for partners to help them navigate this new medium. If Ion can prove itself a worthy guide, and consumers are willing to pony up the money for a new kind of CD player, the company might very well become the entertainment label of the next century.

Janice Maloney

Multimedia group works to change its image

Sony Electronic Publishing (SEP) seemed to have it all when it began two years ago. The group had access to Sony’s vast content libraries, its worldwide name recognition, its technological expertise, its established distribution channels for both the consumer and computer markets, and its funding.

Between its four divisions — Imagesoft, which publishes and distributes game titles for Nintendo and Sega; Multimedia Productions, which licenses and publishes CD-ROM titles for personal computer platforms and Sony’s Data Discman and MMCD player; the Publishers Data and Services group, which develops authoring tools and provides production services for electronic publishing; and the CD-ROM and laser disc mastering and pressing plant — SEP was going to be the publishing company that set the standards for how interactive media titles should be produced, marketed and distributed.

But Sony lost sight of two elements necessary for SEP to thrive in a competitive marketplace: action and innovation. And as a result it has left many involved in the electronic publishing industry doubtful of Sony’s ability to lead the way. In particular, some multimedia publishers affiliated with SEP question the company’s level of commitment to the CD-ROM titles market. And many members of the multimedia publishing group have left the Sony organization.

Not an easy row to hoe. In fairness, Sony’s behavior certainly isn’t the only reason for slow consumer acceptance of CD-ROM titles. SEP simply chose to put its energy into the division that yields the lion’s share of its revenues — the software market for Sega and Nintendo game machines. But with typical Sony arrogance, it wanted to be perceived as a major player in the nascent electronic publishing business and sold itself to CD-ROM publishers as the answer to their prayers: a one-stop shop for manufacturing, marketing and distribution of their titles.

By nearly all accounts, Sony did not deliver what SEP president Olaf Olafsson had promised when he launched the affiliated label program at last summer’s Consumer Electronics Show; now the company must take responsibility for what its arrogance has wrought.

One clear indication of that attitude is that Sony put the multimedia publishing group and the tools and services company in Monterey, a small, exclusive resort town on the central California coast, and expected the Sony cachet to turn it into a publishing mecca — without providing the divisions with adequate marketing, staffing, funding or autonomy.

‘SEP is DOA.’ Several multimedia publishing affiliates, who bought into the promise of the Electronic Publishing group early on, say they feel cheated. One of them, who did not want to be identified for obvious reasons, said, “Sony is going to have to ask me to deliver the rest of the titles under my contract if they want them, but I think they are so buried in their own [garbage] they won’t ask. Sony’s Electronic Publishing group is DOA; there’s no doubt about it.”

Certainly, the Multimedia Productions division does not have much to show for its two years. To date the publishing group has produced 10 CD-ROM titles for the Mac, Windows and DOS, nine of which are published by affiliates, while Sony handles distribution and marketing for a handsome fee. The group also has delivered about 30 DataDiscman titles — 17 of which were published in-house — as well as three MMCD titles.

SEP management says the lack of in-house published titles has to do with the 12- to 18-month development cycles necessary to produce quality CD-ROMs. According to Randy Thier, vice president of SEP, the Multimedia Productions group is working on “six to eight” titles, with about “half of those” to be delivered this year.


Although Sony won’t admit anything went wrong in Monterey in the past, members of SEP today will say they have made changes in Multimedia Productions and Publishers Data Service Corp. (PDSC). To start, these divisions are no longer managed by one person.

Thier, who joined SEP 10 months ago, now controls worldwide operations for multimedia publishing and the affiliated label program. (Interestingly enough, he also handles Imagesoft products distributed outside of North America and has been in Europe recently setting up headquarters there.) Bob Hurley, who has been with SEP since its start, now runs PDSC, the tools and support group.

Hamstrung from the start. When the group started, Bob Headrick, who is now the president of Nimbus Information Systems in West Virginia, had the unenviable position of running operations for both groups. Although members of the Monterey team, past and present, are unwilling to comment on the record, many say they believe Headrick had an impossible job. According to one, he had “forward-thinking ideas but was hamstrung by lack of staff and corporate backing.”

Headrick, who is now helping to develop a multimedia publishing group within Nimbus, says the U.S. launch of the DataDiscman consumed much of the Monterey-based team’s potential development time. It fell to the Multimedia Productions group and PDSC to crank out tools and titles as proof of concept for Sony’s new player.

It was extremely important to Sony that the consumer device had software to run on it when it debuted, and so in less than nine weeks the two Monterey divisions produced 16 titles in house for DataDiscman — which for many reasons, chronicled in this newsletter and elsewhere (see Vol. 1, No. 8, “DataDiscman: So Many Ways Wrong”), was not a successful platform in the U.S.

Separating church and state. Perhaps more important than the division of labor between Hurley and Thier is the separation of church and state between content and technology. Prior to Thier and Hurley taking their respective positions, there was a lot of cross-pollination between the two groups. As we have seen over and over again — including with the launch of the DataDiscman — experts in technology do not necessarily have the skills required to be expert content publishers, and vice versa.

This is not a criticism of the team in Monterey. They were understaffed then, and, according to members of SEP, they are understaffed today. Thier says they are working to solve that problem. Although he will not name names, he says Multimedia Productions will make hiring announcements in the near future — bringing on experts, he says, in interactive media.

Adding a liaison. According to SEP, the group will add a liaison for the affiliate label program, who will work with outside publishers from their first dealings with SEP all the way to the signing of the contracts.

Compton’s NewMedia, which is Sony’s largest competitor for affiliates, has several such liaisons. Today, it is usually only the Sony lawyers and accountants in the room when an affiliate signs on the bottom line. Even Thier admits this practice doesn’t inspire confidence or trust between Sony and prospective affiliate label publishers, but says it has been

“Sony’s way of doing business.”


One of the biggest complaints of affiliates, who wished not to be identified, was that Sony does not market their products well. While Compton’s NewMedia will place ads in computer magazines and use the more traditional advertising vehicles of this market — in-house store advertising and catalog mailers of titles to targeted audiences — Sony has resisted advertising in publications.

“It makes more sense today to invest in retailer advertising or catalog advertising,” says Thier. “In our particular category the cost of the ad page is too high in comparison with the cost of the return.”

Several Sony affiliates disagree, and have in the past signed distribution deals with Compton’s and Electronic Arts.

Home of the exclusive deal. While those affiliates did not have exclusive distribution deals with SEP and were able to choose additional options, future Sony affiliates will not have the same opportunity. “For all future deals we are only going to involve ourselves with publishers who agree to exclusive deals,” says Thier. “It is by nature a dedicated relationship between publisher and distributor, and non-exclusive deals promote confusion in the retail channel.”

Interestingly enough, Greg Smith and Francis Juliano, who helped start SEP divisions in Monterey, and who recently left Sony to start a multimedia publishing company called Roundbook, have just signed an exclusive distribution deal with Compton’s.

Software on the trade show floor. Several affiliates have also been disturbed by SEP’s lack of presence at computer and consumer trade shows. Traditionally, when the Electronic Publishing group participates in a trade show, it holds private demonstrations of its software titles in hotel suites off the main trade show floor. Obviously, from an affiliate’s standpoint, this is not the best strategy if you want to impress the masses with your product.

When titles are shown on the floor, they are usually in a booth that is run by Sony’s hardware division, which often uses titles from Multimedia Productions as generic software to demonstrate the capabilities of its drives.

To date, these Sony hardware booths have been absent of sales people qualified to discuss and/or sell the CD-ROM titles. In addition, there is no literature or promotional material about the titles for potential customers.

According to Thier, this situation is changing. SEP will debut its software titles booth at Summer CES this June in Chicago. The booth, a 50-by-60-foot SEP demo center, will feature titles from both Multimedia Productions and Imagesoft.

According to Peter Dille of SEP, about one-quarter of the booth for CES will be allocated to optical media titles from the Multimedia Productions group, but he says the size could expand for a different type of show that’s more oriented toward computer-based content.


Sony Electronic Publishing has had to learn the hard way that the “It’s a Sony” mentality doesn’t work when you are trying to establish yourself in an emerging marketplace. The lesson was obviously painful for everyone involved. SEP has lost several key people, and has managed to disenfranchise some of its long-time advocates in the CD-ROM publishing community. But the group appears to want to change its image, and it seems that SEP’s powers-that-be are now more willing to put some cash and some marketing muscle into their optical media-based publishing ventures. According to Thier, the next six months will tell.

By that time some of the proposed changes of the Multimedia Productions group will have become tangible — in the shape of in-house produced content titles, new staff and affiliated publisher policies. “My guess is anyone will have a different judgment about any company in the next six months,” says Thier. “I’m confident that we will be viewed with approval.”

Janice Maloney

New consumer GM wants TVs, phones, microwaves…

Craig Mundie, 43, is the former CEO and founder of supercomputer maker Alliant Computer Systems who recently joined Microsoft Corp. as general manager of advanced consumer technology. Reporting to Microsoft’s VP of advanced technology and business development Nathan Myhrvold, Mundie takes

over a number of existing Microsoft projects — including Modular Windows 1.0 (future versions have mercifully returned to the drawing board for some tweaking) — as well as projects in Microsoft’s future business plans, including everything from interactive TV to Myhrvold’s long-desired “wallet PC.”

Three Digital Media editors ganged up on Mundie in a noisy Italian bistro a couple of months ago, and what follows is a patchwork of our conversation.


Mundie begins the conversation by saying that he’s come to Microsoft to start a new business: a software franchise in consumer products. Though he says the “overhype and backlash” of interactive television these days is reminiscent of multimedia and CD-ROM a few years ago, Mundie believes that interactive TV has a “fairly favorable hype-to-reality ratio for them.” (And for good reason: this was right when the rumors were heating up about Microsoft’s partnership with Intel and General Instrument on a set-top decoder box, which was finally announced in late April.)

Architectural guide. Mundie was also anticipating Microsoft “guiding consumer electronics companies toward optimal architectures,” which we assume means Microsoft-based platforms. Asked about how this strategy squared with Tandy’s poorly received VIS multimedia player, he said, “What you see in VIS was the earliest product experiment in taking Windows and trying to meet the needs of low-cost consumer appliances.”

As the first in a family of products, he said, the focus for VIS was on “function and price.” (The VIS player running Modular Windows sells for $399.) “Over the next couple of years, Modular Windows’ name and concept will be applied to a suite of operating systems,” says Mundie. “Over time, Microsoft will have [different] flavors of Windows for major segments of the market.”

What’s the connection? We asked Mundie whether he thought it was logical to keep system software for consumer devices connected to the personal computer. His belief is that “interoperability between the PC and consumer devices is critical,” though this doesn’t imply that they will run the same operating system. (More on this later.)


Mundie says that his charter is fourfold: one, to leverage Microsoft’s existing technology; two, to use Microsoft’s experience in PC user interface for consumer devices; three, to provide the ability to interoperate; and four, as Microsoft enters new markets, to cultivate the “proper relationship” between PC and consumer electronics platforms to enable them to bootstrap “killer applications” at a higher rate of speed.

We thought this was interesting, especially considering that classical consumer electronics companies have shown a marked distaste for paying for other people’s software, which is how Microsoft makes money and commands market supremacy.

In addition, we suggested user interfaces for personal computers might not be really appropriate to consumer electronics devices, and things we’d seen that did a one-to-one map between the two were pretty dismal. And last but not least, it appeared to us that there was a real fear out there of getting into a close relationship with Microsoft.


“They say they’re afraid, but they all show up at the door,” says Mundie. “Success in the consumer business means mastery of software. The consumer electronics world just doesn’t know it yet.”

Mundie says that in the area that he and Myhrvold are attacking, they’re “completely open to working with other people. The qualifying clause is we have a vision about how things should relate. To the extent that people want to help us realize our vision, we’ll work with them in a reasonable way. We won’t compromise Microsoft’s ideas for integration.”

Munching on leftovers. And for those who are afraid that Microsoft wants to own everything, Mundie says “much that has to happen [in the consumer business] Microsoft has no interest in — manufacturing, infrastructure.”

And in any case, he says, Microsoft isn’t big enough to worry about. “We’re 6 percent the size of IBM. We’re 4 percent the size of AT&T,” he says. “Microsoft’s strength is in the homogeneity of its vision and mission. To us, who owns the work [i.e., who has ultimate responsibility for the product] is a big deal. And everything I see says people have a willingness to work with Microsoft.”

Consumers have tin ears. Using the analogy of stereo equipment, Mundie also addressed the perception that Microsoft isn’t known for its elegance in user interface design. Despite the fact that the technology is there for incredibly high-quality audio, most people don’t have the ear of an audiophile, and “the market isn’t interested in supporting it.”

But they are interested in products that aren’t so elegant but that are priced right, and deliver a certain percentage of professional quality and functionality. Thus he believes the “fundamental next step” in multimedia will be decided on the consumer side, and says he believes that computers will drive multimedia into the home.


But, he says, it will be in applications we already recognize such as encyclopedias, replicating functions that people already know. “My own target for this is to develop technology that my wife would use,” says Mundie (without batting an eye, we might add). “Trying to use cable even today is a pretty raw experience. We believe some pretty compelling things can be done to change that experience.”

The Microsoft microwave. We asked Mundie about reports (recently corroborated) that Microsoft was working on telephone interfaces, and how that might relate to other projects. “The telephone per se is less related to what I’m responsible for, but user interface in telephony is the perfect analogy to what we can do in the TV world,” he says.

So, we said, does Microsoft want it all? Does it really want to be in the microwave oven business? “Absolutely. If the microwave is computer controlled, it’s a potential platform,” he said. “A standard way to communicate with applications in the home is very interesting. Once that exists, no device will be as useful as if it’s interconnected.”

Controlling the home. What Mundie is referring to is the potential software platform that could link home appliances and other electrical devices in a smart network; “home control” has been an extremely peripheral market and/or insanely expensive proposition for at least the past decade, but as companies like Echelon (headed by Ken Oshman, formerly of Rolm, and founded by the legendary Mike Markkula, a cofounder of Apple and other groundbreaking Silicon Valley ventures) — and now, perhaps, Microsoft — move into the area, expect home control to become (a) sexier and (b) easier and cheaper to do.


Mundie believes that the multimedia industry is right now where the personal computer was “around the [Steve] Jobs and [Steve] Wozniak era; 1994 to 1995 is when IBM-Intel-Microsoft analogy will come to roost,” he says. (Now that the GI-Intel-Microsoft deal has come to light — which it had not at the time of our dinner — we see much more clearly what he means.)

A system for consumer devices that’s interoperable but not (necessarily) compatible has the potential to open up a whole new business for Microsoft in much the same way as the personal computer. Present Windows and DOS developers who want to play in a new market will need to make investments in a raft of new tools; even more significantly, a whole new generation of designers and developers will be target customers for these tools as well.

These interactive TV and information service developers aren’t likely to mind the buy-in: as Mundie says, consumer electronics has no software tradition, thus has no installed base to drag along behind it. And if Microsoft gets its software into anywhere near the 11 million homes that cable giant TCI owns — and, of course, it will be selling applications to the cable industry as well — servicing those developers could be a tidy business for many years.

I am the sun, you are the moon. So once again, Microsoft has come up with an overarching strategy to own a new market. As Mundie says, a personal computer designed from scratch today wouldn’t look anything like most PCs, and what would Microsoft consider the consumer market to be but a new kind of PC designed from scratch? Like many at Microsoft, Mundie is excited by the clean slate — sans a constantly clamoring installed base of users who don’t have the equivalent of “tin ears” — that the consumer market can provide.

“I have a record of scratch starts with big programs,” he says. “I have enough vision to be dangerous and enough experience to do something really big.”

Denise Caruso

Works with existing CD players, may boost quality for other media, too

Digital audio recording has not changed significantly since the era of the Apple II computer. Efforts to improve the sound on compact discs and other digital formats have been stymied by late 1970s technical standards that limited the amount of information that could be captured and stored on digital recording media, and by the need to remain compatible with the millions of compact disc players already sold.

The digital recording of CDs still strikes many audiophiles, recording engineers and musicians as cold and artificial next to the best analog recording. Now a tiny Berkeley, CA-based company has found a way to breathe new life, and realism, into digital sound.


Pacific Microsonics Inc. calls its solution High Definition Compatible Digital, or HDCD. As its name implies, the process offers improved sound while remaining compatible with existing compact disc or digital tape players. The technology is also applicable to film, video or multimedia.

Intelligent encoder. Like the Dolby System for analog recording, HDCD is an encode/decode process, meant to be used during both recording and playback. Pacific Microsonics designed most of the system’s “intelligence” into the encoder used during recording, so much of HDCD’s benefit can be realized on existing CD players. For optimal results, though, HDCD recordings should be heard on players incorporating the decoding circuitry.

Early reviews from the usually hypercritical audiophile press have been very favorable. “A Sonic Breakthrough in Digital Sound,” headlined The Absolute Sound, while Stereophile termed it “a wholesale leap forward.”


Keith Johnson, a recording engineer and audio equipment designer, co-invented HDCD with Michael “Pflash” Pflaumer, a digital electronics engineer best known for developing the Tops system that pioneered linking IBM PC compatibles and Macintoshes on the same network.

Digital audio was “a case of the emperor’s new clothes,” Johnson said.

“You measured it and the measurements came out perfect, but the measurements were only adequate for vacuum tubes.”

In other words, the types of distortion caused by digital devices are different from those of analog devices such as vacuum tubes. Johnson began his work five years ago by identifying distortions that were unique to digital, investigating what caused them and then how they could be eliminated.

Unique to digital. Several distortions unique to the digital process were primarily due to the limitations of the 16-bit, 44kHz sampling rate standard foisted on digital recording by Sony and Philips more than ten years ago (see Vol. 1, No. 7, p. 20).

They decided that digital audio would sample sound 44,100 times per second and store it in digital “words” 16 bits in length. In high frequencies, music extends to about 22,000 cycles a second.

The theory they used stated that a digital sample must be taken at least twice as often as the highest frequency to be captured, to avoid cycles occurring during gaps be-tween samples. So while 44,100 samples per second sounds high, it is in fact the minimum needed — and, many engineers say, barely adequate.

In addition, to avoid confusing the digital circuitry, a filter eliminates all signals above 22,000 cycles. Because these analog filters begin operating gradually far below that level, discontinuities result at lower frequencies, well within the audible range. High-frequency harmonics, the subtle aftertones, are lost. (This is why violins sound so metallic on some CDs, and also why CD sound lacks a sense of presence.)

Likewise, 16 bits fall short, even though capable of representing 65,000 different numbers. In analog-to-digital or digital-to-analog conversion, tiny moments in sound are frozen in time, and assigned a number. “If that number is off by as little as one in 100,000, you will hear it,” Johnson said. “That number turns out to be a lot greater than 16 bits.”

Low-volume passages use fewer than 16 bits, increasing distortion by using less data to describe those moments in time. (This is why digital sound actually increases distortion at low volume levels, the opposite of analog behavior.)


Digital audio standards “are hopelessly inadequate for serious recording, so what we’ve had to do is essentially [what we call] process manipulation,” said Johnson. Johnson and Pflaumer are vague about details of the process; they’re still waiting for patents to issue.

What they’ll say is that they begin with a signal with a far higher sampling rate, employing 20 bits. This alone would make a better master recording, but one incompatible with existing players. To squeeze the signal into the existing CD audio format, they developed a proprietary algorithm and a high-speed circuit that analyzes the signal on the fly and stores only the data needed to encode a high-resolution recording. The circuit ignores non-essential data, freeing space within the 16-bit format.

Squeeze in more data. “We are altering the signal, but in ways that are not apparent,” Johnson said. “Through that alteration we are able to squeeze in a lot more information that is important and keep it compatible.”

“Compatible” means that most of the additional information is stored in such a way that it can be retrieved by any CD player, and will sound better than conventionally recorded CDs. But an HDCD decoder retrieves still more information, invisible to normal CD circuitry, providing a sound comparable to the best analog recordings.

Four CDs have been recorded with the prototype HDCD encoder by Reference Recordings, a San Francisco-based audiophile label with which Johnson is affiliated. Mainstream recordings by leading artists will be out by the end of the year.

A decoder will be on the market within 12 months, and Pacific Microsonics will license audio manufacturers to include it in their equipment. Ultimately the decoder will be reduced to a chip that could be included within a CD player, an interactive multimedia player, or even a PC sound board at very low cost.

Larry Fisher

Intrepid reporter covers fiber, networked VR, Sega, SGI and 3DO and more, in one trip

Despite the common view that the Japanese are far ahead of us in all things relating to technology, a recent trip to Japan by Digital Media contributing editor Tom Hargadon — he was working the lecture circuit about virtual reality, networking and “the future of the museum” — showed that technological advances aren’t all they’ve been cracked up to be across the Pacific. The Japanese seem to be battling all the same issues we’re facing in the U.S.: how to change the infrastructure, how to get more computers into the schools, how to get up to speed in the networking arena, etc. Here’s his report.

It is April in Tokyo, cherry blossom time, and all the newspapers are agog about a possible massive investment in “social infrastructure” in the about-to-be announced stimulus package for the Japanese economy. It was expected that the package would include up to $15 billion to build a nationwide fiber-optic network and to put large numbers of computers in schools. The highly visible Clinton administration’s words about development of a technological infrastructure were emphasized.

Such a program would have used long-term bonds for what were perceived as short-term results and Japan’s finance ministry was deeply opposed to such use, so hopes for building the new infrastructure were dashed. Just as in the U.S., the warring factions in the telecommunications and computer industries could not settle their differences as to who would get what.

Some companies, such as national phone giant NTT, announced grand plans to invest more than ¥45 trillion ($405 billion) through 2015 to install a fiber-to-the-home nationwide network a week before the stimulus package was announced on April 13. Like Robert Allen, president of AT&T, president Masashi Kojima of NTT felt that the private sector could provide the needed network without government intrusion.

The Japanese were also baffled by why a cable company like TCI was spending $2 billion to put fiber into its systems. With only 3 percent of Japanese homes in the country even passed by cable, they have no conception of cable TV systems as a viable alternative to the telephone companies in the provision of interactive video and data services.

Bob Johnstone of the Far East Economic Review pointed out that the stimulus package was a straight imitation of the Clinton initiatives. The Japanese had done a very careful analysis of those initiatives and noted that there was very little new money for telecommunications infrastructure, but there was money for supercomputers and some money for computers in the schools; so they did the same.

Until 1992, Japan had very few Internet hosts and access was severely limited. The number of hosts quadrupled in 1992; it had been hoped that the stimulus package would add many more hosts in universities, upgrade the present hosts and begin commercial development in earnest. But substantial funds for Internet development in Japan must now wait until next year, Johnstone said.


During the second week of April, the foreign ministers of the seven leading developed nations met in Tokyo, primarily to discuss aid to Russia. But Warren Christopher of the U.S. State Department made a specific effort to ask about the purchase of U.S.-brand personal computers by the Education Ministry. The result seems to be that some U.S. computer companies — probably mostly IBM, which has been in Japan for many years — will get substantial orders. It was felt that Apple Japan was not adequately organized to obtain much benefit.

Japanese disconnect. Perhaps only 10 percent of Japanese PCs in office locations are connected to any local network, compared to perhaps 40 percent in the United States. When I spoke in Tokyo last August about networking trends, the general impression was that the Japanese were five years behind in the use and manufacturing of networking gear. When I spoke in April, the new consensus was “two years back and moving fast,” especially in asynchronous transfer mode (ATM) broadband technologies.

At a much subdued Communication 93 conference in Tokyo, the only major application garnering any attention was video conferencing. With the advent of substantially cheaper video compression-decompression units for desktops (chip sets in the Px64 format may be available for $1,000 in early 1994), there was an expectation that the desktop video conferencing business would explode in Japan in the next year or so.

All the Japanese manufacturers from computer (Fujitsu) to consumer electronics (Sony) companies have video conferencing gear ready to roll. The Japanese will be fierce competitors to Compression Labs and Picture Tel in the low-end video conferencing marketplace worldwide.


Japanese firms love the notion of “networked virtual reality.” The research arms of Sony, NTT, Hitachi and Fujitsu are all spending substantial sums investigating the area, because networked VR promises to provide a different kind of immersive and interactive experience for work and play.

Networked VR will be graphical and visually rich — an environment the Japanese are comfortable with, and where they are not much behind the U.S. in programming skill. But do not expect to see even prototypes for a year or more, followed by advanced input devices based on gesture recognition, high-resolution “worlds” on affordable machines, and networked multiuser commercial applications in such areas as design.

Multimedia means CD-ROM. In Japan, multimedia still means CD-ROM titles for Fujitsu’s FM-Towns or Sony players. We met with the executive directors of Japan’s Electronic Publishing and Interactive Multimedia associations, as well as with the manager of new media for the advertising giant Dentsu. All bemoan the primitive Japanese distribution channels for any new media.

Of much greater interest to them was Sega’s venture with TCI and Time Warner for a Sega channel. This was very big news in Tokyo. It was the front page banner headline in Nikkei, the equivalent of our Wall Street Journal (banner means 2.5 inches, two columns!).

Shingo Minato, manager of the new electronics media division of Dentsu, leans over the dinner table and asks solemnly, “What is the strategy here? It cannot just be downloading.” When I mentioned the purported upcoming announcement of the Sega 32-bit RISC machine for $400 at the Summer Consumer Electronics Show, which would allow much higher graphic performance and upstream multiuser interactivity, there was much nodding.

“We are familiar with Sega’s ‘Saturn’ [code name for Sega’s 32-bit RISC machine] and it would be quite useful in such a setting,” one said. I noted that such a box could probably be modified to be the set-top interface box for interactive television in general, to compete with the likes of General Instruments/Intel/Microsoft or 3DO boxes. It appears unlikely that Sega would get many system operators to purchase its box in the U.S., but the rapidly growing cable markets of Asia would be a natural fit.

32-bit RISC is coming. It was generally known in multimedia circles in Japan that Sega was perhaps only the first to have such a 32-bit RISC box with full-motion video well under way. NEC has such a project under way, as well as Fujitsu and, of course, Sony. All seemed prepared to announce products if it looked as if there were likely to be any sort of market.

They were amazed to hear that the Silicon Graphics Inc. set-top decoder box that Time Warner is apparently evaluating — as SGI chairman Jim Clark outlined a year ago in Digital Media, another big story in Japan — was able to perform hundreds of millions of instructions per second and had billions of bits of communications capability. This was orders of magnitude more capability than anyone conceived possible for consumer products in this century. They just shook their heads as I outlined what I remembered from the Digital Media story (see Vol. 2, No. 1, “Silicon Graphics Tastes the Future”).


In the midst of all the commotion about Sega and Silicon Graphics, 3DO held its first Japanese developer conference in Tokyo. I spoke with six or so of the participants.

They were all quite aware what 3DO had been demonstrating in the U.S., and expressed some disappointment that little — or any — more was shown to potential Japanese developers in the way of real titles or authoring tools, by either 3DO or Matsushita. Matsushita is a hardware company, so it was a bit unfair to expect it to have much to say about such issues.

On the other hand, everyone I spoke with was quite excited about what 3DO was attempting to put together. Since it really did not cost anything to become a software licensee, most planned to sign the licensing agreement that requires a $3-per-disc payment for all titles. Significantly fewer were going to put down the $9,000 or so to purchase the development kit required actually to build titles. A real wait-and-see attitude was prevalent.

Tom Hargadon


3DO of San Mateo, CA, has announced plans to develop a 3DO Authoring Toolkit that is primarily targeted toward developers who are artists. The toolkit will include Macromedia’s Three-D, MacroModel 1.5 and Director applications as well as “extractors,” file format conversion tools that are capable of converting Macromedia data into 3DO’s Multiplayer file format. Though no one is yet speculating on price, the Authoring Toolkit is likely to cost less than the original $2,995 3DO Developers Toolkit.

3DO has more than 250 licensees, but Susheela Vasan, director of market development for 3DO, says only 60 to 70 companies have actually bought the 3DO development environments necessary to create titles for the Multiplayer.

According to Vasan, the newer toolkit is being developed to meet the needs of artists, who have shown interest in creating titles for the 3DO Multiplayer. “The 3DO toolkit was built to meet the needs of a programmer,” says Vasan, “but many of our licensees have said they are waiting on authoring tools before they invest in the 3DO hardware station.”

The two toolkits are complementary, but are considered standalone development environments for the Multiplayer. The 3DO kit, Vasan says, is targeted toward programmers who are comfortable working with C, a widely accepted programming language. The kit provides only limited art creation tools, including an animation/paint package and Adobe Photoshop plug-ins.

According to Bud Colligan, CEO and president of Macromedia, the two companies will also work together to create authoring and playback technology.

3DO is still working on file format conversion tools for its toolkit. The company says it expects these to be available this year. There are no plans to sell the extractors as a stand-alone product to licensees, who already own the $4,995 3DO hardware stations and have Macromedia tools in house.


Fire up those PDAs: the group of cellular carriers working on the open specification for the Cellular Digital Packet Data (CDPD) project recently released version 0.8 and 0.9 of the specification to developers. A final version of the specification — yes, that would be 1.0 — will be released in July.

CDPD will enable wireless data communications for devices such as portable data terminals, automated vending machines and personal digital assistants, or PDAs. The technology allows the transmission of packets of data during idle times on the cellular voice channels.

Wireless service providers are getting a jump on the technology. McCaw Cellular, a leader of the project and the largest cellular service provider in the nation, has founded a new Wireless Data Division. The division will begin deploying a nationwide CDPD network starting in August. It plans to bring wireless data service to 50 percent of its market by year end, completing the CDPD rollout by the second quarter of 1994. Ameritech has announced similar plans to test the technology in Chicago by year end, and other cellular carriers should announce similar launches shortly.

In field tests, the transmission rate for CDPD is up to four times faster than existing wireless services. CDPD claims a carrying capacity of 19,200 bits per second (bps), approximately a page and a half of text. Ardis, an analog data network jointly owned by Motorola and IBM, and RAM Mobile Data, a digital data network run in partnership with BellSouth, use systems separate from cellular networks, but in the same general radio-frequency range. Transmission rate for Ardis is 4,800 bps; RAM Mobile Data’s is 8,000 bps.

CDPD is designed to integrate easily into existing cellular networks, requiring cellular carriers to install additional radio transmitters, routers and software. McCaw claims the cost for cellular voice customers who want to take advantage of the data service will vary depending on the transmitting/receiving device. A PCMCIA add-in card, for example, might cost around $500.

Cost for using the network will be less expensive than a cellular voice call, according to Rob Mechaley, McCaw VP of technology and general manager of the Wireless Data Division. Lower costs are assured because unlike cellular voice calls, the CDPD system “is based on what is sent and received, not on time used,” says Mechaley.

McCaw believes the first adopters of the service will be “large corporations with vertical tracking applications, like UPS,” says Mechaley. Regardless of who signs on first, McCaw and other CDPD carriers should have no shortage of customers. According to market research by Booz Allen and Hamilton Inc., there will be more than 13 million users of wireless data services by 2000.

The CDPD project, led by McCaw and IBM, includes cellular carriers Ameritech Mobile Communications, Bell Atlantic Mobile Systems, GTE Mobilenet, Contel Cellular, Nynex Mobile Communications, PacTel Cellular, Southwestern Bell Mobile Systems and US West.


New York-based Children’s Television Workshop and Electronic Arts, a San Mateo-based video game developer, have announced a long-term exclusive agreement to produce interactive media for children based on CTW’s popular children’s television program Sesame Street.

All titles will be jointly developed by CTW and Electronic Arts’ EAKids division, which develops software for kids aged 3 to 14. “A lot of the motivation for titles will come from CTW because they understand kids and what they want,” says Diane Flynn, director of marketing for EAKids. “We are the specialists in developing software.” Electronic Arts will be responsible for marketing and distribution of the titles.

The goal of the developers is to produce Sesame Street titles that “educate through entertainment” — a concept CTW has successfully promoted since its founding in 1968. Titles featuring Bert, Ernie, Big Bird and Cookie Monster will have no pint-size potential audience, either. CTW’s television and print programs reach children in more than 80 countries.

“We share the same philosophy on product development and how kids learn,” says Flynn. “Fun is a key element in the learning process, as is bringing the kid back to the game again and again.”

In many ways, the crossover of Sesame Street from television to interactive media is a natural. Characters featured on the show regularly call on its home viewing audience to sing, dance and count along with the program. Interactive titles will encourage similar interactions, only the characters will talk back to children as well.

Electronic Arts is hoping to get the first titles on the market by Christmas or early 1994. The $50 to $60 titles will be for kids aged 3 to 6.

The companies plan for “many, many titles on many platforms,” says Flynn. Titles will be produced for a number of platforms including computers, video game machines, CD-ROM and the 3DO Interactive Multiplayer.


Just a month after IBM announced the formation of its digital imaging and special-effects studio called Digital Domain — built in collaboration with film director James Cameron and visual effects expert Stan Winston — George Lucas and Silicon Graphics Inc.’s CEO Ed McCracken announced the formation of JEDI, the Joint Environment for Digital Imaging, which is located at Lucas’s Industrial Light & Magic company headquarters in San Rafael, CA.

Except for the official naming of the digital production studio, christened JEDI after the good guys in Lucas’s blockbuster Star Wars trilogy, not much at Lucas’s renowned production house is expected to change as a result of the announcement. ILM, which already uses more than 70 SGI workstations and 150 image processors as part of its digital production setup, has for many years been an unofficial media lab to the computer graphics industry, and to SGI in particular since 1987.

Lucas says he expects to cut the cost of creating special effects at ILM by 25 percent through the use of computer technology. According to Lucas, he has reduced production costs on his TV series Young Indiana Jones to one-tenth of the traditional price tag by using computer-generated images mixed with live action footage. He says that as the technology evolves and digital image quality improves, he will bring those same cost-cutting techniques into play for producing motion pictures.

In addition, ILM uses dedicated phone lines to link directly with clients in Hollywood or on location. ILM says the system was first implemented during production of Jurassic Park, so that Steven Spielberg, the director of the upcoming film, could preview dailies in Poland, where he is shooting his next film project, but it’s actually been in place longer than that. Our sources just never wanted to publicize it before, for competitive reasons.

For Silicon Graphics, the alliance with Lucas is a way to restate publicly SGI’s claim to being the technology platform of choice among the entertainment community, as big-iron computer companies move in on Hollywood with products such as IBM’s Power Visualization System. Even though the entertainment industry accounts for only 10 percent of SGI’s business, it is growing rapidly, according to McCracken.

More importantly, he says, members of the motion picture industry are some of Silicon Graphics’ most demanding clients. “The film industry is our toughest customer on realistic digital images,” says McCracken, “and their criticisms drive SGI systems forward.”

Technology built in partnership by the two companies will eventually make its way into the commercial market, according to McCracken. He says the goal is to make “tools that artists can use.”

The partnership between Silicon Graphics and ILM is non-exclusive. Members from SGI say we can expect similar announcements involving the technology company and other digital production studios in the near future.


Spectrum HoloByte, the interactive entertainment software developer and publisher of blockbuster games such as Falcon and Tetris, recently received $10.3 million in its second round of equity funding.

The Alameda, CA-based company, which was founded in 1986, made that money in two and a half months, according to Barry James Folsom, the newly appointed president of Spectrum HoloByte. He says the game company attracted several substantial investors, including AT&T Ventures, Paramount Communications Inc. and Kleiner Perkins Caulfield & Byers, a Silicon Valley venture capital firm.

The company, which has exclusive rights to produce computer and video games using the names and characters from the television series Star Trek: The Next Generation, plans to invest the money in new title development for the Super Nintendo and Sega CD game platforms as well as the 3DO Interactive Multiplayer and DOS personal computer platform. Folsom says he expects the Star Trek titles to be in stores by Christmas of this year. The 3DO version, he says, will be shipped when the player is ready.

Spectrum is also working on a location-based entertainment (LBE) installation based on the hit TV series Star Trek: The Next Generation. The Edison Brothers of St. Louis, acclaimed as geniuses in LBE, have been contracted to develop the virtual reality experience that will be installed in malls around the country. No release date for the planned installations has been announced.

Folsom would not comment on other potential licensing deals with Paramount Pictures except to say that Paramount is on the board of directors at Spectrum, and together they have “kicked around a few ideas” but nothing has been decided.


The Motorola New Enterprises group, which has a charter to identify emerging technology and new market opportunities for Motorola, recently invested an undisclosed amount of money in Virtus Corp., a Cary, NC, software company that has carved itself a niche in the commercial VR market with its 3D modeling and visualization program, Virtus Walkthrough.

In conjunction with the investment, according to Virtus’s VP of marketing, David Sink, the two companies have agreed to a partnership that involves research and development work on issues pertaining to human interface design and navigation for hand-held devices and online services.

“Motorola’s world view matches up closely with ours,” says Sink. “We believe it’s going to become a global village and having universal access to information is going to be an issue that companies such as Virtus and Motorola might be able to address. There has to be communications — that’s Motorola. Also there has to be some kind of access/user interface company, and we believe that’s Virtus.”

Virtus, he says, is working on prototyping real-time, object-oriented 3D worlds that can be navigated with a remote control. For example, a person using a device that supported this type of interface, he says, could enter a “virtual village” that mirrors his or her real community. As the viewer “walks along the streets,” he or she could enter a WalMart-type store and order school supplies for the kids through a home shopping service or go into a restaurant and order a meal that will then be delivered.

Bob Burton, vice president and general manager of Motorola’s New Enterprises group, while unwilling to go into any details, did say he sees Virtus as “an enabling technology that may help us as we look at new markets that we might want to pursue.”

As an example, Burton says, “It would be prudent to assume that since we are in the hand-held devices business that there would be an applicability for the type of services Virtus could provide.” He also mentioned that the New Enterprises group has recently invested in an information services company called Info Enterprises, based in Chandler, AZ, which could potentially benefit from an enhanced information navigation system. Stay tuned.


Media Vision, the Fremont, CA-based company that is known for its multimedia hardware technology, recently formed the Multimedia Publishing Group to develop entertainment and educational CD-ROM titles for the Mac and PC.

At the helm of this new venture are Min Yee, former publisher of Microsoft Press and VP of Microsoft’s multimedia division, and Stan Cornyn, founder and former president and CEO of Warner New Media. It is rumored that Media Vision has put as much as $50 million into the Multimedia Publishing Group.

For Media Vision, the lure of software is all in the profit margins. “The obvious handwriting on the wall is that a lot of money will be made in content,” says Satish Gupta, VP of strategic marketing and product development at Media Vision. “The question is, can we do it right? We’re confident we can. We know the business.”

Media Vision, founded in 1990, is perhaps best known for its add-in sound cards and video compression technology for Macs and PCs. The company has also developed a substantial chip business. About one third of its business is with more than 55 OEMs, such as Philips, Sony, IBM and Compaq. The company has done extremely well in the hardware business — reported revenues for 1992 were $68.9 million, a 730 percent increase over the previous year.

With hardware sales gradually leveling off throughout the industry, Media Vision hopes software offers more long-term growth potential. “We expect our growth margins to be better in software than in hardware,” says Gupta, and plans to make use of its existing distribution channels to sell software.

“Sales of multimedia software packages are synergistic with sales of our hardware products through already established computer distribution and mass merchandising channels,” said Paul Jain, Media Vision president and CEO, at the announcement. “These products occupy the same shelf space and are bought by the same consumers.”

Cornyn and Yee will be responsible for finding sources of interactive content and developing software titles using Media Vision hardware and technologies. They will also establish and maintain relationships with developers. Media Vision corporate will run operations, marketing and sales.

The Multimedia Publishing Group’s biggest struggle may come from the limited — and untested — market it is targeting. The group says it will specialize in developing “education and entertainment titles for upscale home PC users,” according to Gupta. Media Vision’s titles won’t “compete against multimedia game vendors and existing vendors at all, really,” says Gupta. “We’re trying to find the high end of multimedia titles.” The first titles will be out this fall, according to the company.


The best-laid plans of company negotiators were thwarted when Kaleida Labs was unable to close deals with charter members of its hardware alliance by the end of March, as it had expected (see Vol. 2, No. 10–11, p. 12).

Kaleida, based in Mountain View, CA, is the joint venture between Apple Computer and IBM to develop core multimedia technologies. Kaleida’s strategy is two-pronged: One, the company is creating the ScriptX cross-platform scripting language that enables developers to create one title that runs on a variety of machines; two, it is signing up hardware partners to create ScriptX-capable multimedia players.

Dan’l Lewin, director of manufacturer relations for the venture, says that part of the delay is that companies Kaleida had not earlier considered as potential “charter members” pushed back the deadline considerably. No date has been reset for when the members of the alliance will be formally announced, but Lewin says discussions with major manufacturers are continuing apace.

In fact, by the time the alliance is made public, Lewin says to expect “at least three or four companies” besides Apple and IBM to announce their membership.

In addition, a recent trade magazine report quoted Kaleida president Nat Goldhaber as saying ScriptX would be delayed until the first quarter of 1994. (Those knowledgeable about such matters doubt it’ll even make it then, software development being the inexact science that it is.)

However, it’s only fair to point out that ScriptX is not even fully enough implemented to be alpha software. (For non-computer types, alpha software is the functional equivalent of having just poured hot water into the Jello powder — all you really know is what it’s going to taste like when it’s done, but it hasn’t gelled.)

Of course, such public relations setbacks make great hay for Kaleida competitors, who are claiming the company doesn’t have product and has no firm commitments from hardware manufacturers other than Toshiba, whose relationship with Kaleida was announced a year ago at Digital World. And indeed they may be right, but saying that there are problems at this point is not only a bit disingenuous, it’s also premature.

The first public demonstration of ScriptX will be at the Digital World Conference in June.


After only a year as Time Inc.’s director of new media, John Papanek has been appointed editor-in-chief of Time Life Inc. Starting on June 1, he will depart New York City for Alexandria, VA, and launch what he hopes will be an opportunity to create and sell real digital media products that people want.

Papanek says it would be a big mistake to interpret the redeployment as anything but a move up. The kinds of products sold by Time Life’s direct marketing experts are, he says, much more suited to digital, interactive media than the magazines he worked with at Time. “There isn’t a new media business in 3-4 million circulation magazines,” he says. (Don’t tell it to Newsweek, however, which just launched its Newsweek Interactive for the Sony MMCD player.) “Maybe they’re a title for a Newton [personal digital assistant], but there are no CD-ROM opportunities there.”

He believes the real market for CD-ROM today is for children, and Time Life — which markets directly to 20 million consumers — has a children’s division. “This will be a lab for legitimate new media products,” says Papanek. “We’re going to focus down into the niche, find our customers and create products to satisfy them. There’s more potential here than any other place.”

Though books are still the biggest sellers under the Time Life umbrella (the ubiquitous Mysteries of the Universe series sold 13 million copies), the Video and Television division is growing fast, as is the music division, which specializes in selling compilations and anthologies.

The music group just cut an exclusive deal with Rolling Stone magazine — which heretofore never lent its name to any commercial enterprise it didn’t control — for the Rolling Stone 25 Years of Essential Rock compilation, a $99, seven-CD set marketed via a 30-minute infomercial of artist interviews and performance footage.

Rights were negotiated by Time Life lawyers, a skill that’s likely to come in handy for future interactive music products, as these seem poised to make the most significant market entrance of any new media product to date (see story on Ion, p. 8).

Papanek is also excited about the potential of creating programming for interactive TV, as Time Life Video and Television is the fastest growing division within the company. International media products are also under his purview.

The potential for Time Life to become a leading publisher of digital media seems actual, as opposed to virtual. With revenues of its own of more than $500 million (Time Warner is a $13 billion company), Time Life is one of TW’s most active divisions. In existence for more than 30 years, it’s a Fortune 500 company all by itself.

It will also be interesting to watch if Papanek is able to push Warner New Media’s interactive titles successfully into the mainstream. WNM, plugging along in Burbank, CA, is still plagued by the low visibility and a scattershot approach to its market that’s typical of most CD-ROM publishers today, even one with parents as rich and famous as Time and Warner. But who knows? A few well-placed infomercials may take care of all that.


Non-profit research organization SRI International based in Menlo Park, CA, is in the midst of an 18-month, million-dollar multiclient study on digital video for 30 companies in the computer, consumer electronics, telecommunications and entertainment industries.

Steve Krause, a senior industry analyst involved in the study, says the goal is a thorough investigation of the commercial ramifications of digital video technology as it’s developing today.

Though he would not comment about specific companies involved, Krause says the 18-month study is sponsored by most of the major players in the convergence industries, including some that compete with each other. Participation in the study is still open.

By the end of the project in September 1993, Krause and his colleagues will have produced several major reports, including a critical look at various video compression algorithms and proposed standards, applications and user needs, platforms and hardware, networking and telecommunications, and what Krause calls “the payoff question” — software.


The Paramount Technology Group, a new business unit under the Paramount Communications umbrella, has been busy since it opened its doors this past November. The group, headed by Keith Schaefer, has at least six interactive multimedia titles in development and plans to deliver the first of these products this August — ahead of its projected fall release schedule.

Richard Scarry’s Busytown, a beautifully illustrated children’s title, is expected to debut this summer on floppy disk for the DOS and Macintosh platforms. Although Busytown is based on famed storyteller Richard Scarry’s characters to which Paramount owns the digital rights, it includes primarily original content not found in any of the author’s books.

Targeted toward three- to seven-year-olds, the title helps teach children how things work by interacting with 12 different visual playgrounds, including a house, a gas station, a deli called Bruno’s and a ship with Captain Salty at the helm. In Busytown, the cursor is Mr. Huckle, one of the author’s main characters. The product is being “beta tested” with children from Head Start and preschool programs located in the San Francisco Bay area.

Busytown, which is expected to retail for $59.90, will also be released for the Windows and Macintosh CD-ROM market this fall. According to Schaefer, the title is in development for the 3DO Multiplayer and will be released for that platform in 1994.

Other educational titles in the works at Paramount include Amazonia and The Virtual BioPark, which are both being produced in collaboration with the Smithsonian Institution’s National Zoological Park in Washington, DC, and codeveloped by AND Communications of Los Angeles. Paramount’s Computer Curriculum Company is funding 70 percent of the development of these educational

CD-ROM titles since it will distribute them into the middle school science market.

Amazonia, which is based on a “Swiss Family Robinson”-type premise where the user takes on the role of a member of a family that has been lost in the Amazon, will include footage shot by the Brazilian government and from a BBC documentary on the Amazon. The Virtual BioPark allows the user to explore four different environments — including city, ocean, prairie and desert — through six different animals, including a cheetah, pigeon, prairie dog and octopus.

In addition to the educational titles, the group plans to enter the game market as well. In September, the Paramount Technology group plans to release Lenny’s Room, an interactive, animated, musical-game venture that features “an irreverent penguin,” who, according to Schaefer, is tuned into Penguin TV. Although details were unavailable, other titles in the works at Paramount include a game title based on the hit TV series, Star Trek: Deep Space Nine as well as a CD-ROM title based on Paramount’s upcoming movie, Addams Family Values, a sequel to the The Addams Family. Both are slated for 1994.


The computer technology industry appears to be rallying around the Interactive Multimedia Association in its attempt to establish cross-platform compatibility standards for multimedia applications and data. The Annapolis, MD-based IMA, which issued three Requests for Technology (RFT) this past December, recently announced that it has received a number of responses from companies including Apple, AT&T/NCR, Avid Technology, Gain Technology, Hewlett-Packard, IBM, Kaleida Labs and SunSoft.

According to Philip Dodds, the executive director of the international trade association, the IMA is pleased with this high level of response. He says it indicates the possibility of cross-platform multimedia solutions within months instead of years (see Vol 2, No. 8 p. 32).

Kaleida Labs and Gain Technologies have provided letters of intent to submit their scripting technology specifications to the IMA. A cross-platform scripting language would allow for interactive media titles developed on a particular platform to play on a variety of other platforms, such as Macintosh, Windows, DOS, CD-I and Unix.

Apple Computer and Avid Technology plan to respond to the RFT for multimedia data exchange. The data exchange RFT defines the requirements for exchanging files among different hardware and software platforms and applications.

The multimedia service RFT addresses the increasing need for distributed multimedia data types such as video and audio in local area networks, wide area switched networks, cable television systems, and for teleconferencing. Hewlett-Packard, IBM Corp. and SunSoft have stated that, together, they will submit a joint multimedia services specification. AT&T/NCR will also submit a response.

In a separate announcement, Hewlett-Packard, IBM, The Santa Cruz Operation, Sun Microsystems, Univel and Unix Systems Labs announced they would submit a joint multimedia services specification based on their common open software environment (COSE) initiative.

The RFTs will be reviewed by evaluation teams that have been elected by the technical working group responsible for drafting the individual RFTs. The evaluation and submission process has been open to all parties.

The IMA will publish “recommended practices” based on the RFTs in the fourth quarter of 1993.

The standoff between media and multimedia

Laura Rieman is a principal of U.S. Media Group, a San Francisco-based business development company focusing on the creation of information products for interactive multimedia in partnership with traditional media companies and new media developers. She was previously vice president of finance and administration for Chronicle Broadcasting Company, a subsidiary of the Chronicle Publishing Company.

Traditional media companies — newspapers, magazines, broadcast television, cable networks and entertainment syndicators — can’t compete in the 1990s. Each media segment is accustomed to operating in an environment of well-defined technologies, entrenched competitive barriers and lucrative economic returns based on its historical experience.

All this is changing, as is obvious to even the least involved consumer who is experiencing a plethora of TV channels, dozens of new communications gadgets to buy each Christmas and a very obvious recession that has kicked consumers, retailers and advertising-supported businesses in the groin.

That the (old) media are threatened is natural; that they are reacting by assuming an extremely defensive, rather than proactive, posture is short sighted. They are attempting frantically to “bar the gates” with every resource at their disposal: regulatory lobbying, initiating a bog of lawsuits, promoting fear that rights to intellectual property, privacy and freedom of speech will be overthrown, and trying prematurely to nail down “standards” for communication before the pace of technological change has even begun to think about slowing down.

Multimedia, by definition, crosses the borders of these traditional terrains; it makes a confusing mess of all the old ways of thinking, communicating and making money.

Also by definition, multimedia is based on, utilizes and redeploys content developed and nurtured by the old media industries. News, movies, game shows and advertising messages do not evaporate as transmission modes change, and it is wasteful, if not impossible, to try to recreate the wealth of content as well as content-generating machines that have fed consumer demand for decades. The lack of cooperation on the part of the traditional media companies is stultifying and oppressive to the struggling growth of these emerging businesses.


In the past, similar competitive logjams have inevitably been broken, and the resisting player has always been the loser. The cable networks overturned resistance by Hollywood studios, professional sports establishments and entrenched worldwide news gathering organizations to bring fuller, more timely and more easily accessed content to consumers.

The videotape rental industry, fueled by the enhanced choice and timeliness its service provided, swept over resistance from studios, distributors and regulators.

The triumph of television in a radio-centric world, despite a high consumer entry cost and complete incompatibility with prior technologies, is so complete that it has been forgotten that television, too, had a “zero installed base” when capital was invested in the first transmitters and production studios.

In each case, and many others, where did the money go that was spent on litigation and other forms of resistance to change? In short, down the drain. It is not strikingly insightful to realize that dollars invested in developing the future are a better bet than dollars invested trying to live in the past. However, it is an insight that has failed to permeate many media boardrooms. Why?


Movies like The Player, Broadcast News, and All the President’s Men aptly portray at least one salient characteristic of the media industries: an overwhelming egocentricity, the belief that the world would be bereft if that particular media were not available to guide, inform and influence the populace.

Newspaper companies scoff at television; broadcasters and cable companies continue to battle tooth and nail. At media conventions one hears a continuous drone of reference to the “public service” missions that media companies like to cloak themselves as serving.

There is some irony to the thought that institutions that are so dedicated to public interests (i.e., what the public is interested in) spend so much time belittling other institutions that the public clearly supports.

But egocentricity and self-righteousness alone do not explain the industry’s stiff resistance to the challenge of new media. There also exists a great fear of anything that threatens the traditional sources of cash flow. When the marketplace demands change, existing players have three relatively unattractive choices: they can invest in future technologies and products (putting capital and reputations at risk); they can co-venture with the emerging experts (thereby accepting a smaller piece of future pies); or they can lie down and die (no risk, no return). Simply stated, few managers want to take responsibility for making any one of these three choices.

There are further cultural factors, specific to the traditional media industries, that make the new competitive environment even more foreign and therefore fearsome.

First is a mass-marketing mindset, to which the concepts of interactivity and consumer choice are as directly challenging as a river confronting a leaky dike. Traditional media economics, in terms of both advertising and other revenue streams, are entirely based on control of information access to large population segments. Everything about this economic model must be reinvented to make it work in an era of media that is both personalized and accessible from interchangeable sources.

Second, traditional media have been lulled by a long history of regulatory protectionism. Their natural first reaction is to seek legislative assistance to sustain their positions. However, a fundamental underlying change has occurred that will ultimately make this type of relief unavailable: The media industries have grown up. Communications regulations, however uneven, were at their core driven by public and political desires to prevent the consolidation of information control in the hands of a powerful few. Regulations that have outlived this concept by continuing to protect the few in the face of market demands for diversity will eventually collapse.

Adept at closed markets. Finally, because media companies are used to operating within anticompetitive, protected franchises, they have attracted and nourished managers who are adept at closed-market economics. The companies are mature and often bureaucratic; their long-time employees have deeply ingrained habits; their cultures have set like cement. Those that try to establish “new media” departments are faced with the dilemma of either staffing them from within, which usually creates an ineffective clone of the same old cells, or hiring a nucleus of new managers who may find communicating with and obtaining resources from the core company futile, since they are so inherently unalike.


From every aspect — regulatory, technological, financial, competitive, consumer habit — the nature of the worlds that fostered the growth of newspapers, of television and of CATV systems has changed. On the surface, the shift from clear business segments and established communications intermediaries to multimedia and diversified distribution systems is obvious. But there are deeper societal changes that, moving like a current below the surface of the products and services we see, explain why it is so difficult for historical entities to adapt and why there is such power driving the force of change. The world is moving from:

• Static plateaus of technology to permanently, rapidly evolving technologies.
• The gate-keeping of scarce spectrum to the availability of unlimited bandwidth.
• Franchise valuation and financing to project and product financing.
• Legally segregated ownership to broad interownership (and the blurring of competitive battle lines, as exemplified by the current Warner/Disney feuds).
• Media-defined content to consumer-defined content (and delivery time and place).
• Broadcasting and narrowcasting to “spreadcasting” (reaching most of the audience through a multitude of channels).
• Targeted advertising to consumer-chosen advertising.

These changes present vast, fertile ground for creative and profitable invention. It is not sufficient to pipe old content over new networks; “talking heads” are fine for radio but could never compete on television media with the kaleidoscopic images of MTV.

New media is not just a new distribution channel, it is a new form of communication, which has yet to be defined. Existing media companies are actually at a disadvantage to the extent that they try to translate rather than to recreate, as if it were simply a matter of changing the words from English to Russian, or copying newscasts onto CD-ROMs.

To fulfill the promise of this opportunity will require every ounce of innovation available from the minds of program developers, operations managers, system engineers, advertisers and their agencies, and the business executives who will try to pull the whole thing together into some kind of reasonable bottom line. Perhaps some of the “winners” will be preexisting companies; but they will not win by doing business as usual.


As exasperating as it may be for those who believe in the potential for a multimedia future and would like to get going on its realization, consumers watch programs, not technology; and therefore, multimedia has a basic need to access content that has proven appeal. There are numerous searches in progress for the twin holy grails of a technology standard and an installed customer base, but neither will materialize until a core exists of some attractive information formatted in a compelling way (the elusive “interface”).

The interactive multimedia industry got under way principally through the efforts of the electronic game business and those who saw opportunities in the education and training market. Both fields have long experience in interactivity, and leapt at potential for huge quality gains available from multimedia technologies. Both fields are thriving. But when the average adult thinks of time spent daily utilizing various media, what fraction of that attention span is spent on either games or educational pursuits?

An enormous portion of the average person’s media-dedicated time is spent perusing newspapers and magazines, watching sitcoms and soap operas, news and sports shows, and absorbing advertising (classified, display, image, infomercial, home shopping, catalog, direct mail and every other permutation). The bulk of the information contained in this waterfall of data is owned or controlled by the traditional media companies.

Not only is traditional media content the meat and potatoes of consumers’ information consumption, but it is stuff almost ideally suited to the enhanced capabilities of the interactive multimedia environment. The eagerness of advertisers to provide more information about their products to interested consumers (if they only knew who they were); the chronic complaint that this newscast or that newspaper doesn’t spend enough time on local (or international or whatever) topics to suit a particular viewer, but “wastes” time on subjects of little interest; the deep need of soap opera addicts to know more about their favorite characters, which they feed with auxiliary magazines and audiotext services: all represent opportunities for interactive multimedia to provide immediate value-added programing to large audiences.

An artifact of the foundation of multimedia on the game and educational markets is the neglect of its potential for significantly improved advertising communications. Advertising support is multimedia’s untapped white knight. The game creators, the educators, the movie moguls who are beginning to invest in multimedia development, and the cable and telephone companies that are beginning to invest in its distribution, know next to nothing about how to access the $100 billion in advertising dollars that annually chases consumer eyeballs in the U.S. The media companies, which know these dollars intimately, are trying to hang on to the cash by pretending multimedia doesn’t exist.

But the advertisers are starting to get wise. The largest are building in-house technical staffs and outfitting multimedia production studios to prepare for the coming wave of distribution opportunities. The irony is that the longer traditional media companies continue to deny the future, the better prepared their future competitors will become to take the whole cake.

In a historical precedent, the cable television advertising business grew largely through the force of advertiser demand (why aren’t we reaching that 3, or 5, or 15 percent of the viewers anymore?) while broadcasters spent money on cable-bashing campaigns rather than offering to extend the services of their sales and programming departments to cable operators.


Looked at from either point of view — the traditional media or the new — one thing is certain: Money is going to be wasted, in recreating existing products and in fighting the evolution of new for-mats, until some form of mutual recognition is established. What are some possible scenarios for this resolution?

Joint ventures: An obvious alternative. Joint ventures have been plagued by three common pitfalls: They may be chaired by a neutral third party that is not commercially oriented and doesn’t have the drive to get to market very fast (these often go by the name “consortiums”); they may be so broadly based that they include direct competitors who refuse to share any important information or products with the joint venture; or they may be dominated by one party whose historical orientation and/or competitive objectives derail the success of the joint effort. Nevertheless, some JVs are starting to work, among which 3DO and General Magic seem to have the highest profiles.

Another option is direct but noncontrolling investment by traditional media companies in the new entities that stand to profit from the media revolution. Cap Cities/ABC proved the wisdom of this course with its relatively early investments in cable programming networks, at a time when other broadcast networks were still denying their viability.

A subset of the joint venture/investment category is something that could be called a nonpartisan business development corporation. This could be a limited partnership between key providers of expert and necessary knowledge — a local and an international media company, a distribution system operator, a creative programmer with experience developing interactive interfaces — which creates a very specific target market and time frame for the introduction of a defined set of products.

A key component of such an affiliation is management by a knowledgeable team with direct financial interest in the venture, yet without corporate cultural or other commitments to any special interest beyond that of the partnership. The objective is to achieve a synergy between the assets of each partner without burdening the future with the excess baggage of the past.

Clearly, each of these scenarios involves some sharing of the pie. This is a repulsive thought for traditional media companies that once had it all. They would find it consoling if they could accept the fact that the future pie has the promise to be much, much bigger than they ever dreamed. The final alternatives are either to take the giant step of radically changing corporate cultures and investment risk profiles to activate effective multimedia programs in-house, which some media corporations are starting to attempt; or to relinquish the future to currently struggling, but inevitably triumphant competition.

Laura Rieman

Conference Program Update

Like Digital Media, the Digital World Conference is a uniquely cross-industry event. It is the one common meeting ground that really explores the shape of the future, by bringing together the key people that are leading the way today.


Leaders from a cross-section of key industries share their plans and visions. You can be assured that most of them will not agree—which is one of the things that makes this event so interesting and so stimulating. All of them should challenge and intrigue you:

Speakers: John Sculley, CEO & Chairman, Apple Computer; Mitch Kapor, Chairman, Electronic Frontier Foundation; Bob Carberry, President, Fireworks Partners; Craig McCaw, Chairman and CEO, McCaw Cellular Communications; Brian Roberts, President, Comcast; Richard Brown, Vice Chairman, Ameritech

Moderator: Jonathan Seybold


Will these be the latest toys for the gadget-happy? Are they really just notebook computers shrunk small? Or, are we, indeed, talking about a new class of indispensable tools?

Speakers: Bill Warner, President, Wildfire Communications; Rob Mechaley, VP-Technology Development, McCaw Cellular; Others to be announced

Moderator: David Baron


In cooperation with the Advanced Technology Council of the American Film Institute, a panel of distinguished film directors will discuss the ways in which digital technology is changing the existing film medium.

Speakers: James Cameron, Cochairman, AFI Advanced Technology Council (Terminator I & II, The Abyss, Aliens II); John Badham (Point of No Return, Bird on a Wire, Stakeout); Martha Coolidge (Lost in Yonkers, Ramblin’ Rose)

Moderator: Jonathan Seybold


This session will feature the first open public discussion of several of the most important/most interesting projects.

Speakers: Ed Horowitz, Senior VP, Viacom, interactive digital cable system, Castro Valley, CA; Bruce Sidran, Exec. Director, MCC/First Cities, Interactive communications alliance; additional speaker and project to be announced

Moderator: Denise Caruso


From computer to telephone companies, everyone would like to be a content “publisher” of some sort. A panel from some of the most important and most active media companies will share its ideas.

Speakers: Michele DiLorenzo, Senior VP, Viacom; Keith Schaefer, President of Technology Group, Paramount; John Papanek, Director of New Media, Time.

Moderator: David Baron


Join us for an evening of product premieres and first public demonstrations of important new technologies and products.


We are now setting out to build a new digital communications infrastructure. This will open up a wealth of new products and services. But our public policy remains confused and divided. How do we insure equal access, privacy and interconnectability?

Speakers: Mitch Kapor, Chariman, Electronic Frontier Foundation; Ken Thomson, Telecommunications Consultant; Matt Miller, VP-Technology, General Instrument; Others to be announced

Moderator: Jonathan Seybold


How do you choose between licensing your product as software and selling it like a book or other finished goods? How can you leverage a deal to ensure your success?

Speakers: Jessee J. Allread, VP-Sales/Marketing, EBook; Richard D. Thompson, Managing Partner, Silverberg, Katz, Thompson & Braun; Others to be announced

Moderators: David Baron, Joanna Tamer


Content, not technology, will determine whether the new Digital World is successful. We will devote the entire day to an exploration of new interactive content. Authors and artists will demonstrate new work (most never seen before) and tell us what it means to create in this new medium.


Others sessions include: Interactive TV; Technology and Education; Security, Privacy and Data Protection; Virtual Reality and Location-Based Entertainment


Where do we go from here? The closing session will focus on the next steps we must take and the next challenges we must overcome to realize the promise of our digital future.

Speakers: Richard Green, President & CEO, CableLabs; Nat Goldhaber, President & CEO, Kaleida Labs; Al Sikes, President, New Media Technology Group, Heart Corp.

Moderator: Jonathan Seybold


The DemoCenter at Digital World continues its tradition of offering a first look at innovations never seen before. Presented in an intimate, hands-on environment, the DemoCenter showcases the very latest digital technology for your review, including several major product launches.

Beverly Hilton Hotel, June 23–26, 1993

June 23-26, Beverly Hills, CA
Seybold Seminars
(800) 433-5200 or (310) 457-8500, fax (310) 457-8599

Digital World is the event that defined the digital revolution in 1990 and has been on the forefront ever since — if we do say so ourselves. It was the first, and continues to be the most progressive forum for strategic thinkers and high-level executives involved in communicating information and expressing creative thought.

This event provides an atmosphere of community where creatives, professionals, technologists and executives share information and discuss and debate the developments of this rapidly evolving industry.

This year’s opening session will feature leaders from a cross-section of key industries, including Mitch Kapor, chairman of the Electronic Frontier Foundation; John Sculley, chairman and CEO of Apple Computer; Craig McCaw, chairman and CEO of McCaw Cellular; Richard Brown, vice chairman of Ameritech; and Brian Roberts, president of Comcast. The closing session will include Richard Green, president and CEO of CableLabs; former FCC chairman Al Sikes, president of Hearst New Media and Technology Group; and Nat Goldhaber, president and CEO Kaleida Labs.

There will be discussions focusing on important issues that arise from the shift to digital technology — questions of privacy and security; licensing and rights; and the relationship between technology and education. Telecommunications will also be addressed.

But the critical issue of the digital world is content: There will be a session about how the big media companies, like Viacom, Time Warner and Paramount are dealing with new media and its creators.

We will also devote an entire day to the exploration of new interactive content. This day will feature Allee Willis, interactive movie producer David Riordan of POV, and interactive music maven Ty Roberts of Ion (see p. 8), among many others.

An evening session will feature film directors Jim Cameron, Martha Coolidge and John Badham.

The DemoCenter will feature exhibitors such as 3DO, Apple, C-Cube, Hyperbole, McCaw Cellular, Philips, Radius, RasterOps and SuperMac, and many others. (See p. 31 for information on Digital World sessions.)