Oracle founder Larry Ellison was all-in on building the Interactive TV highway—then came the Internet
Why Larry Ellison bet big in 1994 on the ‘Interactive TV’ dream that wouod ‘Enhance our lives as the Library of Alexandria stimulated the intellectual development and prosperity of the Greek and Roman civilizations.’
By Anthony B. Perkins
From June 1994 issue of Red Herring
Larry Ellison enjoys the celebrityhood his billion dollar leap to the top of the information management software industry has earned him. You can see it in his eyes. The Herring waited patiently by Mr. Ellison’s side as he graciously exchanged cordialities with a crowd of Oracle customers, employees, and industry peers that had gathered around him after his presentation at this month’s DB/EXPO in San Francisco. At one point, a gentleman anxiously asked Mr. Ellison for his autograph. “I just want to prove to my friends at work that I really did meet you,” he explained. Mr. Ellison, of course, was pleased to oblige. He’s their hero, and he should be. Oracle Corporation, the company he founded with Robert Minor back in 1977, has emerged as the world’s largest vendor of software that helps large corporations and governments better manage their information. And along the way, Oracle has created 12,000 jobs and $9 billion in investor wealth ($2 billion of which belongs personally to Mr. Ellison), and has catapulted to Forbes 500status.
But don’t confuse Mr. Ellison’s success for contentment. He’s gearing his company up for the final and biggest battle of the Information Age. “Skeptics may disagree, but I believe the sheer impact of the interactive network into the home will rival that of the electric light, the telephone, and the television. We won’t just talk or shop on the information highway; we will live on it,” he prophesied. “An information highway is, in many ways, like a great library that comes to you. It has the same potential to enhance our lives as the Library of Alexandria stimulated the intellectual development and prosperity of the Greek and Roman civilizations.” By The Herring’s estimates, Oracle is the first and fasted competitor out of the blocks in the race to become the number one provider of software for consumer interactive network. At the heart of its strategy are the recently announced Oracle Media Server, a digital “multimedia library” that will store, retrieve, and manage all forms of digital information from video to text, and two dozen strategic alliances with some of the top telephone, publishing, and computer companies in the world. “We are two years ahead of everybody,” Mr. Ellison boasted. Read on and let us know what you think of the man who wants to be king of the information highway.
Perkins: How long do you think it will take before we’ll have the two-way information highway into the home?
Ellison: Well, Bell Atlantic is planning to have a million homes online by the end of 1995. By the end of 1997 or 1998, there will be tens of millions of households hooked into the interactive highway. It will be a huge business long before this decade is over.
Perkins: What are the biggest challenges facing the builders of the information highway?
Ellison: At this stage, I think that the obstacles are much more regulatory than technical. We believe that we will be delivering the stream servers at a cost of a couple of hundred dollars per active stream, and that includes both hardware and software, by the first quarter of next year. And set-top boxes will sell for around three hundred dollars. So the total capital cost for a working television set — where the stream server is talking to a set-top box — will be around five hundred dollars. That’s about the cost of a decent quality VCR today. The capital cost of building interactive information services and delivering those services to the household is not that great. Remember, the network companies have to upgrade their networks for a variety of reasons, not just to offer multimedia applications. They are going to fiber optics for enhanced voice services and to lower their maintenance costs, as well as for multimedia. The interactive information highway is going to happen, and it’s going to happen a lot sooner than people think.
Perkins: Do you think the government will end up impeding the build out?
Ellison: There certainly is a danger of that. And it’s not necessarily just the federal government. There are regional and local governments that are looking at this as an opportunity to throw another tax at the phone and cable companies that are going into this business. The biggest concern that we have right now is the incredible regulatory hoops that the different phone companies have to jump through to get approval to offer interactive services. An enlightened government could certainly make it easier for the phone and cable TV companies to build the network. If the government could break down the regulatory barriers, I think that the network could come on stream very, very fast.
Perkins: What is your advice to Al Gore?
Ellison: (Pause) Well, it would be presumptuous for me to give the vice president advice, but, again, we need to let the companies compete in the open market, let the phone companies start delivering interactive services. Untether the RBOCs!
Perkins: Silicon Graphics founder Jim Clark commented recently that the information highway is already here in the form of the Internet. He further projected that by early 1995 there will be more Internet users than cable subscribers. Any thoughts on the Internet?
Ellison: The Internet is very low speed. So the idea that the Internet will ever be the primary multimedia hook-up into the home is sheer nonsense. (Pause) First of all, I’m not sure what the information highway is. It is an unfortunate metaphor. I think of it as a very low-cost, high-speed, two-way networking service available to consumers. And the networking has to be at least 1.5 megabits per second, and you don’t get that with the Internet unless you have T1 lines to everybody’s house, and that would be prohibitively expensive today. So the information highway itself is in the province of the telephone companies that can deliver broadband services at a very, very low rate. The Internet is really a series of nodes on the highway, and Internet users will be able to take advantage of those broadband services when they’re here. But one should not think of the Internet as a network provider, because it doesn’t provide networking equipment. The Internet provides a series of nodes, and it provides information.
Perkins: Don Valentine [see following interview on page 58] and Mark Stahlman have argued in our pages that there will never be a set-top box — that the two-way network into the home will be plugged into the home PC.
Ellison: That’s like trying to figure out what’s going to be more successful, the stove or the refrigerator. There are going to be multiple information appliances attached to the information highway. PCs, Macintoshes, personal communicators, smart televisions — and air conditioning systems, for that matter — will be attached to the information highway. All sorts of devices. Our software demonstrated here today, Oracle Media Objects, which is our client-side software, runs on set-tops and Macintoshes and PCs unchanged. We have already said we are agnostic on the platform issue. This whole argument on whether it’s going to be PCs or set-tops is bizarre and ridiculous.
Perkins: You made it very clear today that Oracle’s strategy is to provide a complete set of software for the delivery of on-demand consumer services. If you achieve this goal, where will Oracle be in ten years?
Ellison: Ah, interesting. Well, the best way I can describe it is that, in my opinion, this is the dawn of the real Information Age. With the broadband service to everyone’s home, the sun is really rising. Today, Oracle is the world’s largest provider of software that manages information. The opportunities before us are enormous. We are limited only by our ability to take advantage of and exploit those opportunities.
Perkins: How about Oracle’s revenues? What percentage of your revenues will come from the new consumer services in ten years?
Ellison: Oh, I think we’ll still have huge revenues coming in from our corporate customers and government organizations such as we do today, but there will also be a substantial contribution coming from delivering information services to consumers.
Perkins: Do you think that the corporate world or the consumer world will generate more service revenues on the information highway?
Ellison: Business-to-business usage will be a bigger market than the consumer market.
Perkins: Will the commercial market happen first because businesses have the money to pay for it?
Ellison: Ahhhh. (Pause) No, I think that the consumer market will happen first, because the phone companies have invested so heavily in the technology for the consumer market.
Perkins: What are Oracle’s challenges to becoming the dominant software provider to the information highway? Is it other competition?
Ellison: No. Again, it is our ability to deliver the technology we already have, because we think our technology works, that it’s very cost-competitive, and that it’s better than any other technology in the market.
Perkins: What about Microsoft’s new offering?
Ellison: It is very expensive and it isn’t here. We are years ahead of Microsoft! We have stream servers for $200; they can’t even quote a price for stream servers. We have $300 set-top boxes. It is just a matter of our transferring this technology successfully to the different phone companies we are working with, such as our deployments with Bell Atlantic and British Telecom, and several others that will soon be announced. We have at least half a dozen new deals with major phone companies that will be announced in the next few months. We are winning most of the deals because Oracle is the only company that has technology that works today. We have proven that! So we not only have to take this technology and couple it with services, but we have to help the phone companies actually install and build these systems. This complete integration has to happen before the systems will be up and running.
Perkins: Will the ultimate hardware for the system operator be the nCUBE server?
Ellison: Not necessarily. But it will be some kind of parallel processing machine. We think the nCUBE 2 is the best machine today. The nCUBE 3 will be out some time early next year and will be delivering of information under $200 per stream. So that technology path has been very attractive. We also think H-P has a terrific system, and we will be announcing shortly a deal with a major telephone company that has selected Oracle software and H-P hardware. So we are not limiting our software to any one hardware system. We think, for example, that PCs running Oracle Media Server over LANs will become a huge business product for us.
Perkins:Stepping away from business for a moment, how do we avoid creating a society of information haves and have nots?
Ellison: It’s not really going to be a problem because I think competition will drive down prices like a rock. These services will cost about the same as your current VCR/cable TV set-up. Beyond that, the schools should have access to these services at an even lower cost. Vice President Gore challenged all of us to provide networks to hook up all the schools and hospitals for nothing. Of course, whether the phone companies will do that or not is something else. But I think you will see these services delivered to schools at a very low cost.
Perkins: Will giving schools access to the information highway really help education?
Ellison: Absolutely. Kids will have greater and more efficient access to the information they need to learn their assignments and get their homework done. The idea that schools close down for the summer, or at two o’clock in the afternoon is nonsense. The schools and libraries are incredible community resources and they should be available in the afternoon, late at night, on weekends, 365 days a year! This would also help people who can’t afford to buy the interactive services, because they could go to a community facility or school and receive training and gain access to the information they need.
Perkins: How will a busy and important person like Larry Ellison benefit from the rising sun of the Information Age?
Ellison: I get tons of electronic mail. To be able to sort through that text, categorize it, index it, and summarize it is incredibly valuable to me. And that is one example for me. I have to deal with a lot more textual information than structural information. Tools to manage text will definitely make my life a lot more pleasurable and efficient.
Perkins: On the entertainment side, will you watch more movies?
Ellison: No. I’ll watch better movies (laughs).
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