The Internet vs Interactive TV—The 1990s battle for the new consumer network we all forgot about
A look back to 1994 when Silicon Graphics founder Jim Clark and 22 year old Mark Andreessen bet on the Internet while Bill Gates and Larry Ellison tried to pioneer two-way cable—From June 1994 issue of Red Herring magazine
By Anthony B. Perkins
From June 1994 issue of Red Herring magazine
Silicon Graphics founder Jim Clark began his remarks at a recent gathering of the Stanford Business School Alumni Association by chiding a certain politician for creating the fantasy of the “information superhypeway” as a means of trying to emulate his father’s role in the construction of the interstate highway. The Herring won’t take issue with that insight. But don’t let it fool you into believing that Mr. Clark is dismissing the idea of an interactive highway into the home.
Last January, Mr. Clark resigned from his post as chairman of the multibillion dollar visual computing company he built to start an interactive software company for the Internet, Mosaic Communications, which could quite possibly represent an even bigger opportunity than he had with Silicon Graphics. “The Internet is more exciting than 3D graphics,” he told the Stanford audience. Mr. Clark is the sole investor (“Venture capital is good for the raw entrepreneur”), and his start-up team includes Mark Andreeson, the 22-year-old whiz kid, and his development team from the University of Illinois, who created the Mosaic interface software which has been responsible for the soaring popularity of the Internet. “I’ve learned everything I know about the Internet over the last three months, have become convinced that the Internet is the information superhighway, and that Mark Andreeson’s vision is right on,” Mr. Clark said. He explained that the Internet currently has 25 million users and that number would double by the first quarter of 1995. “By mid-1995, there will be more Internet users than cable TV subscribers,” he prophesied.
Mr. Clark also described what he saw as the impracticality and inefficiency of involving the cable TV companies, which he views as a lumbering and bureaucratic industry “basically controlled by Time Warner and TCI.” Mr. Clark admitted that his comments might surprise some people, given that his last four years at Silicon Graphics, with Time Warner as his partner, he spent evangelizing the cable TV/phone company model for the consumer interactive network. He even speculated out loud that it’s conceivable that he would debate SGI’s current CEO, Ed McCracken, some day on their conflicting visions for how the network will shape up. Unfortunately, that’s all the detail about his new project Mr. Clark leaked that night at Stanford. But he did promise that Mosaic would be making some announcements shortly, including news about the significant strategic relationships the company has formed.
For a contrasting view of the consumer interactive network, readers can delve into this month’s bull session with Oracle CEO Larry Ellison (see below). At this point, Oracle appears to be outpacing the software pack, including Mr. Gates’ Microsoft, as the dominant software provider for the phone company/cable TV interactive network. And Mr. Ellison wasn’t afraid to say so. “We are two years ahead of Microsoft!” he declared. Mr. Ellison views the Internet as too slow to ever be the primary multimedia hook-up into the home. “The networking bandwidth 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, according to Mr. Ellison, “the information highway itself is in the province of the telephone companies.”
Mr. Ellison also predicts that his version of the consumer interactive network will fall into place soon, citing Bell Atlantic’s plans to have a million homes online by the end of 1995 and his own belief that 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’s over,” he said.
When we asked his opinion about whether the primary interactive device will be the home PC, as industry pundit George Gilder and Jim Clark believe, Mr. Ellison responded by saying, “That’s like trying to figure out what’s going to be more successful, the stove or the refrigerator. PCs, Macintoshes, personal communicators, smart televisions — and air conditioning systems, for that matter — will be attached to the information highway. All sorts of devices. This whole argument on whether it’s going to be PCs or set-tops is bizarre and ridiculous.”
At a certain point, all arguments about the emerging interactive networks become bizarre and ridiculous. In the final analysis, however, the consumer will decide who wins. The Herringbelieves that if one really ponders the consumer-demand angle, one can begin to see how the visions of Larry Ellison and Jim Clark may actually both be right. Think about it. The interactive crowd like their PCs and use them as interactive devices (e.g. e-mail and online services) almost every day. They are also rushing to sign up for the Internet; and, for the most part, these folks are not television watchers. So, it’s easy for The Herring to see how companies such as Mosaic could end up making lots of money selling Internet-related software and services to the interactive consumer and this powerful new interactive medium could take hold and create a huge new industry.
The entertainment/couch potato crowd (i.e. the Larry Ellison folks) will probably have the pizza box sitting on top of their TVs running Oracle software and ordering up programming on demand, playing games, and, perhaps, engaging in a little home shopping and gambling to pass the time away. Do these folks want to sit around their dens interacting with their home PCs? We don’t think so. They represent a whole different market of consumer. It’s kind of like the difference between the people who contribute to public television and members of the Rosannefan club. Venture capital industry dean Don Valentine describes the scenario well in his interview with The Herring this month: “The people who think they’re going to convert television watchers into interactive players who will want to change the ending of movies and play interactive games are engaged in pure 2001 fantasy. Hal will have to be there verbalizing how to operate the interactive TV set before the couch potatoes in Des Moines, Iowa, will learn how to use it.”
In his forthcoming book, Telecosm, George Gilder warns Al Gore that people won’t build the interactive consumer network unless they can get rich doing it. The Herring agrees. The potential for significant financial reward in return for intelligent and hard work is a basic tenet of the American dream. Jim Clark and Larry Ellison have become rich as a result of the tremendous success of the companies they founded. After spending a little time listening to the current visions of these two raging cowboys, The Herring feels a little more comfortable about the future of the American economy. We are also looking forward to our interactive future.
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