[Sidebar] February 8 - 15, 2001

[Features]

Belo lays an egg

The Dallas-based owner of the Providence Journal has ambitious plans for integrating its media empire with the Web, but some early stumbles have critics wondering about the vision thing

by Ian Donnis

In the realm of building synergy -- the coveted integration of old and new media for maximum advantage -- this was supposed to be as good as it gets. Two of the flagship properties of Belo Corporation, the Dallas-based owner of the Providence Journal, were about to become the first newspaper and television media to introduce an Internet- enhanced technology that would enable readers and viewers to instantly jump to related Web pages on their computers.

Unveiling the initiative last September during a Dallas news conference, Belo chairman Robert W. Decherd radiated optimism: "The cornerstone of Belo's Internet strategy is to build on our well-established local media brands and leverage relationships we have with local viewers, readers and advertisers. The Digital:Convergence technology fits perfectly with that strategy, advancing our Internet presence significantly, and enhancing the value of our media franchises."

Belo, which bills itself as the nation's ninth largest media corporation, was far from alone in its grand expectations for Digital:Convergence's signature product, the :CueCat -- a bar code scanner that attaches to computers -- and related software that can link televised "cues" with particular destinations on the World Wide Web. Belo plans to sink $37.5 million into the venture, and other backers include such heavyweights as Coca-Cola, Forbes, NBC, Parade, Wired, Young & Rubicam, and RadioShack.

But since being unveiled, the :CueCat has become one of the most ridiculed products of the Internet era. From wired.com to salon.com, technology writers have slammed the device, describing it as an ill-conceived white elephant that speaks more to the commercial aspirations of marketing types than the practical concerns of media consumers. Because each :CueCat has a unique identifying number, it raised the hackles of privacy advocates. And the Providence Journal received unwanted national exposure last fall when it delayed publication of a column in which Walter S. Mossberg, a Warwick native and respected technology columnist for the Wall Street Journal, concluded, "For now, the :CueCat isn't worth installing and using, even though it's available free of charge" (see "Disappearing ink," News, November 23, 2000).

About 20,000 :CueCats have been distributed free in Rhode Island, mostly at RadioShack stores, and 50 million are supposed to be disseminated nationally by year's end. The :CueCat has been constantly plugged in the Journal and on WJAR-TV (Channel 10), the first NBC-owned-and-operated station to use the embedded cues of the accompanying CRQ software, which enables televisions and computers to communicate with each other. But individual usage of :CueCats in tandem with Channel 10 hasn't reached 100 a day, according to Lisa Churchville, WJAR's president and general manager. Still, even though many people have their computers and TVs in separate rooms, Churchville remains bullish about the :CueCat's future, citing a finding that 20 percent of Internet denizens utilize television at the same time. "The wirelessness of it is very positive," she says. "I think the future is extremely bright."

Other media observers, however, are decidedly less impressed, and no one at Belo or the Journal is talking about how many people are actually using :CueCats. Although Digital:Convergence spent a lot of money building and distributing the devices, "the scuttlebutt is that publishers are disappointed with the incremental traffic they're getting," says David O'Brien, a senior analyst with Forrester Research in Cambridge, Massachusetts. "I'm very negative about these. I think they're just impractical. They just don't take into account the way that people read [newspapers and magazines]." By concentrating so much on creating a potential new revenue stream, "Nobody really thought about whether this idea would be popular with readers."

Adds Tim Schick, administrator of the Providence Newspaper Guild, which represents about 500 of 1200 employees at the Journal, "It's a toy, and if I want to play a game on the computer, I'm not going to use the :CueCat. Belo will be many millions poorer, although some day they'll be able to corner the market at the Antiques Roadshow for these and eight-track players."

Digital:Convergence officials had planned to take their company public in April, but that move has been delayed -- hardly a surprise considering the :CueCat's unflattering clips and the dismal climate for tech stocks. Still, stranger things have happened than a dramatic reversal of fortune for a new technology that once seemed stupid and off-putting, and Belo officials show no signs of backing away from their largest single investment in new media. "I think time will tell us more, and we remain committed to the use of the technology," says Skip Cass, a Belo senior vice president, who, citing Digital:Convergence's plans to go public later this year, declined to talk about the :CueCat in greater detail. Digital:Convergence spokesman Peter Eschbach didn't return a call seeking comment.

Even now, there's no sign that Belo's investment in Digital:Convergence, with the $37.5 million being spread over multiple years, is hurting the company's stock, which was trading last week at $19 -- close to last year's high of $20 in August. Steve Hahn, an analyst with Chicago-based Morningstar, says Belo's stock, like that of similar media companies with newspaper holdings, faces more of a near-term threat from rising newsprint costs and possible declines in advertising revenue.

In a similar way, after the dot-com sector bubble burst last year, Belo is hardly the only big media corporation that's struggling to find the right approach for enhancing the the components of its empire, which includes five newspapers and 17 television stations, while trying to cash in on the Internet. The New York Times reported last month that large newspaper companies, including the Times Company, Tribune Company and Knight Ridder, have laid off new media workers, and similar plans were in the works at Rupert Murdoch's News Corporation. As Felicity Barringer put it in the Times, "The first era of newspaper experiments on the Internet, fueled in part by the fear that the Web would devour profits, is over. A new era of newspaper experiments on the Internet, fueled in part by the fear that the Web will not generate profits, has begun."

That said, Belo still has ambitious aspirations for its new media division, Belo Interactive, and with good reason -- even with the dot-com sector in a downturn, the level of e-commerce and the number of people on the Internet are expected to continue increasing exponentially. Adds Cass, "I think, as a general rule, we feel exactly the same level of enthusiasm for Belo Interactive that we've always had . . . Because we have this information [in media properties], we believe people have an appetite for it. We remain very optimistic for our overall efforts in the interactive field." Indeed, according to internal memos obtained by the Phoenix, Belo Interactive hopes to raise its anticipated revenue from some $11 million in 2000 to $88 million in 2003, and $320 million in 2005.

With clusters of properties in Texas, Arizona, and the Pacific Northwest, Belo plans to build on its local brands and deliver specialized content and advertising, in part through the registration of Internet users, and "by capturing implicit and explicit information from 6 million users of our combined properties," according to the memos. Groups of salespeople at Belo papers, including the Dallas Morning News and Providence Journal, have been detailed to pitch their respective Web sites and strive for monthly goals. And while the :CueCat represents Belo's largest single new media investment, there are a number of other projects and alliances, including one with Sun Microsystems-Netscape to develop Internet initiatives for media companies.

But coming after what, for now, looks like a losing investment in the :CueCat, and a curious approach to building synergy in Rhode Island -- Providence Journal staffers say they've been barred by management from voluntarily contributing video and audio clips to projo.com, the newspaper's Web site -- critics wonder about Belo's vision when it comes to new media. "On one hand, I think it's good that Belo is interested in this," says Schick. "On the other hand, you really have to question their decision-making process in terms of picking what they're going to invest in."

PEOPLE LIKE Schick might consider the :CueCat a joke, but Digital:Convergence's signature product has found an enthusiastic and unexpected following among computer hackers. The device remains largely unknown even in Belo's prime markets, but enter its name in a search engine on the Web, and you'll pull up some 30,000 references, many of them with instructions for reinventing the :CueCat as a "Cool Cat," particularly by tapping the Linux operating system to use it as a bar code reader.

As reported by wired.com, hackers began converting the :CueCat -- "a cheapo bar code scanner that looks like a marital aid and plugs into a computer's keyboard socket" -- into a general use peripheral within days of its release in September. The potential uses are broad because of the ubiquity of bar codes. A project headed up by a 17-year-old high school student has made it possible, says wired.com, to scan a book and search for the best price among competing online retailers. Hackers have also suggested using the device to catalog CDs and movies, or place orders with online supermarkets.

This enthusiasm for altering :CueCats led lawyers for Digital:Convergence to send letters to hackers with their own how-to Web sites, such as flyingbuttmonkeys.com, saying the hackers' actions are "in conflict with intellectual property right owned by Digital:Convergence," according to foxnews.com. "It's not to shut them down, per se," Doug Davis, president of Digital:Convergence's technology group, told foxnews.com. "They've got to at least run a transaction through our back end server to at least acknowledge that this thing's been used." -- an oblique reference to how Digital:Convergence hopes to make money on the :CueCat by charging publishers for including its bar codes in their periodicals.

Bree Geiggars, who represents Digital:Convergence for Burson-Marsteller, a New York public relations firm, notes that the :CueCat's scanning capability, along with the memory to save scans for subsequent downloading, has been incorporated into a key fob and A.T. Cross pen as a way of addressing questions about practicality. The unique identifier in the device is used to gather grouped data, including gender, age range and ZIP code, but individual information is not tracked, she says. A one-time instance last year in which Digital:Convergence was hacked, and some of the information of registered users (as many as 146,000, according to various press accounts) was exposed, led the company to send out $10 gift certificates for RadioShack, Geiggars says.

But critics in the technology community were hardly mollified by the token apology. As columnist David Coursey put it in ZDNet News, "So this is the kind of company we're supposed to trust with our personal shopping habits in return for their ability to scan magazine bar codes?"

IF THERE'S a the newsroom of the future, it may be that of the Chicago Tribune, where CLTV, the Tribune's local all-news cable channel, has a TV stage in the middle of the room where reporters are encouraged to be interviewed after writing stories for the paper and its Web site. Although reporters tend to have mixed feelings about being asked to take on more responsibility without additional pay, this approach -- likely to grow with the Tribune Company's acquisition of the Los Angeles Times -- is embraced by some managers as the epitome of synergy.

When a gunman opened fire in the US Capitol in July 1998, for example, Tribune staffers in Washington and Chicago collaborated to quickly report the story through three different media. "Every outlet benefited from the multimedia activity," Mitchell Locin, the Tribune's senior electronic news editor, wrote in an article for the American Society of Newspaper Editors. "The broadcast outlets secured information from resources usually available only to larger networks; the Internet kept ahead of the breaking story; and the Chicago Tribune was able to communicate that it was on top of the story through its own vast reporting resources by sharing exclusive information that would lose its uniqueness long before the newspaper would hit the streets."

In sharp contrast -- and even though building the Web presence of its newspaper properties is a significant part of Belo's new media strategy -- reporters and photographers at the Providence Journal are no longer allowed to gather audio or video for projo.com, the newspaper's Web site. More than anything, this prohibition reflects the suspicion and acrimony that have intensified during an extended battle between the Guild, whose last contract expired in January 2000, and Belo-backed management at the Journal.

Belo jumped into the ranks of the nation's largest media companies when it bought the Journal Company and its nine television stations in 1997, but it also set the stage for an anticipated showdown. From the outset, many Rhode Islanders feared that the newspaper's sale to a big out-of-town owner would result in cutbacks and a diminution of journalistic quality. Although the first few years under Belo's ownership were better than expected, management has imposed concessions on the Guild (see "Hardball," News, February 25, 2000), contract talks haven't been held since last July, and many members believe that either Belo or Journal managers have targeted the union for elimination.

Meanwhile, although some of the respected reporters who have recently left the Journal, such as Jonathan Saltzman and Christopher Rowland, say their departures were unrelated to the internal strife, the length of the standoff is affecting morale, Schick says, and prompting staffers to question "whether they still want to work for the Journal."

Schick says the audio/video prohibition was imposed after he sent an October 30 letter to Thomas J. McDonough, the newspaper's director of human resources, indicating that, "While the Guild has always welcomed the introduction of new processes to Guild jurisdiction, the Guild has concerns related to the impact this equipment and processes may have on employees," including the need for training. Guild officials say some editors misinterpreted this letter as a grievance, and the company quickly barred the kind of audio/video work that some Guild members had been doing for projo.com.

McDonough and Journal publisher Howard Sutton didn't return calls seeking comment from the Phoenix, and Cass, the Dallas-based Belo senior vice president, wouldn't comment on the audio/video issue. According to the Guild, McDonough wrote to the union, indicating that sound and video work isn't within the Guild's jurisdiction, and that union members voluntarily made recordings and videos that were offered for inclusion on the Web. Schick, however, says the work is within the Guild's jurisdiction and that union members were assigned to do it. The union also claims that Journal managers, retaliating against the union after the Guild asserted its right to the jobs, have threatened to outsource the video work. The conflict led the Guild to file another in a series of unfair labor practice complaints -- known as charges -- with the National Labor Relations Board.

Schick says Journal managers "just seem to be going down the path, keeping the Guild and the rank-and-file employees out of the loop, making the decisions on high and letting the people know what the oracle has said." It's an approach, he says, that's antithetical to the nature of the Internet and which could undermine efforts to enhance the paper's Web site. "The Web is a very grassroots place," Schick says. "It doesn't work well in a hierarchy."

The idea that the Journal would try to cut its unionized news employees out of the paper's Web site isn't entirely new. In the mid-'90s, management excluded Guild members when Rhode Island Horizons, a precursor to projo.com, was offered through Internet service provider Prodigy. Schick says the company, maintaining that the work wasn't part of the Guild's jurisdiction, relocated a group of Horizon workers to a separate building. The idea of excluding reporters from a Web-based version of a newspaper was fundamentally flawed, of course, and management relented a few years later, after a sequence of litigation before the NLRB. The scrap over New Horizons, however, was viewed by the Guild as a honest disagreement. "There was nothing inherently anti-union about what they wanted to do other than set this up as a non-union function," Schick says.

As new forms of technology emerged in the '60s, transforming the production of newspapers, some newspaper unions sought lifetime job guarantees for their members. Certainly, it would have been impossible to preserve some of the old craft functions that have since been absorbed in news and advertising departments. But the Providence Newspaper Guild, because it defines its jurisdiction as the kind of work performed by its members, has traditionally welcomed technological advances. Although total employment at the Journal has declined over the last 20 years, the Guild's philosophy has translated into an increase, from about 400 to 500, in the membership of the union.

SCHICK CLOSELY monitored the recent strike involving the Seattle Post-Intelligencer and the Seattle Times, the first strike in Seattle in 50 years. On one hand, he says, it showed, "you can still strike after Detroit. For a long time, people looked at [an earlier strike in] Detroit and said, 'There will never be a strike again.' " But on the other hand, Schick says, union members were only marginally successful, and they paid a high price for going on strike.

Since relations soured between the union and Belo-backed managers at the Journal, the Guild has taken a more measured approach, stressing the importance of avoiding illegal actions, such as a mass sick-out. Instead, the union has staged periodic protests, steadily filed unfair labor practice charges (a hearing on one charge, consisting of about 20 allegations, is scheduled for April 2), and moved forward with preparations for its ultimate weapon -- a possible boycott of the Journal.

As the Phoenix reported last November, the Guild has worked with the 80,000-member Rhode Island AFL-CIO, and other unions and community groups, to gather boycott pledges. More recently, the Guild has distributed flyers, informing Journal readers of other possible news sources, including www.projo.com; the union's Web site, www.riguild.org; the Phoenix; WRNI-AM, Rhode Island's NPR affiliate; and local television stations, in the event of a boycott. Schick will only say that "a lot" of pledges have been collected. "We have enough cards in that we could launch a boycott, but we don't want to do it just for the sake of having a boycott," he says. "When you pull the trigger, you want to have some stopping action."

Clearly angered by the tactics, publisher Sutton wrote to Journal workers in mid-January, expressing his disappointment in the Guild and indicating that the most recent contract offer -- which was overwhelmingly rejected by the union in January 2000 -- might be weakened. Sutton indicated the company has "no interest in `breaking' the Guild or any other union," and accused the union of using "anti-company" tactics, including "false and frivolous" unfair labor practice charges. In threatening to reconsider the company's contract offer, he praised three percent annual raises, a new bonus, free parking, and a promise to negotiate pensions at mid-term in the contract. Guild officials, however, say Sutton failed to mention the inclusion of more expensive, less flexible medical plans, a requirement that the Guild drop most grievances, the elimination of a holiday, a demand for the elimination of grievance rights in one department, and other issues.

In recent weeks, the already tense union-management standoff has grown increasingly bitter. In January, Darrell West, a respected political science professor at Brown University, offered to serve as the moderator of a forum in which the union and management could air their respective views. But Mark T. Ryan, the Journal's senior vice president for legal and administration issues, said the company was unwilling to take part because it feared that the union would pounce on statements as fresh ammunition for new unfair labor practice charges.

"No one can measure the damage already done in the marketplace by your [Guild] leaders' misinformation campaign," Ryan wrote in a February 2 letter to Journal employees, which also contained a threat to diminish last year's contract offer. Schick responded by sending a February 4 letter to Sutton, calling on the company to demonstrate good faith by, among other things, agreeing to an arbitration process, undoing concessions, and improving the January 2000 contract proposal.

So it goes, with no sign of mutual movement toward renewed contract talks. Although this escalating dispute remains, like the :CueCat, obscure to most Journal readers, it makes for a certain irony: Belo is yearning to make the most of its new media plan while one of the outposts of the empire remains bedeviled by a decidedly old-fashioned union-management conflict.

Ian Donnis can be reached at idonnis@phx.com.

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