VIACOM MERGES WITH BLOCKBUSTER, UPS PARAMOUNT BID

In the further chronicles of the four-and-a-half-month-old Paramount-Viacom-Blockbuster-QVC buyout wars, earlier this month Viacom Inc. announced a definitive merger agreement with its Paramount bidding partner, Blockbuster Entertainment Corp. By terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, but must still be approved by shareholders, Blockbuster will receive Viacom stock valued at $8.4 billion. The combined company will be called Viacom-Blockbuster, Inc. (For more on the Paramount battle, see Vol. 3, No. 5, p. 3.)

Viacom chairman Sumner Redstone will assume the title of chairman of the combined company. Blockbuster’s chairman and CEO, H. Wayne Huizenga, will become vice chairman of Viacom-Blockbuster and chairman of the Blockbuster subsidiary. Blockbuster will remain headquartered in Ft. Lauderdale, FL.

According to Redstone, Viacom sees Blockbuster as providing access to a mass consumer audience from which it could greatly benefit. “Blockbuster’s established relationships with customers and large presence in the retail video and music markets provide Viacom with important access and distribution to consumer and entertainment products,” said Redstone in a statement.

In many respects, Blockbuster is a sound acquisition for Viacom. Blockbuster, the world’s largest home video retailer with more than 3,593 stores internationally, generates approximately $500 million in annual revenue, is nearly debt free and has posted quarterly growth increases between 40 and 64 percent for the last two years.

While immediate business prospects for Blockbuster are rosy, the long-term outlook is somewhat more troubled. With video-on-demand systems looming in the not-too-distant future, Blockbuster is scrambling to diversify its core business rooted in analog technology. In the first major step in this direction, the company announced a program to introduce software rentals and sales in its stores this past November. (For more on Blockbuster’s business and its attempts to move into new markets, see Vol. 3, No. 7, p. 28.)

Its latest move in this direction came earlier this month, with the purchase of a 19.9 percent stake in Virgin Interactive Entertainment plc for approximately $30 million. VIE, which maintains offices in California, London, Paris, Tokyo and Hamburg, develops and publishes video game and entertainment software compatible with consumer hardware systems, including Nintendo, Sega, personal computer and CD-ROM systems. Founded in 1983, VIE has published more than 200 versions of 90-plus entertainment titles and sold more than 13 million copies of its software since July 1990.

In tandem with the Viacom-Blockbuster announcement, Viacom stated it was increasing its offer to Paramount by more than $800 million to bring the total combined Viacom-Blockbuster bid to $10.5 billion. The resources for this increased bid are the result of a deal between Viacom and Blockbuster in which Blockbuster has agreed to invest $1.25 billion in Viacom by purchasing its stock. This investment is subject to the consummation of Viacom’s tender offer for Paramount, according to Viacom.

While in public statements Viacom enthusiastically welcomed the international video giant into the family, the merger was also clearly intended to stimulate interest of the Paramount board in a combined Viacom-Blockbuster company. In fact, so confident does Viacom appear to be about the prospect of a Viacom-Blockbuster-Paramount merger that along with the announcement of the Viacom-Blockbuster merger, it distributed a four-page Blockbuster-Viacom-Paramount merger fact sheet showing the combined assets of the three companies.

So far, Viacom’s strategy appears to be working. The larger Viacom-Blockbuster bid has once again won the approval of Paramount’s board. However, Paramount chairman Martin Davis says the company will consider competing bids until the Feb. 1 deadline date for final offers.

At Digital Media’s press date, no formal response or upping of the ante has yet been issued by QVC Network, which has a $10.1 billion bid for Paramount on the table. If the evolution of events since Sept. 12 (when Viacom first announced its proposed deal with Paramount) can be read as any indication, one has already been entered.

MULTIMEDIA PATENT UNDER REVIEW

To the relief of the multimedia developer community, the U.S. Patent and Trademark Office (PTO) recently decided to reexamine the Compton’s NewMedia patent for multimedia technologies. PTO will examine the 41 claims that comprise Compton’s patent on SmarTrieve technologies, a computer search system for retrieving text, video, graphics, still images and sound from a multimedia database. (For more on the Compton’s patent claims, see Vol. 3, No. 6, p. 21.)

The somewhat unusual step of ordering a review of the patent, which had been issued in August, was prompted by the strong reaction of the multimedia community to the claim, according to PTO.

Companies and individuals may submit prior art to be considered in the case. However, as is general practice, the review is closed to the public in order to protect the filing company’s trade secrets.

Bob Carr, spokesperson for the Tribune Co., says Compton’s and the Tribune Co. are still confident that the patent will be upheld. “We have not changed our position at all,” he says. “This is the same thing that happened with Dolby sound, the color chip in color TV and other technically oriented patents in the past,” where industry challenged individual company claims to a widely used technology. He says Compton’s will honor whatever decision is reached by the PTO.

“Our opinion is that the patent is too broad,” says Ken Christie, marketing director of the Interactive Multimedia Association (IMA), a trade association representing 260 member companies and organizations. “We’re concerned that this will scare people away from wanting to create multimedia.” He noted that, during the review, the patent is not enforceable.

PTO commissioner Bruce Lehman has also initiated a series of public hearings for critical feedback on how it evaluates patents for software. Hearings are scheduled for Jan. 7–8 in Crystal City, VA (outside Washington, DC). Testimony will be heard from many industry groups, including the IMA, which Christie says will propose a more open review process for patents and pre-grant publication of claims.

FULL ACCESS TO THE INTERNET MADE EASY

If you’re tired of waiting for your commercial online service to implement full access to the Internet, this spring, O’Reilly & Associates, a publisher of Internet books, and Spry, Inc., a developer of Internet applications, plan to introduce an all-in-one product for connecting and using the Internet.

Internet-in-a-Box, as the product is called, includes a variety of Internet applications: file transfer protocol (FTP), Telnet, mail, news, Gopher and Mosaic search and retrieval software from Spry, as well as a customized version of Sebastopol, CA-based O’Reilly’s The Whole Internet User’s Guide and Catalog, a frequently updated reference guide that lists addresses for special-interest areas on the Internet. As part of the package, customer support and service providers for one-step Internet connectivity will also be provided.

Perhaps one of the niftiest features of Internet-in-a-Box is its navigation system, which comprises World Wide Web and Mosaic. (Both World Wide Web, or W3 for short, and Mosaic were developed by research institutes. Spry licensed the Mosaic code from the National Center for Supercomputing Applications at the University of Illinois, Champagne-Urbana.)

W3 is based on a Hypertext model. It creates direct links between text in documents so that jumps from one document or file to another can be made by clicking on highlighted, or linked, text. W3’s global Hypertext system is connected to news groups, Telnet services, gophers and other resources and enables text links between documents on different systems around the world that are connected to the Internet.

Mosaic, a graphical interface for W3, is intended to simplify use of the system. With Mosaic, users click on icons to retrieve information automatically from disparate network sources. In addition to text links, Mosaic supports the use of programs to view digitized images and video clips and to listen to sound clips. While Mosaic is available free of charge on the Internet, Spry believes that its packaging of the technology and customer support will appeal to users, according to Deanna Leung, spokesperson for Spry.

Buyers of Internet-in-a-Box automatically become subscribers to O’Reilly’s Global Network Navigator, a free online magazine on the network, and its vast resources. GNN provides direct links (using Mosaic) to more than 600 information resources. The quarterly magazine has published two issues since its October founding with the second — on education — appearing this month.

GNN has more than 15,000 subscribers, according to Ron Pernick, a spokesman for the companies. Unlike other areas on the Internet where usage is unrecorded, specially designed software enables O’Reilly to track access to specific areas of GNN.

In order to offset development costs, the magazine features advertising by some 25 companies, including DEC, Nordic Track and Lonely Planet Travel Guides. In keeping with the “Internet culture,” with its strong non-profit (some would say anti-profit) predilection, advertising is designed to be unobtrusive. In order to view promotional material, users must click on a marketing icon.

User connection fees will be determined by the individual companies Spry and O’Reilly contract for service connection. (Users will be allowed to choose among the service providers.) Seattle, WA-based NovX InterServ is the first Internet access provider to partner with the companies. Hourly charges are expected to average between $8 and $12.

According to O’Reilly spokesman Brian Erwin, Internet-in-a-Box will be priced at less than $100. A Windows version will debut this spring. The product will also be developed for Macintosh, but no timeline has been established for this yet.

INTERACTIVE MEDIA IS MAJOR GROWTH SECTOR

While the task of tracking developments in the ever-changing field of interactive media can be likened to trying to catch a greased pig, three companies, Digital Information Group, Veronis, Suhler & Associates Inc. and Cunningham Communications, have attempted to tackle the “growth of multimedia” in recent surveys. The findings of the companies highlight past and potential future growth of interactive media businesses in the United States.

Stamford, CT-based Digital Information Group recently released a report forecasting future growth of the CD-ROM industry. The study concludes that commercial CD-ROM sales will grow 80 percent in 1994 to reach almost $6 billion worldwide. It estimates 1993 sales of CD-ROM machines at $2 million and says this figure will approach $2.7 million in 1994.

Information and reference products will continue to account for most CD-ROM title sales. Hot areas of growth will be in the consumer market, where the study says sales will increase 150 percent this year, compared to 50 percent last year. Despite this growth, competition among publishers for consumers’ attention is getting fierce — Digital Information says more than 1,200 new titles appeared on the market last year.

In December, Veronis, Suhler, a New York-based investment banking company, released a compilation of extensive financial data and analysis on 349 publicly reporting companies in the communications industry from 1988-1992. According to the annual survey, interactive software emerged as the biggest growth sector of the communications industry in 1992. Revenues for the 30 digital consumer entertainment and information publishers surveyed rose 21 percent to $3.4 billion, and operating profits rose 56 percent to $308.9 million.

The review looked at 30 publicly reporting software companies in the areas of consumer data and transactions, consumer reference, education, games and home shopping/infomercials. Videogames, led by Sega and Nintendo, is the largest of these categories with gross annual revenues exceeding $7.7 billion for 1992. Education and consumer reference enjoyed the highest margins of these five categories.

John Suhler, president of Veronis, Suhler said that the growth experienced in this area is due to the increasing number of computers and CD-ROM drives in the home. An estimated 40 to 50 million households have videogames and 20 to 25 million homes have personal computers. The 30 million PCs that were sold in 1992 exceeded the number of cars sold worldwide, according to Suhler. “In addition, the growing population of CD-ROM readers now routinely installed in new PCs, mega-mergers in the cable television and entertainment industries and double and triple-digit growth for online services all point toward significant growth for the interactive digital media segment,” he said in a prepared statement.

Earlier this month, Santa Clara, CA-based Cunningham issued “The Cunningham Interactive Report,” which presents portfolio-style information on the alliances, investments and activities of 30 companies involved with interactive media. The “trendsetters in the converging worlds of entertainment, computers and communications,” as the report refers to the profiled companies, include telco and cable companies, such as Ameritech, AT&T, Bell Atlantic, TCI, Comcast and Cox, as well as content providers, such as News Corp., Capital Cities/ABC, Paramount and Walt Disney Co., and technology component developers, such as Apple Computer, General Magic, Hewlett-Packard, IBM, Microsoft, SGI and 3DO.

While the information provided in the 70-page, $995 report is fairly detailed, especially in the area of alliances, a large binder of blank paper should perhaps be kept beside it in order to enter information on new alliances that are being forged with the wink of an eye.

DIGITAL OCEAN SELLS WIRELESS NETS

The services that are underground shall rise up and fly through the air, while the services that travel through the air shall hide underground. Thus spake Nick Negroponte, guru of MIT’s Media Laboratory, in the early days. And so it is coming to pass.

Negroponte had noticed that television, once exclusively a broadcast service, was increasingly being distributed by cable, while telephones were going cellular. He predicted that the economics of communications would continue to shift; the radio spectrum would become increasingly valuable for mobile users, while point-to-point transmission (which most entertainment is) would benefit from the cleaner signals and higher bandwidths that fiber and coax offered.

The latest manifestation of Negroponte’s theory is the entry of Digital Ocean (Lenexa, KS) to the Macintosh market. Ocean provides wireless AppleTalk networks, based on spread-spectrum technology, for desktop Macs, PowerBooks and Newtons. The transceivers (cutely called Groupers) have an indoor range of 300 to 800 feet, depending on building construction. Operating in the 902–928-MHz band, the transceivers have a raw bandwidth of 2 mbps, which they divide into five channels. This allows different groups of transceivers (“schools” or network zones) to operate in the same vicinity without interference. Network speed is the same as LocalTalk: 230 kbps.

Digital Ocean also provides network management software, called “school administration” just to mix the watery metaphor a bit. The network transmissions are encoded (using each device’s ID number in ROM) for snoop-free operation, but are not what the military would call secure. A promised option is 64-bit DES encryption.

The PowerBook and Newton transceivers run on batteries for true walkabout networking. PowerBook Grouper batteries will last at least as long as the PowerBook’s own batteries, we were told. Each Grouper, whether designed for NuBus, PowerBook, Newton or direct attachment to an Ethernet backbone, is priced at $699.

ELECTRONIC WHITEBOARDS MARK MACWORLD

During the Macworld computer conference held this month in San Francisco, several firms showed whiteboards that relay your writing to a Mac screen. Once it’s on the Mac, it can be saved in a file for later printout or inclusion in a publication. More interestingly, it can be transmitted to other Macs by modem or LAN using Farallon’s Timbuktu Remote software. Thus remote participants could get more out of a briefing or brainstorming session. The cost for a 40-inch-by-50-inch board is typically about $3,000.

There are a couple of ways to capture whiteboard scribbling for the computer’s benefit. Microfield Graphics of Beaverton, OR, uses a pair of lasers, mounted at the corners of the board, to track the position of a specially coded dry marker. Smart Technologies of Calgary, AB, uses a pressure-sensitive surface, similar to the digitizing tablets that have become commonplace in the last couple of years.

In both approaches, it is important to detect which color of marker (or eraser) is being used. The products we saw used a color-coded marker tray with electric eyes in each slot; they assumed that whichever pen was most recently taken from the tray was the pen in use. Two-fisted whiteboard lecturers, or slobs who don’t replace their pens in the right slots, are out of luck.

Another tool for remote collaboration is Meeting Space by World Benders of Nashua, NH. It is text-only conferencing software, more like a chat session on CompuServe than a live videoconference. It uses a metaphor of meeting rooms that you can enter or leave, complete with minutes (session transcripts) that you can read and private notes that you can pass to individual participants.

Meeting Space can be run in real time or as a store-and-forward system. In real time, it is no substitute for face-to-face interaction, but we suspect that lots of meetings don’t really depend on nuances of body language and intonation. Just getting a common set of facts to your audience and responding to questions is sufficient for many business purposes. And in some cases, the opportunity to edit your words before you say them can be a lifesaver.

The price for the software seems rather steep: $1,750 for every five users. But the developer suggests that companies with scattered sites can quickly recoup the price in travel and time savings. Future versions of the product will offer more functions, such as shared text editing, multiuser whiteboards and secret-ballot voting.

MASTERING AUDIO CDS ON THE MAC

Last summer, JVC brought out a recordable CD-ROM system for data archiving and very-short-run disc production. It could write either Apple’s HFS or standard ISO 9660 formats and cost only $4,000. Oddly enough, it could not make audio CD discs, even though CD-ROM coding is based on audio coding techniques. The reason: missing software.

Now JVC has teamed with Digidesign to provide audio mastering functions on the CD recorder. Once you have created the sound files you want (using any of the high-end audio tools now available for the Mac) and stored them on your Mac’s hard disk, Digidesign’s software does the rest. It uses the JVC write-once hardware to create a Red Book-compatible audio disc, which is the standard today for CD audio quality.

The resulting disc works in any CD player. Musicians can send out demo discs instead of demo tapes, and if no one signs them up, they can publish the music themselves. (But don’t fear an avalanche of self-published noise; the JVC machine records in real time, taking an hour to write out 60 minutes of sound.)

The Digidesign software costs $995, and blank discs cost about $25 apiece. Wannabe recording artists will also need a Mac (either one of Apple’s AV models or an older model with a 16-bit stereo sound card) and a gigabyte disk to prepare the 600 MB of sound that will fit on a CD. A complete “desktop music publishing” system adds up to about $10,000 — steep to an amateur chamber group but cheap compared to the cost of the speakers, amps and synthesizers that a rock band needs.