Telephone Systems Pick Up on Electronic Information Where Media Firms Left Off : Don’t Hang Up on Videotex
Remember “videotex?” It wasn’t long ago that media followers were predicting it would make newspapers extinct, that readers would prefer to find out what was happening in the world by turning on their home computers instead of picking up inky newsprint.
Hedging their bets, newspaper publishers, led by Times Mirror Co. and Knight-Ridder Newspapers, tried to corner the new electronic marketplace. But they couldn’t generate enough interest or any profits, and last year, the two pulled the plug on their videotex services.
Now comes phase two.
The new generation of videotex services may be controlled by telephone companies who hope to thrive where newspaper publishers failed, basing their system on advertiser-backed “electronic yellow pages” instead of subscriber-supported electronic newspapers.
System Sold
The transition was marked in California last month by the sale of Chronicle Videotex Inc., which was owned by Chronicle Publishing--the parent company of the San Francisco Chronicle--to a unit of Thousand Oaks-based General Telephone of California.
Exact terms of the deal were not disclosed, but a General Telephone spokeswoman said the purchase price was “under $10 million.”
The Chronicle unit, renamed GTEL Electronic Media Services, has 250 Teleguide terminals in the Bay Area, offering staples such as AP news as well as guides to sports events and movies.
General Telephone plans an additional 170 Teleguide terminals for Los Angeles, to be installed by year-end, and an additional 130 units here in 1988.
The computer terminals, placed in public places such as airports and office complexes, are free to users. As in the yellow pages, retailers buy display advertising. The difference is that a computer can offer information as detailed as complete restaurant menus and hotel room information.
User Can Choose
On approaching a Teleguide terminal, a user is offered a “menu” with such numbered selections as arts and entertainment, restaurants, sports, news and horoscopes.
It was thought at first that videotex would be used primarily in the home, allowing people to electronically read news reports, pay bills, do their banking or place orders with stores.
But consumers have been reluctant to pay for the information services and the equipment needed to connect to such services. In addition, many public and free “electronic kiosk” systems have also gone out of business.
Despite this, other telephone companies are moving into the videotex business, including Southern New England Telephone and Bell South.
Some videotex services, aimed specifically at home computer users that offer news without flashy graphics, have prospered. The leader is CompuServe, based in Columbus, Ohio, with a subscriber base of more than 250,000. CompuServe offers a mix of news, communications, shopping and special services for personal computer owners.
With the entry of the telephone companies, many in the videotex business are once again enthusiastic.
“It’s the beginning of a big, important trend,” said Robert Smith Jr., a spokesman for the Videotex Industry Assn. in Rosslyn, Va. He said phone companies would succeed by following the formula of television, depending exclusively on advertising revenues instead of partially offsetting costs by charging subscription fees.
The media companies were once similarly optimistic. But according to analysts, Times Mirror, publisher of the Los Angeles Times, lost $15 million before scrapping its Gateway service last February after a year and a half of commercial operation.
Two months later, Miami-based Knight-Ridder, which publishes the Miami Herald and the Philadelphia Inquirer among other newspapers, ended its Viewtron venture, having lost $50 million in only 2 1/2 years.
“I don’t think the phone companies can make much of a go of it,” said Bruce Thorp, an analyst for Washington D.C.-based John Morton & Co., which follows newspapers.
Aim Is Integration
However, General Telephone’s idea is to integrate Teleguide with services--such as banking--with which the company already has experience. General Telephone hopes to run interactive terminals, which would not only provide information but also disburse cash much like automated teller machines, and sell and dispense tickets for concerts, plays and sporting events.
“Think of videotex as an electronic highway,” said MacArthur Boykins, 41, director of GTEL Information Businesses in Thousand Oaks, which oversees GTEL Electronic Media Services. The idea is to collect the tolls, not own every truck and its contents, he said.
For example, Boykins also heads GTEL Electronic Funds Transfer, which runs a network of 210 multibank ATMs in Safeway grocery stores, predominantly in Northern California. General Telephone receives a fee of 75 cents for each transaction, paid by banks.
“The next step is to process the transactions of business, whether by providing the means for a room reservation or selling a theater ticket,” Boykins said.
No Profit Yet
Nevertheless, the money isn’t pouring in just yet. Teleguide never turned a profit for Chronicle Publishing in the four years it operated the terminals in the Bay Area, and Boykins doesn’t anticipate turning a profit with it before next year at the earliest.
One of the pluses a phone company like GTEL has, Boykins explained, is that it already has a Yellow Pages operations and so can have its sales staff try and sell Teleguide to advertisers without any substanial marketing costs. In addition, advertising on Teleguide won’t be prohibitively expensive, Boykins said. For $400 to $1,200 a year local businesses can advertise and also update their Teleguide ads to include new information, on sales, for example.
Eventually, Boykins hopes, videotex will catch on in the United States as it already has in France. There, more than 2 million terminals, called Minitels, have been distributed free to telephone subscribers.
Back home, it’s a different story. “Advertisers still have more convenient, more accessible mediums in newspapers, magazines and television,” analyst Thorp said. “The problem remains of getting the public interested in videotex.”
