Attorney on Microsoft’s Back Is Enjoying the Ride

It’s not often that the U.S. government can paint itself as the underdog in a David-and-Goliath-style battle.

But Joel Klein, assistant attorney general for the Justice Department’s antitrust division, is clearly enjoying his uphill battle to prove that Microsoft violated a 1995 consent decree by bundling its Internet Explorer software with Windows 95.

“I love this,” an animated Klein said Friday at a meeting of the business group Town Hall Los Angeles. “Bill Gates and Microsoft have done a great job for America. We just think they’re wrong on this issue.”

One day after the Justice Department all but accused Microsoft of lying when it said it had planned all along to integrate Explorer into Windows 95, Klein reiterated the core reason the government believes that the Redmond, Wash.-based behemoth is stifling competition.

“Microsoft is taking its market power in desktop operating systems and using this power to gain an advantage in the browser market,” he said.

Perhaps because his audience included so many business leaders, Klein emphasized that “we are not trying to control their market. The government doesn’t want to decide what should go on a computer. We want the market to determine that, but we don’t want it to be affected by market power.”

Klein deflected questions about the antitrust implications of Microsoft’s dalliances in the cable industry, saying the matter “might be relevant” to the Justice Department’s ongoing investigation of Microsoft.

Klein--who says he makes less money all year than Gates makes each second--also discussed some antitrust issues involved in deregulating the local telephone industry.

Although the transition from a regulated natural monopoly to a competitive market has been rocky--particularly for the companies trying to enter the market for the first time--he said consumers will reap the benefits in about five years, with lower prices and more convenient services.

“If it was easy to deregulate local phone companies, I would have done this a long time ago,” he said. “As I listen to all of the carping and all the political finger-pointing, it convinces me that there is a real need for antitrust enforcement.”

Hollydex: While most of the high-tech industry gathered in Las Vegas for the annual Comdex extravaganza, much of Hollywood huddled in downtown Los Angeles for a three-day conference about the future of online computer games, one of the more promising joint ventures between the technology and entertainment industries.

The conference, sponsored by New York-based new-media research firm Jupiter Communications, provided a snapshot of the overlap between Hollywood and Silicon Valley. Television broadcasters and cable channels are building Web sites with advanced software features, while hardware firms are building user-friendly appliances to integrate the Internet into TV shows.

Marvin Minsky, a professor at MIT’s Media Lab and senior vice president at Walt Disney Imagineering, predicted that researchers developing sophisticated multi-player and virtual reality games will be the first to make some key breakthroughs in artificial intelligence, a field he pioneered.

Unlike scientists, “people in entertainment and games don’t have an obsession that everything has to be done according to a universal theory of everything,” Minsky said in a keynote address.

Working without such restraints, entertainers are in a better position to do the sort of creative thinking that will inevitably lead to a breakthrough.

The conference kicked off with a daylong status review of the much-heralded convergence of two of California’s most critical industries. Most of the participants proudly described their achievements to date and spoke glowingly of their visions for the future.

The best example was from NBC Digital Productions, which has created a Web site based on the popular detective show “Homicide: Life on the Street.” The site follows detectives who share a bureau with the TV characters but work on the night shift, and one of them will actually make an appearance on the show in January, said Shawn Hardin, vice president and executive producer.

As bandwidth expands and technology improves, the Web will become compelling even for entertainers, said Lee Masters, president and chief executive of E! Entertainment Television.

In fact, much of the niche programming that was once envisioned for the 500-cable-channel world will end up instead on the Internet, where costs of production and distribution are far more reasonable, he said.

Jupiter’s group director for consumer content, Mark Mooradian, chastised the movie studios for being slow to develop content that takes maximum advantage of Web technologies.

Most participants disputed that notion, but Michael Vollman of DreamWorks was surprisingly frank when he said that “unless it’s a sci-fi movie, we won’t spend much money in this area.” The Web site for DreamWorks’ premiere feature film, “The Peacemaker,” was sponsored and paid for by PepsiCo, he said.

Mooradian also raised the question of whether an entertainment company’s TV shows and Web sites work at cross-purposes.

“I’m often asked if our Web site cannibalizes our TV product,” said Scott Webb, senior vice president of Nickelodeon Mediaworks, which has created one Web-only series and plans to do more. “The answer is, ‘Who cares?’ ” The reason, Webb said, is that Nickelodeon’s goal isn’t to get kids to watch more TV, but to “get them to interact more with our brand.”

At William Morris Agency, Web sites based on TV shows are developed and treated in much the same way as TV spinoffs, said Lewis Henderson, head of new media for the agency.

“We see interactive media as an extension of our core business, but we’re not building any new annexes onto our building yet,” he said.

Spinning a Larger Web: USWeb, the Santa Clara, Calif., company that aims to build a national network of Web site designers, has shifted from its franchising strategy and started buying its partner companies.

In Los Angeles, USWeb has purchased former franchisees USWeb LA Metro and USWeb Hollywood, which merged in August with another Web design firm called Dream Media. USWeb SystemLogic of Santa Monica remains a franchisee.

Earlier this month, USWeb added another local Web shop to its portfolio by acquiring W3-design of Culver City for nearly $3.5 million, according to a Securities and Exchange Commission filing. Altogether, USWeb has bought 25 companies and has another 19 franchisees.

Officials from USWeb and W3 said they could not comment.

USWeb expects to raise about $50 million in a public offering before Christmas.