Welcome to Las Vegas and NAB'97! Every year it seems like the technology of our business changes so much, so fast, we wonder how much farther it can go. Well, this past week, the FCC made it official. We are in the era of digital broadcasting. That certainly portends more change, and given the schedule outlined by the FCC, this change will happen faster than anything we've seen before in consumer media. Depending on which demographic group you call your own, the cartoon thought bubble over your head might read either, "Wow! Too much, too fast!" Or, "Like way cool dude!"

Walking the exhibit floors this week is going to be mind boggling. There is so much to understand, so much to choose from. Well, it's not all that much easier as a consumer. The well-equipped household will boast of TVs, radios, VCRs, PCs, multi-line telephones, fax machines, CD-ROMs, DVDs, cable, DSS, cellular telephones, Internet, America On Line, WebTV - and maybe a Batman utility belt to carry around all the remote controls, mouses, and keyboards. The consumer media marketplace, according to the Consumer Electronic Manufacturers Association will reach $86.4 billion in sales by the year 2000.

When it comes to understanding what's going on in consumer media, I like to think of three different ages in consumer media. These ages are similar in some ways and different in others. These ages are the Newspaper Age, Broadcast Age and the age we have just entered, the Internet Age. In the rest of my time with you this morning, I'd like to share some ideas about the characteristics of these three ages of consumer media and what it means for broadcasters.

Modern mass media began about 150 years ago with the launch of the so-called "Penny Press." This was the beginning of the Newspaper Age. Using Industrial Revolution technologies and the mass production economies of the factory, huge numbers of newspapers could be printed and distributed inexpensively. Costs were kept low enough so that the final price to the reader was one penny, hence the name, "Penny Press." For the first time in history, the average person on the street had access to a regular source of professionally collected, written, edited and distributed news, information and entertainment of the day. This was tremendously empowering for consumers and it led to the development of new markets.

The Newspaper Age is over 150 years old, and has certainly gone through much change. However, newspapers are still very much with us here today. The Broadcast Age began about 75 years ago when the first commercial radio station signed on in Pittsburgh, Pennsylvania. The key enabling technology of the Broadcast Age was the ability to move the mass production printing presses out of the newspaper factories and into consumer homes. In a sense, what radio and television broadcasting does is to print electronic copies of programs in consumer homes in real time. Instead of printing and distributing only one newspaper a day, in the Broadcast Age, you can turn on your radio or television and experience real-time, constantly updated content. It's like a living newspaper.

This created a whole new experience for the audience. The audience began relating to people on the radio and television as trusted friends. For years, research has shown that television news is the most credible source of news. People rely on radio as a personal companion. With the ability to essentially have a round-the-clock, constantly updated newspaper, Broadcast Age companies scrambled to come up with ides to take advantage of this new program platform. Ideas were borrowed from the newspaper industry, from vaudeville, from concert halls, and indeed, new forms of content and audience experiences were developed.

Just as the newspaper industry developed new conventions and new forms of content, so did the broadcast industry. As I mentioned earlier, the newspaper industry gave us conventions like organizing the news into sections, front page, sports, style, etc. We still use that convention in the Broadcast Age. Consumers have entirely different relationships with their local TV news anchors and radio drive time personalities than they do with newspaper reporters. It's a more personalized relationship.

In fact, the Broadcast Age plays a major role in the average person's life. Altogether, advertisers, consumers and institutions will spend $353 billion on newspapers, broadcasting, cable, home video, magazines, books, video games and online services. The average U.S. household can receive about 45 television channels and nearly as many radio stations. The average person will spend 40% of their time listening to radio and watching television in a typical week. That's 3,500 hours per years! The U.S. has the richest, most diverse and prolific consumer media environment of any country on the planet.

However, that doesn't appear to be enough.

Enter the Internet Age. In the Broadcast Age, we moved the printing press from the newspaper factory into the home. In the Internet Age, we also move the editorial office into the home. We move the graphics, layout and composition rooms into the home. We move the reporters' bullpen into the home. We move the mailroom into the home. The Internet Age consumer becomes a fully empowered participant in the information age. We are leaving behind Industrial Age economics.

The Internet Age is not based on the Industrial Revolution economics of mass production. It is not based on the ability to move the printing press to the point of distribution as in broadcasting. The Internet age is based on digital commerce, which has entirely different characteristics. The economic premise of the Newspaper and Broadcast Ages is that you create one high cost copy of content and then amortize that investment by distributing a large number of increasingly less expensive copies. To the consumer, each copy of the original is the same.

The economic premise of the Internet Age is that each customer creates his or her own low cost original copy of content. No two consumers are going to have the same experience. We've gone from relying on mass production technology in the Newspaper Age, to combining electronic mass production and distribution in the Broadcast Age, to creating essentially individual digital copies on the fly in the Internet Age. The consumer content experience in the Internet age creates value for consumers and advertisers.

That is what is unique about the Internet age relative to the Newspaper and Broadcast Ages. We can't afford to print and distributed individually tailored newspapers or broadcast programs. However, in the Internet Age, it is perfectly economical to create a large repository of digital content, a multimedia database and let consumer access this database by creating personalized views of its contents. Consumers can even become content producers themselves. That's what America On Line is all about. That's what the World Wide Web is all about. That's what webcasting or real-time multimedia streaming is all about.

Consumers can either request something specific from a database using a client-server model, or they can select certain categories of things to be sent to them on a specified basis, using the "push-model." The basic business model is changing from the creation of a high cost first copy, which then needs to be mass produced and distributed to achieve economies of scale - to creating a high cost media repository or database for which economical personalized views can be created. In the future, businesses will not just be producing and broadcasting programs, but creating media assets that can be accessed and served in customized packages specified by the consumer.

The Broadcast Age is all about distributing single programs in real-time. The Internet Age is all about connecting consumers to program elements in their own time. The basic technology of the Internet Age is the unification of the production, distribution and consumption platforms. The connectivity and interoperability is achieved through digital processing and standard setting. The entry point in TCP/IP, the language of the Internet. We are now into HTML and ATV television formats. Soon we will have digital radio as well. These possibilities will only grow in scope, magnitude, and consequence.

As broadcasters become digital, our companies automatically will become Internet Age companies. We will have two basic business lines - the traditional Broadcast Age business of providing programs in real time. However, using the same kinds of content, we can mange our media assets and distribution platforms to also diversify very successfully into Internet Age economics. We can data broadcasting, multiple program feeds, broadcast multiple data types, offer software services or provide multiple camera angles, program statistics and other customized views of our media assets. We will also take advantage of the technologies to create new services and revenue opportunities. What will happen to newspapers and traditional broadcasting in the Internet Age? My view is that both will survive. Newspapers serve as a key niche and so does broadcasting. There will always be an audience demand for broadcast programs. Audiences organize much of their lives right now around real-time broadcasting. They love it and spend thousands of hours of their lives each year proving it. With digital broadcasting we can enrich and expand on this experience, and develop new businesses.

With each new consumer media age, there are both new artifacts and new terms. I'll refer to this consumer media technology as the "artifacts" of each age. Like archeologists studying artifacts of ancient civilizations to understand their cultures, consumer media artifacts help us learn more about the three ages of consumer media.

The consumer media artifacts of the early Newspaper Age were basically reading glasses and candles. The consumer media technology of the Broadcast Age expanded upon what existed in the Newspaper Age. Once we moved into the Broadcast Age, we added radio sets, television receivers, and then cable, remote controls, component stereo systems, portable radios and TV's, home theater systems and eventually, digital satellite systems. All these artifacts of consumer media take advantage of the Broadcast Age's basic characteristic of using the radio receiver and the television set as in-home printing press for distributing real-time content. In the Internet Age, the artifacts include things like personal computers, sound boards, video boards, WebTV, keyboards, mouses, disk drives, CD-ROMs, DVDs, America OnLine, gigabyte hard drives, RAM, and even smart homes that run on computers.

Broadcasters can rest assured that the business of creating and distributing programs is grounded in a continuing economic reality. This particular consumer media artifacts won't change this. Will it matter if "Drew Carey" gets viewed on a Compaq personal computer with a Microsoft operating system instead of a Toshiba widescreen television? Probably not. Will it matter if "60 Minutes" is viewed on digital broadcast channel 35c, when channel 35 is operating a multiple program feed mode instead of analog channel 7? Probably not. Will it matter if consumers don't watch the "World News Tonight" as originally broadcast at 7 p.m. but instead put together their own newscast from ABC News daily archives and watch it whenever they want? Probably not. Audiences will still gather around content and advertisers will still pay for access to those audiences.

What can we expect from consumer media? Where will the successes and failures be? Of course, the answers aren't clear. However, based on 150 years of consumer media, there are some clear guidelines of what it takes to be successful.

As we look forward to predict what's next in consumer media, we might do well to keep these guidelines in mind. Consumer media must be:

Economical

Structured

Easy

Compelling

Synergistic

Let me elaborate briefly on these points.

1. Economical

People don't mind spending money if they think they're getting their money's worth. Consumer media must deliver a perceived value that equals or exceeds the price, or the outcome is failure.

Consumer media must be economical. This means that a sensible business model must be developed. As we weigh the benefits of new technologies, we must remember that the flip-side is their costs. Exciting new technologies have to perform in the marketplace. Consumer media operate on basically three revenue models: Advertisers Pay, Consumers Pay, and Advertisers and Consumers pay.

In 1997, the business model winning the greatest consumer use is the "Advertisers Pay" model. The advertising dollars from consumer media in 1997 summed to $170 billion. The emerging consumer medium which filled the headlines all last year, the Internet, rang in dollars of just $267 million or 0.16% of ad spend. People spend thousands of hours each year with their favorite radio and television stations, amounting to 60% of their total time with all consumer media. Coming in second is the "Advertisers and Consumers Pay" model, exemplified by cable, newspapers, magazines, and to some extent online services. This comes to about 25% of their time spent with consumer media. The "Consumers Pay" media includes things like books, video games, movies, home video and recorded music. That occupies about 15% of time spent with all consumer media for the average person in a year.

The trend over time is away from the Advertiser Pays to other revenue models. In 1990, 44% of the spending on consumer media was from Advertisers. By the year 2000, according to Veronis, Suhler & Associates, this will drop to 41%. In this same time frame, overall spending on consumer media (advertisers, end users and institutional) is expected to jump from $193 billion in 1990 to $353 billion in 2000, or up 83%. This great growth in consumer media spending will therefore come largely from the Consumer Pays model and the consumer share of the Advertisers and Consumers Pay model.

To the broadcasters in this audience, I offer this thought. Consumers are now spending 60% of their time with something they get for free - radio and television broadcasting. That's a pretty hard competitive position to attack. Growth in consumer media revenues will be driven by consumers, to the tune of $150 billion over the next several years. Consumers will spend for more personalized content experiences. Internet Age broadcasters have all the necessary qualifications to be an important part of this emerging marketplace.

2. Structured

People organize their living spaces so they can walk in the dark, if they have to, without crashing into things. As the adage goes - "a place for everything and everything in its place." That's the way people like their media too. People like the familiarity of conventions. The evening news is organized into basically the same kinds of sections pioneered by the Penny Press. It works.

Consumer media must provide a kind of psychological refuge for people, if they are to be successful. It is important to understand and meet consumer expectations. Market research teaches us that consumer use media for different but predictable reasons. They want to be informed. They want to be entertained. They don't want to be bored or lonely. They also don't want to have to dress in sweat suits and track shoes to get their daily media exercise by running an obstacle course of browsers, menus, and search engines.

Consumers expect their media to be easy to use, easy to understand and easy to enjoy. Many people have trouble with Boolean operators, indexes, and other navigational interfaces. The average U.S. home now has 45 channels of television and probably as many radio stations piped into it. That's quite formidable. People are finding it ever more difficult to orient themselves in this media space. The average person uses between 8-9 television channels and 2-3 radio stations per week. Consider that everybody with access to the Internet has over 16 million host sites to visit, with potentially hundreds of millions of multimedia objects! This is really testing the limits of consumers' abilities to comprehend and act on all the possibilities.

Whatever we can do to help connect people to the media content and experiences they value, the more likely we will achieve success. That is a great challenge to be solved in the next generation of consumer media. People need to know what to expect and where to find things that are interesting to them. It is no accident that online services like the Microsoft Network and America Online have reverted back to organizing their content using the metaphor of television channels. This is a familiar and powerful way for consumers to understand and act on media content and experiences. The use of a channel metaphor, i.e., the News Channels, the Sports Channel, the Movie Channel, is by now a convention they accept. Consumers recognize and appreciate a structured environment. Packaging adds value to content.

3. Easy

The definition of "easy" in consumer media is something people already know how to do, and preferably already are doing! Consumer media that require new skills or behavior change are fighting an uphill battle.

While the Penny Press of the 1800s was a marvel of technology and entrepreneurial effort, things never would have gone anywhere if people did not know how to read. One of my favorite barometers of technology literacy is the percentage of VCRs flashing 12:00. This is the percentage of people who don't know how or don't want to be bothered with the basic step of programming their VCRs. Of course, if their VCR doesn't know what time it is, they probably aren't using them for time-shift recording. When it comes to consumer media, people don't like to plan ahead, they don't like multi-step procedures and they don't like learning new skills.

The basic skill in reading a newspaper, other than literacy, is the ability to turn a page. For broadcasting, consumer must know how to operate the on/off switch and station selector. For home video, we add another layer of complexity with features like fast-forward, pause, and record. Now, we're into the online world and expect consumers to deal with software installs and configuration, login procedures and menu structures and search engines before they can even get started.

4. Compelling

Consumer media must offer something compelling to people. There are too many ways for people to spend their time and money these days. The basic premise of consumer media must offer a bargain people just can't pass up. Again, the broadcast model is, "we'll give you well produced shows which are entertaining and informative for free if you'll sit through the commercials." That is a proven killer application.

Betting the farm on a "build it, and they will come" business model may have worked for Kevin Costner, in "Field of Dreams," but this may not transfer well from baseball in Iowa to consumer media on Main Street. Telephone companies and cable operators bet that video on demand would be the next great consumer medium. They started to build it, but noticed a distinct lack of crowds gathering at the gates in their proof of technology and early marketing trials. Why? What they were offering ended up being not all that worthwhile to customers. The technology to serve video on demand is here. However, the packaging of price and content to be delivered are major limiting factors in determining how worthwhile that service is to consumers. Pay-per-view movies may offer some convenience relative to going to the video store, and given the high percentage of late returns may even be somewhat comparable in cost. However, people like to shop. They enjoy browsing over hundreds of titles at the video store.

5. Synergistic

Consumers like to get something for nothing. They like to add value to things they already own. Things that work together well add value synergistically. Consumer technologies tend to be introduced piecemeal and later be incorporated into systems or multifunctional units. Consumers like that. They like TV/VCR combinations. They like telephone/answering machines. They like multimedia PCs. The more complementary the consumer media experience, the greater the value to be leveraged. Television viewing and telephone use are different consumer experiences, for example. People have stayed away from video phones in droves. We might as well to make refrigerator/toaster combinations.

VCRs took off so well, going from nowhere in 1980 to 86% of U.S. television homes in 1996, because they added value to the television set and the viewing experience. Video homes use their VCRs about 5 hours per week, mostly for playing prerecorded tapes. The online world grew from an embedded base of PCs and later helped drive PC sales. The telephone modem is to the PC what the VCR is to the television receiver. It adds value to an existing asset.

The basic building blocks of successful consumer media have remained largely unchanged since the beginning days. It's a simple formula in concept, yet as imperative as it is difficult to achieve in the marketplace. Any new ventures into the consumer media space during the Internet Age should be weighed in view of these necessary qualities to assess success prospects:

Economical

Structured

Easy

Compelling

Synergistic

That's one view of what features consumer media must have, based on 150-plus years of experience. What will change the Internet Age? The Newspaper Model of consumer media is based on low volume of use, large amount of content, ability to store and browse, and mixed revenues (consumers and advertisers) pay. The broadcast model is based on high volumes of use, select content, limited ability to store, no real browsing ability, and advertiser pays. The Internet Model joins these models and then adds it own compelling features. What kinds of features am I talking about?

1. Push vs. Pull

The Newspaper and Broadcast ages of consumer media are premised on the idea of creating and bundling content packages, daily issues or programs, and sending these packages to consumers as intact services. In a sense, newspaper and broadcast companies are filling up boxes and pushing them out the shipping door for delivery to consumers. Consumers have the choice of accepting or nor accepting delivery. If they do accept delivery they then have the choice of opening or nor opening the box. If they open it, newspapers permit browsing, broadcasting requires linear participation in real-time. Neither the Newspaper nor Broadcast models let the consumer individualize or segment their consumer media environments. That's because newspaper and broadcasters rely on mass production economies in the creation and distribution of content.

In the Internet Age, the connection between content and consumer can be highly personalized and operate in real-time or non real-time. Consumers can have a standing order with content providers to send or push only that content that matches their predefined profile. Or consumers can benefit from the interactivity of the Internet and send out their own content orders to be gathered and pulled from various databases and sent back to them on whatever schedule they choose.

This permits the creation of personal broadcast networks. By using intelligent agents, consumers can customize and personalize their own media space. Utilizing intelligence in the multimedia data centers, on-the-fly content packages can be developed based on structured consumer queries. Relational multimedia databases, distributed intelligence, platform connectivity and interoperability will be the technology engines of the Internet Age.

Consumers will value this service and pay for it. This is especially true of our children, as they make their presence felt in the marketplace. And it's also likely to be true for those of you who go around the exhibits saying, "way cool, dude." Advertisers also will value the ability to reach highly select target segments of consumers. That's a good thing, because all this stuff is expensive and we need all the money in the system we can get!

2. E-commerce

Consumer media will support more than the ability to inform and entertain audiences. The same technology platform can be applied to other human activities, like shopping. This will add a new source of revenues to companies involved in the Internet Age. The new economic model of consumer media will include revenues from advertising, user payments and transactions. The same infrastructure used for consumer media can support electronic commerce. This provides access to whole new markets with new revenue streams that let us further amortize infrastructure investments.

The Internet is no longer the providence of geeks. Of the 220 Million people over the age of 16 in the US and Canada, 23% are using the Internet and 17% are on the WWW. About three-quarters (73%) of WWW users search for information about products and services. An estimated 5.6 million people or 15% have purchased online! Admittedly, there is a distance to grow. Internet transactions in 1996 totaled only $550 million, compared to catalog sales of $60 billion. But, this growth will come.

3. Direct consumer interface vs. embedded interface

Another source of economic opportunity in the Internet Age is that not all of the functionality needs to be obvious to consumers. Some of the functionality can be totally invisible to consumers. Intelligence can be embedded into consumer devices rather than confronting the user directly with an interface. This includes ideas like smart homes, netphones connected to the Internet telephony services and radios and TVs that serve Internet content. Consumers needn't be aware that they are connecting to the Internet to get services, they can focus on the service itself.

We will enter an age of consumer devices that have IP addresses and connectable to the net either on a full-time or batch basis. How many times have you left on a vacation only to wonder if you left the coffee machine on? If your coffeepot has an IP address, you can use your car phone to issue the command, "turn yourself off." That seems like a neat feature on the coffee machine and people needn't know or care about the technology infrastructure supporting this simple service.

4. Consumer as producer

Another source of the technology inherent to the Internet Age is that the boundary between producer and consumer will blur. Consumers can become producers. News footage of disasters is increasingly coming from amateur home video cameras. There's no reason why this same content can't be posted on the Internet server and either served on demand (i.e., "pulled") or broadcast (i.e., "pushed") to interested consumers. This kind of content doesn't have to become part of the mass production machines of the Newspaper or Broadcast ages - it will become part of an individual production machine. The cost of creating content will be borne by the consumer, not by the producer. The consumer media infrastructure will provide value-added access and processing to that content.

In summary, what's next in consumer media is the Internet Age. This age will create new economic and creative opportunities for companies already active in the Newspaper and Broadcast ages. It will engender new types of consumers and consumption patterns. It will enable the development of new kinds of content and services. It will benefit not only from the economies of Advertiser and Consumer pays, but also from transactional economies. The Internet Age will present itself both face-to-face to consumers in the form of various browsers and interfaces, but also embed itself invisibly into a wide range of consumer devices. The Internet Age will encourage change in the way audiences behave, stimulate new economics and allow us to restructure our media environments for greater personal empowerment.

Consumers are going to like the Internet Age, and I think there's plenty of opportunity for all of us in this room to benefit from this and run some pretty successful businesses.