NEW-MEDIA MELTDOWN AT NEW CENTURYHow a big online newspaper venture bit the dust
It was created with a name most of its owners disliked, with a logo one partner ''hated,'' in a city everybody rejected, with a mission nobody understood. So it was fitting that when New Century Network was kicked off last April by nine media giants teaming up to conquer electronic competition, even the launch party bombed.
In a ballroom at the Newspaper Association of America convention in Chicago, a thousand bottles of champagne emblazoned with ''New Century Network: The Collective Intelligence of America's Newspapers'' awaited the hordes expected to come to toast the watershed new-media joint venture. When fewer than 100 people showed up, Chief Executive Lee de Boer made an abbreviated speech before retreating. ''They built a business and nobody came,'' says David Morgan, president of the online ad agency Real Media Inc.
The reception was the first public humiliation for New Century Network, but only one in a series of blunders that culminated in the company's abrupt shutdown on Mar. 10. Created in 1995 to unite newspapers against Microsoft Corp. and other competitors girding to woo electronically advertisers and readers, New Century Network came to embody everything that could go wrong when old-line newspapers converge with new media. ''Newspapers are reacting in very traditional ways to a very untraditional marketplace,'' says Peter M. Winter, president of Cox Interactive Media, who was New Century Network's original chief executive. ''And they're being superceded fast.''
Started with $1 million each from Knight-Ridder, Tribune, Times Mirror, Advance Publications, Cox Enterprises, Gannett, Hearst, Washington Post, and New York Times, New Century seemed an entrepreneurial dream. The Internet had just opened to the world, creating vast new competition for readers--and for the advertisers that pump $40 billion into newspapers. But it also gave newspapers a chance to capture national accounts that favored the one-stop-shopping convenience of TV and national magazines.
CUMBERSOME. And New Century had something even William H. Gates III coveted: the content of newspapers throughout the country. Affiliates could use Mardi Gras stories from the New Orleans Times Picayune or Hollywood news from the Los Angeles Times. Separate subject-oriented Web sites would pool stories on everything from health care to sports. And advertisers could run banners on one site or 100 with the push of a button.
But the media companies had wildly diverging philosophies about how newspapers should make the electronic leap and what role the new venture should play. ''You had private companies and public companies and companies that were risk-averse and those that were risk-tolerant,'' says Harry Chandler, head of new media for Los Angeles Times. ''You had big-city papers and small chains. We shared a need. But it was frustrating trying to come together.''
While the wired world moved at warp speed, New Century spent 18 months hiring a permanent ceo and two years creating an electronic doorway to 140 newspapers. By the time it became wired last June, not only was Microsoft ahead with its Sidewalk.com online city guides, but New Century's own partners also had launched competing ventures. ''This thing is really racing,'' says Al Sikes, the former Federal Communications Commissioner who is president of Hearst New Media. ''Organizations of a number of co-equals can't turn on a dime.''
Like nine parents with a new baby, they couldn't even choose a name. Some wanted news. Others wanted classifieds. Tribune Co. was so exasperated, it joined America Online Inc. in a classified service, becoming a New Century pariah.
The most divisive issue was a proposal by Winter to bring in as a partner Kleiner Perkins Caufield & Byers, a San Francisco venture capitalist, that could also take the venture public. The vote was split between those companies dominated by newspapers and those more multimedia-oriented. Cox, Tribune, and Hearst favored the idea. Gannett was neutral. Knight-Ridder, Washington Post, New York Times, and Times Mirror argued that New Century should push all its profits out to affiliates. The debate dragged on for months, ending on a sweltering summer day in 1996 in a hotel room a half-mile from Knight-Ridder's Miami Herald. The proposal was defeated 5 to 4. ''The fallout from that plagued New Century going forward,'' says Bob Ingle, president of Knight-Ridder New Media.
In June, New Century hired de Boer, 44, a former Home Box Office executive who had been running his own media consulting firm. He pulled together top-rate executives and veteran journalists. But, by all accounts, he was a poor communicator. When board members flew to New York, where they wearily located New Century for de Boer's convenience, they got no updates, no materials. ''We turned the business over to him to concentrate on ours,'' recalls Ingle. ''We should have given him more guidance.''
COLD BUTTON. But they were busy doing other things. Knight-Ridder was creating Real Cities to link 32 newspaper Web sites and run classifieds for jobs, cars, and real estate. Tribune, Times Mirror, and Washington Post were building an online advertising network called Classified Ventures. Tribune also poured $20 million into AOL's Digital City online guides. Cox was developing AutoConnect classified service and is now in discussions with Microsoft to link with Sidewalk.com, say industry sources. Winter says simply: ''We're talking to a lot of people.''
The board was paying little attention when de Boer hatched his first major plan: NewsWorks. Run by former Sports Illustrated Managing Editor John Papanek, it posted stories daily and linked to 140 sites. But small papers said they were neglected, and big ones feared it would steal eyeballs. ''We didn't need it, and it was competitive,'' says the Los Angeles Times' Chandler. So many papers buried the NewsWorks button on their home pages, leaving the site with little traffic and few advertisers. Last year, advertisers spent $500 million on the Internet--only $1 million of it at New Century.
The partners ultimately invested more than $25 million in the virtual venture. But late last year, New York Times refused to pay another penny. Papanek left to launch ESPN Magazine and de Boer began a fruitless search for a high-tech partner. In February, they shut down NewsWorks and laid off half of its 70 employees. De Boer asked for funding to reshape New Century into an advertising shop. The board decided instead to pull the plug, coming to a remarkably quick agreement--for the first and final time.
By I. Jeanne Dugan in New York
Updated Mar. 12, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.