Burn Rate

by Michael Wolff

  A rising star at TW, Viebranz, in his late forties, with blond-gray hair and fine suits and carefully contrasting shirts, had come from more than a decade at HBO and then a stint running Time Life Books in Europe. One of the surprising things to me about my interlude in the business world was how few people appeared true to type. In general, I could find little apparent reason why a given person was doing what he was doing. Matching success and failure with education or looks or temperament was a toss-up. Aristocracy, meritocracy, old boys—such order, at least in the business circles in which I’d been moving, seemed to have been thrown to the wind. But Viebranz fit perfectly. He was male, Anglo-Saxon, and precise and athletic in appearance; he had both clear leadership qualities and a short attention span. He had a whip of interest that would strike quick and efficiently and then be gone. He was, in style, an inquisitor (different from being inquisitive) in pursuit of the weakness in the argument, presentation, or thought: “Why?” “Is that right? I don’t remember it that way.” “Can you present that again?”

  The contrast between Viebranz and Judson, his lieutenant, seemed extreme, at first. Viebranz was seamless whereas Judson was ragged with anxieties and details and options and countervailing forces and a million considerations—and, invariably, a suit that was too big for him. But after a while this seemed classic, too. The general officer remained above the fray, a beacon of objectivity, while the field officer mastered the logistics of the battle (and in the end was the only guy who knew what was going on). Judson, actually, was both field officer and warrant officer, always running off to secure supplies.

  While Viebranz was the formal business head and Judson the designated detail man, it was clearly Isaacson’s show.

  It was amazing how unprepossessing Walter was. I tended to forget this between encounters, because people talked about him with such awe. I knew more than a few women from his class at Harvard who, once on, couldn’t get off the subject of Walter; they carried wounds from his lack of interest. Up close, though, the fair-haired college boy was now short and stout in a worn-too-many-times suit, his blond hair faded and limp, an odd remnant appearing, even, not necessarily to be his own.

  But when he sat down at the piano . . .

  By now I’ve been in a thousand meetings that have had as their agenda what to do with the Internet—what it’s best suited for, how consumers will be willing to use it, what functions are needed to enhance it, and how in the world you make money from it. Each of these questions is helped by a synthesis of past, present, and future trends in media, technology, commerce, advertising, and finance. But while all these industries converge in cyberspace, few people can bring all these disciplines together. West Coast people tend to be ignorant of everything save technology, New York media people have virtually a learning disability when it comes to technology, and finance people don’t know enough about anything except finance. And that’s only on the most general level: when you break these groups down to geeks (and you can break geeks down to UNIX geeks, Mac geeks, Microsoft geeks, game geeks, and so on), content people, venture players, investment bankers, advertisers, and agency people, the chances of bringing all the various aspects of the business (aka “the moving parts”) together grow ever slimmer.

  But Walter Isaacson was the Toscanini of convergence. It was really something to listen to him. Extemporaneously, he could represent wildly diverse interests. He could hold a truly global battlefield in his head. His diorama of the conflicts and potential alliances of technology and media and marketing was breathtaking in its detail and in its vision. Walter, I found myself hard pressed to admit, was the only person who understood it all.

  It wasn’t for nothing that after his Kissinger biography Walter had plunged into the life of Benjamin Franklin, one of the few truly Renaissance men in American history, an opportunist in the humanities as well as the sciences.

  Walter was used to navigating between competing interests. He came from the church side of Time’s famous church and state division (i.e., editorial affairs separated from business interests), and while having clearly achieved a cardinal’s status, he was at ease with all the personalities from state and was comfortable with their issues—advertising and circulation issues, share price, personnel, real estate even. What’s more, at the same time he was a Time editor and a Time executive, he was also a writer, and somehow had managed to take the conflicts there—conflicts of sensibility and of hours in a day—and manage them. By all accounts, what motivated this remarkable talent for convergence and synergy and political acumen was the most competitive nature of our generation; he needed to achieve not just in one way but in all ways. “Walter has turned overachieving into a force of nature,” jealously explained one of his Harvard classmates. “He will learn everything you know, befriend everyone you know, and get your job done better and faster than you ever could. Or he’ll kill you.”

  Walter and the New Media group were waist deep in something called the Full Service Network, then being tested in Orlando, Florida. This was Time Warner’s literal version of the information superhighway. Using the television set, augmented by a cablelike box, ordinary consumers would, in theory, be able to access movies of their choice, video games, shopping services, various print publications, and customized news programs.

  “Our new electronic superhighway will change the way people use television,” Time Warner chairman Jerry Levin said when the service was announced in January 1993. “By having the consumer access unlimited services, the Full Service Network will render irrelevant the notion of sequential channels on a TV set.”

  Within Time Warner throughout 1993, people would say, “We’re building the information superhighway in Orlando,” and they would mean it. It was not for them a metaphor. They thought they were building it, the actual information superhighway thing.

  While the Full Service Network was Time Warner’s big interactive enchilada, the new media group had also inherited Time’s relationship with America Online. By early 1994, AOL had begun to pose a bit of a conundrum.

  “We’re actually getting screwed,” said Judson. Annoyingly, AOL was becoming what the Full Service Network was supposed to be—and it was doing it on Time Warner’s dollar. AOL had been a computer bulletin board service that specialized in member chat groups and offered a smorgasbord of mostly unbranded, and in some cases homespun, information (legal information for laypeople, career help for job seekers, directories of country inns—anything it could get cheaply and without extended negotiations). In late 1993, AOL began trying to recruit national information brands. Time became one of its first major deals—and in many ways the engine of AOL’s growth. The idea was that Time would “publish” on AOL every week; that is, it would offer certain interactive events with its editors and writers, and it would make available to AOL’s subscribers a searchable archive of Time’s articles. Then, too, the idea would provide AOL with free or low-cost advertising space in Time. In return, Time could look forward to a small percentage of AOL’s hourly connection fees.

  By 1994, FSN, having been taken through its paces in four thousand households in Orlando, looked a lot like a dud (technology problems, consumer resistance, bad press)—and a supremely embarrassing one at that—and AOL, partly on the basis of its relationship with Time, looked like a rising star. What’s more, it was becoming evident that modem-to-modem communication (what AOL was based on) could offer—and might do it cheaper, faster, and better—the kind of mixed bag of information, entertainment, and services that FSN was promising.

  In the first year of their relationship, Time’s share of AOL’s proceeds would amount to little more than five hundred thousand dollars. AOL, on the other hand, had realized tens of millions of dollars in new subscriptions from the ads it had placed at no cost in Time and from the appreciated share price that came from its association with the magazine. Time, it would seem, had actually screwed itself.

  There were obvious options for Time, Inc.: negotiate a new deal with AOL, buy AOL, start a
n online service, or buy a competing service—CompuServe or Prodigy.

  Hence, a committee was formed: the Online Steering Committee.

  “But it’s not just online. It’s the Internet, too. It’s the World Wide Web,” Judson told me in a stage whisper. “We believe in the World Wide Web. Walter believes in the World Wide Web. It’s so incredible.”

  “Have you seen it? Have you played with it?” I asked.

  “I’ve never really ‘surfed,’ ” he noted, making quotation marks in the air. “But I’ve seen it. I’ve looked at it.”

  America Online had clearly aroused Walter’s competitive instincts. AOL was playing Time, Inc. for a fool (interestingly, Walter believed in Time earnestly and passionately—it was hard to tell if this was a virtue or a flaw). It was making money from Time without fairly dividing the spoils. It further annoyed Walter that AOL seemed to think that just because it had the technology to deliver information to the American people, it could be a news and information organization, too, no big deal. And it annoyed him because, in the end, AOL users didn’t seem to be all that interested in reading Time online. What AOL users wanted to do was chat and chat and chat! (“What are you wearing?” was not a question you necessarily wanted to ask a Time editor.)

  Walter’s one, seemingly formative, experience with AOL had come on Christmas Eve in 1993. He had sat down at his home computer and found lonely people online, strangers who wanted to chat with other strangers on Christmas Eve.

  “I was disturbed,” he said. “I was quite disturbed.”

  Walter believed, however, in all the virtues of online communication: its speed, its interactivity, its changeability, and the promise of customization. Time’s area on AOL offered users the weekly magazine sooner than you could get it in print form; it offered users the chance to chat one-on-one and exchange e-mail with Time’s editors; and Walter could easily envision it changing as regularly as television and being tailored to each user’s interests.

  But, in truth, AOL users were more interested in chatting with each other (chatting with strangers! chatting, most often, about sex!) than they were in chatting with Time editors or in catching up on current events.

  Walter blamed it on the fundamentals. This was AOL’s audience, the lonely people he had met on Christmas Eve, and not Time’s natural audience. What’s more, the packaging, the presentation, the look and feel, were AOL’s. Time, Inc. was severely handicapped—not to mention foolish, in giving AOL all that free advertising and getting little in return.

  Time began a negotiation with AOL to try to improve the deal. But Walter wasn’t particularly optimistic; he knew that AOL users weren’t signing on to AOL to read Time. “You won’t win at the negotiating table what you can’t win on the battlefield,” the writer of two books about diplomacy acknowledged.

  Anyway, where Walter was really heading was the Internet.

  The Web—or the software that allowed viewers to see graphics and programmers to create structured layouts—had debuted in spring 1993 at Internet World (what was then a ragtag group of tables in a small corner of Manhattan’s Javits Center is now a three-times-a-year multitiered extravaganza of million-dollar convention booths). By early 1994 there were still only a handful of Web sites, mostly one-page jobs with straightforward hypertext links. Envisioning the Web as a breakthrough multimedia publishing platform was the working of a very academic mind. Walter, while having had very little firsthand exposure to the Web, had done the reading.

  For Walter, the Web, or at least the theoretical Web, was Time’s opportunity to go back into the publishing business, to do what it did best: present and package information, rather than just supply and license it to an online service. Walter got the theory of the medium quicker than anyone I had seen grapple with it before. At that moment in time, most conversations about the medium never got too far beyond trying to explain where this stuff existed and how it just hung there and who was in control and who owned it.

  To me, it was wonderful, revolutionary even, that a major media company would embrace the view of the Web as a profoundly important new publishing tool, but also odd. In the online services, you had a functional, understandable business model. People paid to get access to the information and entertainment that was being provided. The Web, so far, had no economic model. It was not yet clear how many people would ever be able to reach the Web. Even among the rarefied group that had access to the Internet, most had text-based access available over a telephone line; giving them the ability to use a graphical browser, that is, to see the Web, was not, as programmers say, trivial (“That’s trivial.” “That’s not trivial”).

  All other major media and software companies who had the foresight to be involved in online delivery—Ziff-Davis, Apple, AT&T, and Microsoft, for instance—were thinking about closed online services rather than the Internet. (Each of those efforts—Ziff’s Interchange, which was sold to AT&T; Apple’s eWorld; the first several versions of Microsoft’s MSN; and the AT&T-backed Europe Online—would die agonizing but quick deaths.)

  Nor were the existing online services giving much thought to the Internet in early 1994, except to dismiss it. AOL executives had a litany of objections that ranged from technology incompatibilities to pornography issues to a competitive analysis (information was available for free on the Internet whereas on AOL it cost money, so why should AOL encourage people to use the Internet?). Duh. Executives at GEnie, G.E.’s online service destined for oblivion, maintained that because GEnie used excess time on G.E.’s mainframes and because G.E. serviced the Defense Department with some of these same computers, giving GEnie subscribers access to the Internet would pose a national security risk. (They said this with a straight face; they actually seemed to believe this.) In a fabled meeting with CompuServe executives out at CompuServe’s vast complex of aging technology in Columbus, Ohio, the Time Warner delegation was told that CompuServe would never expose its subscribers to the lethal computer viruses that thrived and multiplied on the Internet. Walter grew more and more insistent, telling this gathering of network specialists and technology executives why the Internet was inevitable, why online services as we knew them could not survive, and why the business model for conveying information was inalterably changing. When the CompuServe executives showed little interest in accepting Walter’s view of online communications, he declared Time’s participation in the meeting over and, Timers in tow, stormed out. (“You must remember,” he told associates back in New York, “when you storm out of a meeting in Columbus, Ohio, you won’t be able to find a cab.”)

  It is surely worth noting again that Walter himself had virtually no firsthand knowledge about the Internet, about the experience of using it, about the technology it required, about what Internet users were looking for or thinking about (part of my job was to brain-dump this knowledge from me to him). Still, he was right and CompuServe was wrong. Sort of. (In April 1995, as it finally followed Walter’s advice, CompuServe would plunk down $100 million to buy Spry Communications, an Internet access and browser company, in one of the many deals it would make, transforming itself from the most profitable company in the online access and information business to a has-been enterprise).

  Virtually every element of Walter’s argument for the Web contained greater and lesser untested assumptions. The largest of these, and perhaps the most unchallenged, was surely that the Web could be an efficient and compelling advertising medium. The significance of this argument was that it provided a way to make money from the Internet in its free form and it justified Time’s presence, even auguring for its dominance, in the medium. If advertising needed to be sold, who better to sell it than Time?

  On the thirty-fourth floor of the Time Life Building, the Online Steering Committee met each week in a purposeful fashion that resembled a trial, and maybe even a court martial. Isaacson was prosecutor and, representing an authoritarian state, virtually all-powerful. Judson served as both clerk to the court and an assistant in the prosecutor’s office. Viebranz
was judge and jury. It was left to me, oddly, to be the hapless defense attorney representing the online services. This was a good example of the dexterity with which Walter could work a meeting. How was it that I had come to argue for the online services? I had spent the past year saying to anyone who would listen, “Hey, you’ve got to see the Internet!” Hell, I was the only person in the room who had ever been on the Internet.

  One of the ways Isaacson took control of a meeting was to be on his feet when everyone else was sitting, and he now paced restlessly, his shirt pulling from his pants, his arms held tight across his chest (he was a sloppier version of William F. Buckley), waiting to pounce, as you hit the period or paused too long at a comma in your sentence, or to dash to diagram a concept on the white board. “The Web puts us back into the driver’s seat. We can control our content. We can target our audience. We can use our resources to reach that audience. We can sell that audience.”

  This seemed like a grand and wonderful notion to me, but it also seemed highly theoretical. There were no real examples of a magazine making the transition to the Web. It was still amateurs and academics out there.

  “Okay, but why do you think that people are going to come to Time when it’s on the Web? These are young men. This isn’t Time’s audience,” I said, trying to be a responsible consultant.

  “Not now!” shouted Judson. “Not now! But tomorrow, the next day. You’re the one who says this is going to be a mass medium. Like TV!”

  “But I don’t really believe that!” I said with my best Cheshire smile.