“They think you know the secret of cyberspace.”
“Then why don’t they listen to me?”
“They don’t want to listen. They want you to just tell them the secret, and they’ll pay you.”
“All right, let’s just tell them the secret and go home. Let’s sell them the Internet,” I said getting up to leave.
I got one of Alison’s baleful looks.
They filed back in. They were no longer salesmen. Now they were businessmen, deal-makers, gatekeepers of the family’s fortune.
“I’m assuming that we should get to some ideas about the structure of a relationship,” said Alison in her best practical approach.
There was a collective hesitation on their part, a mutual clearing of the throat; they meant to present a corporate consensus.
“What would you sell everything for?” said the CFO, clearly the appointed spokesperson.
“What is everything?” Alison asked deliberately but with some interest, as though this were fundamentally a philosophic question.
“The relevant assets, to be defined,” said CMP’s lawyer.
Alison was measured in her response. “This comes as somewhat of a surprise. And, honestly, I don’t know if such a possibility might or might not exist. As you know, we came here looking for a partner. But to the degree that we can separate out certain relevant assets, essentially the intellectual property related to this concept, which might include database assets, trade and service marks, goodwill, and other concept materials, I suppose it might be possible for us to value that defined asset pool.”
What she had just described, what she had just drawn a cordon around, was, as far as I could tell, absolutely nothing. There were, really, no assets. Unless they thought we could sell them the Internet. In some way, that is what they thought. We would sell them the right to start a magazine about the Internet, which right they obviously had before we walked in. We would sell them, Alison seemed to be saying, some outdated site lists.
It was very hard to know how to respond. It was scary almost—lest the moment go away, lest the moment be real. We had gotten the wrong change, a twenty instead of a one. Should we confess?
“Would you care to value that?” the CFO prodded.
I felt the pressure of Alison’s shoe on mine.
“I don’t frankly know if there is even a number at which we’d consider a sale. Even assuming there is, I’m not sure it’s appropriate at this point to cast this discussion in those terms. We are looking for a situation that will allow the natural appreciation of value. I would doubt that you would be interested in fully valuing our concept-related assets at this point,” she said.
“Well, try us?” pursued the CFO.
Again I felt Alison’s shoe.
“Listen, if you have something in mind, let us know,” he continued.
“Hey, this is just getting everything out on the table,” said Cron. “Is there a number that you’d take?”
“Sure!” I blurted out. “Ten million.” The stab of Alison’s heel was instant and sharp.
The CMP side countered with sober looks.
“It would be my recommendation,” said Alison, “that we adjourn to consider this. I think you should think about whether an outright sale of assets is the only way in which you’re interested in proceeding. And I would advise that you consider this carefully, because it may well not be an option from our point of view. Likewise, we will do some serious soul searching and some careful numbers crunching.”
“Why would you have said that?” Alison walked swiftly through the parking lot to the Fleetwood.
“Ten million? I’ll do it!”
“You said ten million as clearly an exaggeration. That’s your outside—and obviously a wild exaggeration at that. So what’s really your number? That’s what they’re thinking. Considerably less than that.”
“But what are we selling them?”
“The name. They think it’s TV Guide. They do. They think it’s the same thing.”
“They don’t really think that?”
“They do. They really think that by owning the name they will own the product.”
For a second, I waffled. “Maybe they’re right.”
“Oh yeah. For sure. TV Guide. NetGuide. Quick, go tell Mom, NetGuide is here.”
“All right. All right.”
“And the database,” she considered. “I think they want the database.”
“The database?”
“Yes,” she said with more confidence.
“What? That? Are you crazy? You think just because you call it a database it’s worth something? In my day we used to call it notes.”
“I think that they think it’s worth quite a bit.”
It was an oft-stated conceit or threat of large capital-plentiful businesses that they could afford to make mistakes, that, in fact, the process of doing something right was as much the process of doing something wrong. No industry seemed more to take this to heart than the software industry. The very notion of upgraded software had created a profitable business structure for trial and error. If you could confidently enough maintain the position that all mistakes, like all technology, were transitional, then the consumer (in a remarkable number of instances, it had been proven) was perfectly willing to go along.
What we were seeing, too, and getting ready to become a part of, was an entrepreneurial business structure designed to service this willingness for making big boners, this appetite for failure. The combination of salesmanship and technology was a sure recipe, if not for disaster, then certainly for a good con.
“They know nothing about any of this. And you know next to nothing,” Alison said, struggling hard with the absence of reason. “It does appear, however, that we can sell them the next to nothing we know for a lot of money.”
It paid, of course, to be married to a lawyer versed in the new alchemy of intellectual property.
Alison began the nimble and painstaking process of constructing a legal reality for assets that did not, in conventional reality, exist. What is the Internet? How do we define it? How do we describe it? How do we contain it? Those were the business and legal issues. It was also a rather complex philosophic issue (how can you tell the dancer from the dance? If a tree falls in cyberspace . . .) that reflected profound discomfort with the notion of form and its substance and property and ownership. Who owns the airwaves? was a popular question of the 1950s. That question has various legal, logistical, and philosophic answers. The question of who owns the Net is not reasonably addressable from any of those points of view. It is more akin to who owns the body politic, who owns the atmosphere, who owns the excitement of the city.
Technology companies need to own something in a way that media companies do not (not that media companies wouldn’t like to, but their arrogance is of a different order). Even as technology companies have moved from hardware and code out to the much more loosey-goosey world of well-turned phrase and singular point of view, they’ve sought to colonize and govern. The industry is, for instance, paranoically obsessed with confidentiality and nondisclosure agreements. At Starwave, the Seattle-based Internet content company started by Microsoft cofounder Paul Allen, the guest name tag that you sign and affix to your lapel during your stay is also a broad confidentiality agreement and assignment of rights to what you’ve thought and discussed during your visit. From the technology-world point of view, the babble of the media world, the idea community, with its gossip and exchange of ideas in public places (i.e., restaurants rather than office cafeterias), is undisciplined, indulgent, and even self-destructive.
If technology companies owned the newspapers (and, not impossibly, one day they will—although I wouldn’t bet on this outcome), they would not be entirely happy until they owned the town, or at least the shopping areas. It is not at all a secret that the competition among technology companies on the Internet is to own the network itself. It is perhaps the natural insecurities of most nascent industries—railroads, movies, oil, long before
software—that make them monopolistic.
At any rate, like any self-respecting technology company, CMP needed to come away from their relationship with us owning something. It was not enough to share, partner, discuss, relate, enjoy one another’s company, learn from, license. They had to own. So one of the largest technology publishing companies in the country, with the aid of White & Case, one of the largest law firms in the nation, was about to pay me a wonderful seven-figure sum (a movie-deal number), and in return I was going to give them, well, nothing.
I genuinely believe they thought that they were buying the Internet from us, that our FileMaker Pro database was in some way a treasure map, that if you had that, it was like having bought the experience of navigating the jungle without having to endure the bugs. Without the experience of the medium, it was almost impossible to fathom that the known world of cyberspace at that moment would be wholly remade the next moment. As for the simplistically magical name, which had begun in our office as somewhat of a joke—an exaggeration, certainly—it seemed a cruel irony that Net would become among the most generic prefixes of all time.
In fact, as we came to the final hours of making a deal with CMP, it turned out that the name was not ours to sell, that a consultant in Massachusetts was happily doing business at the address netguide.com. We quickly (with the mock innocence of this game: “This will be a hardship, but I guess I might be able to give you a little something for what didn’t cost you anything”) paid a few thousand, against our imminent fortune, for the address.
“This is not a normal situation,” Alison said of the CMP deal with an almost reverse paranoia. (Because they were acceding so much to us, were we therefore acceding even more to them?) We had been left alone in one of the many paneled conference rooms at White & Case, sandwiches and coffee thermoses on the sideboard, the thousands (literally) of document pages on the long conference table. “We’re going to leave here with everything we had when we came in.”
“Plus a check.”
“Yes, plus a check. This is so bizarre.”
“You’re getting me worried.”
She considered. “We’re selling them an off-the-shelf database containing information that they have, in theory, inspected. In fact, they’ve had a whole payroll of experts to inspect it. The fact that this information is or will soon be entirely out of date is not our responsibility. We’re selling them a name that may soon be functionally generic, and, at the same time, we’re preserving our right, obviously with their agreement, to go on using the name anyway. What’s more, it appears that we have the right to use online anything they develop. In addition, we can compete with them in any way we like. We can, if we want, use all the money they’re paying us to compete with them.”
Our unease was mounting.
“But these are good lawyers at White & Case,” Alison said, clearly rationalizing.
“What’s so good about them?”
“They’re doing a deal which is a straightforward transfer of intellectual property, which would work if we were talking about anything but the Internet. It just doesn’t work here. Things change too quickly. Stuff can be replicated so easily. The business model is so . . . well, there is no business model. There’s going to be a zillion deals like this,” she said.
“Just think,” I said, warming to the moment, “how many stupid people there are in this world who we can take advantage of.”
“But they don’t stay stupid.”
That was hard to believe, however, as they filed back into the room.
They certainly seemed delighted with the results of their deal.
“We enjoyed doing business with you,” Michael Leeds said. “I hope you agree that we follow our principles. If you ever need anything—anything—we want you to come to us. We’d love to do business with you again.”
I confess to enjoying a brief moment of omnipotence. It felt like God had given me one. For free.
Now, here I was, two years later, back at the driver’s ed headquarters.
I felt somewhat like Cool Hand Luke, briefly free of his bonds and now recaptured and waiting for the reprisals of the guards. Michael Leeds was the sadistic warden. Cron and Lundell were the trusties, shuffling and glum.
In the year and a half or so since our deal, CMP had spent as much as any company in cyberspace, with as little to show for it. They had spent a reported $15 million to $20 million on NetGuide magazine and had failed to catch anybody’s imagination; they had lost as much as $10 million more trying to build a bridge from print to online. (What’s more, we had competed with them every step of the way: our books had competed with their magazine and our Web products had competed with their online guide.)
In the course of its oh-so-brief life, the Net had become as vast as, well, nearly life itself. The two years had been like one of those fast-action movies in which all of human history is expressed in a minute of film. The Net was exaggerated and comical like that. To reflect that experience in a monthly magazine you had to offer Web sites. The problem was that these Web sites—and there were thousands upon thousands of them . . . hundreds of thousands . . . millions!—were not at all the point of the experience. Content was not the thrill. Content served as the signs on the highway or perhaps the view or the rest stops, whereas the experience of driving was altogether something else. The thrill was action, motion, control, freedom at the wheel.
“We’re not a hype company, and it’s all hype,” said Cron, resigned.
“It really helps to have an attitude,” said Lundell.
“Together we could have been Yahoo,” said Cron.
“I’m not sure Yahoo is Yahoo,” I said. “I’m not sure anyone has found the secret yet.”
They seemed to perk up at this.
“To my mind, you have an unstable audience without learned behavior or ingrained habits. It’s like someone dropped down in the middle of New York City,” I said. “Or in the middle of Moscow. Straight from Dubuque. Nobody knows what they’re supposed to do, how they’re supposed to act. So it’s not so easy to fit them into a commercial model.”
“When we did the deal with you, we really didn’t know what we were doing,” said Cron.
Everything about them looked beleaguered. “Well, who did?” I shrugged. “Who could have predicted any of this? Our deal became absurd the moment after we signed it. It didn’t—it couldn’t—anticipate a whole sweeping evolutionary continuum. You know what I’m saying? How could we have predicted human beings, speech, civilization, culture, technology, the whole goddamn twentieth century. You know?” They looked at me hoping, it seemed, that I would have some answer, but beyond that they were still confused. “And the interesting thing is that the game hasn’t even begun. This is warm-up. Nobody who is here today will be here in the same form tomorrow. Everybody will evolve into something, some form, that meets a whole new set of demands. It is, I’m serious, the first day of the rest of our lives.” I really thought I could just whip them into shelling out another cyber-size sum.
“Mike is right,” Cron said to Lundell.
“How honestly can I speak?”
“Open kimono.”
“If we got together on this,” I said, lowering my voice and peddling harder, “it could be an incredibly powerful combination. Just think about this. What you have and we don’t have. What we have and you don’t have. Putting that together. It boggles my mind. Let’s think about this. Just for a moment. Okay. Putting your Internet assets together with our Internet assets. We would instantly create—instantly—the greatest Internet information company on earth! No question. Pure play. Then we roll it out to the public. Conservatively, what do you think? I’d say, conservatively, three hundred million dollars in a downmarket. And easily, on a better day, six hundred million.” It was as though Machinist and the bankers had taken possession of me. I was their medium. I felt, suddenly, that my real interest in this whole business was the verbal excess, the total ridiculousness in which perfectly reasonable people would beco
me complicit.
“Not impossible by any means,” Cron said.
“I’ll put it on the line,” I said. “We’ve had a great year. Nothing in my life has ever prepared me for what I’ve experienced over the last twelve months. You remember that handful of people in our office? Now I look out the door—seventy! Cyberspace is a wonderful world! But, of course, I don’t have to tell you, expansion is costly. We all know that. I have a group of investors who are very supportive. I couldn’t have better partners. They’re not only first-rate guys—true professionals—but they bring such experience, such real savviness. Invaluable, truly invaluable. At the same time, of course, I can’t expect them to finance us at the level that this industry is burning cash. We are looking for a second-stage strategy now. Clearly, you are, too. I think the time is now for us to look at our common goals and natural synergies.”
Cron and Lundell looked at each other. It wasn’t hard to imagine that they were looking as much as I was for salvation. Inside CMP, I’m sure, Cron and Lundell were being blamed for the curse of the Internet. Indeed, there had been a whole generation of executives wiped out at CMP over its ever-deepening Internet hole.
“There is an interest on the part of the family in taking advantage of the public market,” said Cron carefully.
For a second, I thought this was curious. If you had a successful privately owned company, why in the world would you ever want to be a public company? Except to make a fast buck, of course. If everyone else was turning dross into gold, come on!
It certainly had been a surprise to them, I imagined, that start-up companies, with no background, experience, or goodwill in the technology business, suddenly had all this money from the public markets to compete with a solidly profitable, responsibly run, good old-fashioned half-billion-dollar-a-year company like CMP.
“Together we can raise the money to go to war!” I exulted.
Lundell looked down.
“Michael Leeds hates you,” Cron said heavily.
“What?”
“He blames you.”
From Cron’s defeated look, it seemed evident that I really had left a blood score in cyberspace. “He feels you took advantage of him.”
Burn Rate Page 19