The Year the Information Industry Hit Bottom

Article excerpt

Tim Miller is president of New Media Resources, a San Francisco-based consultancy that offers strategic services to interactive content services. He can be reached at tim miller@newmediaresources. corn.

One of the enduring images of 1998 is the reminder of what happens when sluggish behemoths hit large immovable objects. Not only did we see the Titanic head to the cold floor of the Atlantic Ocean after colliding with an iceberg (on movie screens, anyway), we also saw major players in the information industry hit bottom after colliding with a radical new set of business paradigms. Titanic may never rise again. However, our industry is this year for the first time showing signs that it has bottomed out and is on its way back to reclaiming its role in the lives of information consumers.

The following discussion takes us through some of the changes of 1998 and points to several signs that this was the year the industry began to rise from its nadir.

Repeated Blows to the Paradigm

The rapid diffusion of the Internet over the past 4 years accelerated changes that were already transforming the information industry. Though the industry was already adapting to the growing end-user market that was being delivered via computer local area networks (LANs), it was simply overwhelmed by the sheer velocity at which the Internet swept 80 million new information users in the door. The Internet blew distribution channels wide open and delivered repeated blows to the pricing, packaging, and distribution paradigms of the industry.

Faced with the need to be as agile as speedboats, more than a few captains of the information industry found themselves behind the helms of large, intransigent organizations that were locked into archaic technology, multi-tiered distribution, and high-cost structures. The ensuing panic and confusion threw the industry into a frenzy of consolidation, reorganization, and, sometimes, failure. This year, various segments of the industry trimmed their sails and began the long road toward comeback.

Consolidation Mode

This year saw some dramatic moves among legacy players, those companies that had been heavily invested in big, bloated payrolls; high-cost structures; and commensurate high price points that marked the old, doomed information industry of the 1980s. We ended last year with the demise of NewsNet and the acquisition of Dialog by MAID, and opened this year with the attempted merger between Reed Elsevier and Wolters Kluwer. We later saw Engineering Information and Moody's FIS get swallowed up by partners who could bring the scale and resources necessary to compete in the new era. Orbit folded and Information Access Company, Gale Research, and Primary Source Media got lumped together to cope with the increasingly tough library market. The new Dialog Corporation plc laid off hundreds of people and moved its headquarters from California to North Carolina. These moves were largely intended to bring the scale and cost-reductions necessary to compete in the new information era.

On the pricing and packaging front, the newly merged Dialog Corporation went into a frenzy of pricing and packaging experimentation and LEXIS-NEXIS relaunched late this year with a full embrace of the Web and more affordable flat-fee pricing.

Cusp Players to the Lifeboats

Cusp players are companies caught by the Internet's strobe light with one foot in more traditional LAN network distribution models and a toe in the Internet. Lacking the muscle mass of the legacy players, many found they couldn't survive alone. Two of the major companies in this category, Individual, Inc. and Desktop Data, merged late last year. The combined entity spent this year edging toward profitability by what it calls "terminating and' harvesting" businesses like Hoover's (itself another classic cusp casualty), and expanding marketing to gain a total of more than 1.2 million users- 375,000 of them enterprise customers. …