The big lesson that I learned as a CD-ROM publisher still deeply in debt (with a title that garnered excellent reviews and press coverage, and enjoyed over 20,000 sales), is that distribution power rules the market. It is not just a question of whether you as a publisher can get distribution; the question is whether you have enough money to spend to pull customers into the stores during that very short window of opportunity afforded you by the distribution system.

Cynics like me think this is an extension of common sense, a lesson you could learn in any industry. To paraphrase the small publisher's motto, freedom of market is guaranteed only to those who own one. But not everyone in this industry is a cynic like me. Many dreamers in the personal computer industry believed, and still do, that opportunity is always knocking and that the market is virtually free for anyone to try something. These people are joined by many more who say that they don't want the software market to be controlled by only a few companies who decide what should be displayed in the limited shelf space. A smaller group that actively buys goods are interested in limitless shelf space.

Catering to these winds of revolt are the Web pundits, the Web developers, and the purveyors of Web advertising. One of the hottest ideas is that the Web will soon displace the current distribution apparatus for software, especially of multimedia entertainment currently on CD-ROM, increasing the customers' choices and making the development of interactive entertainment profitable for titles besides hit games. Another hot idea is that the Web will grow as a hybrid broadcasting-publishing medium with ever-increasing advertising revenues flowing to on-line "magazine" and "TV show" producers on the Web. Some people lump these two ideas together into amazingly optimistic business plans.

To shed light on the merits of the first idea, consider the very real efforts of small CD-ROM publishers. Getting distribution for a CD-ROM title is, like in most industries, a function of capital: if you can demonstrate that you have enough money to launch the product properly (with megabuck advertising) and draw crowds into stores, you have no trouble getting distributors. The mechanisms are in place for them to leverage off your efforts with co-op advertising, in-store contests, promotions, and so forth.

Nothing wrong with this business model; it just favors larger publishers. The shelf space that these publishers have spent so much money acquiring are typically filled with the kind of products the publishing executives understand, which is why they put out so many games for young boys, sports-related titles for young men, and shallow "mainstream" titles for the rest of us. And people wonder why the products of this industry are not drawing hordes of consumers to this new media.

What can the Web actually do to change distribution? Plenty, but one of the things it probably can't do, at least in the next few years, is liberate the shelf space for small publishers who are mining niche markets. The business model favors the larger publishers who can spend money on mainstream advertising to promote their Web sites. Most of the buzz about interactive entertainment surrounds the most trivial kinds of content in relation to everyday life: soap operas and interactive game-playing.

That doesn't mean small publishers can't take advantage of the Web to make their distribution efforts work. It means that small publishers must offer products or services that are very much in demand. Works of art, works of the heart, and really narrow niche titles simply don't make enough money to justify the effort on economic terms. The one or two titles per year that break through this barrier to get attention and sales are the rare exceptions that we all embrace with enthusiasm, starved as we are for content that is truly interesting and relevant to our lives.

Unfortunately, much of the power of interactive media is vested in the customer's ability to plunge further into the depths of knowledge and information, which is almost by definition a niche of some sort, be it a sports niche, an alternative lifestyle choice, or a particular rock band. And unfortunately, most of the titles and even many of the Web sites are too superficial for this kind of activity because the editorial effort is either skimpy (due to lack of revenue) or too broad in an effort to cover mainstream topics.

Even dominant companies like Microsoft, which can afford to do nearly any kind of title or service as an experiment, has nearly abandoned the niche-oriented CD-ROM titles (and, by implication, the Web sites for these topics) that it exuberantly funded a few years ago by partnership with niche publishers such as Voyager and Dorling Kindersley. As Denise Caruso points out in her recent article on Microsoft in Wired (June 1996), these titles require too much work for too small a return.

And just to remind those who still flame on incessantly about how the Web will kill the current distribution system, keep in mind that the Web also brings retailers and wholesalers together by improving their inventory and ordering applications, resulting in more efficient distribution and higher profits for the middle-people.

Niche-oriented publishers desperately need to keep the margin that typically went to the distributor, and they also need to build the channel themselves, which is to say, they need to attract enough people to the Web site that is used to sell merchandise and services. Such publishers have to play the game of retail in much the same way it is played with other forms of merchandise in current channels: the lowest price rules, except when you are the only one who carries your type of product or service.

It is the second hot idea -- that of funding the development of content on the Web with advertising revenues or sponsorships -- that is so popular among small publishers, because it seems to offer exactly what a niche publisher or broadcaster wants: to reach customers directly and to become self-supporting without giving away a substantial margin to the middle-people.

So the major heat is on this idea, and it is illustrated by so many stories in the mainstream press about startup on-line magazines like Michael Kinsley's Slate (put out by Microsoft). What is illuminating about all these articles is that no one has yet figured out a profitable business model for Web content.

No matter how much technology and content a publisher puts on a Web site, it still takes deep pockets to create enough buzz and interest to get large numbers of people to visit your site; if the numbers aren't large, there will be no advertising revenue for quite some time.

In short, your labor of love on the Web will probably reap a reward of simply more love, not money. Lord knows, we all need more love, but it is no substitute for adequate funding.

So this is why you see me at conferences and trade shows babbling on about distribution and Web atrocity stories where too much money was wasted. The best ideas are under-funded or not funded. What does it say about an industry in which the creative people -- the talented writers, directors, artists, musicans, and interactive game designers -- are worried more about distribution or advertising than about implementing their ideas? It says that the industry is still much too stifling to encourage creativity.

Perhaps that is why many consumers walk on by most of the exhibits at the E3 conference. Perhaps that is why some of the greatest icons of our culture, such as Bob Dylan and the Woodstock concert, were trivialized by the interactive titles that exploited them. The pundits who write about interactive entertainment can't blame this lack of quality content solely on the Hollywood influence or on excessive hype. I believe the economic system of captive capital that most of the western world lives in favors the rich and the corporate empires. Newbie companies that make it are exceptions, not the rule.

The last two "revolutions" were in personal computing and desktop publishing. What made these technologies revolutionary for me was not the changes brought about in the office or the graphics shop; it was the opportunity to create new profitable businesses around the creative efforts of independent writers, programmers, and producers. Interactive media technology was thought to be revolutionary when it first appeared, and when the heat of hype was applied; in the cold light of reality, it now seems to be pushing smaller companies into bankruptcy or into mergers with larger companies.

With few exceptions, entertainment content seems to be getting more trivial, rather than more vital to our lives. And the rallying cry of the corporate executives and the young marketing suits of the new Web culture can be heard in the streets where the consumers amass in confusion and borderline resentment: let them play games, let them watch soaps!

-- Tony Bove
Gualala, Calif.
May 22, 1996

Copyright © 1996 Tony Bove

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