Publishers chase hi-tech revenues

Content, not packaging, is the key, writes Mathew Horsman report

Pity the corporate strategist charged with developing "new media" in the midst of a communications revolution. No one is sure how the market will develop, yet media companies know they must take steps now to be certain that they remain competitive.

Nowhere else is the need to stay abreast of technological change greater than in publishing, where companies live or die by their ability to produce content, package it, and sell it on at a profit.

Companies such as News International, Reed Elsevier and Pearson, traditional publishers of newspapers, books, magazines and reference publications, are all spending heavily on developing materials for the new media - eager to turn mountains of copyrighted material into a new source of revenue.

News International, with five national newspaper titles in the UK and a host of international media holdings, is constantly looking for ways of wringing extra value out of its archives and fresh material.

"We constantly have to be looking at the income stream," said Richard Withey, media director at News. "We have a lot of content and must look at innovative ways of packaging it." That includes providing articles on-line from the Sunday Times, developing CD-ROM (compact disk read-only memory) titles for schools and, eventually, the consumer market, even setting up its own on-line service, Delphi, to allow consumers access to databases and the worldwide Internet.

Electronic publishing has been around for years: think of wire services such as Reuters, sent into the computers of City dealers and journalists every hour of every day. But the emergence of new technologies, and the growth in satellite and cable, have created intriguing new possibilities for the dissemination of information to individuals, presaging a time when one can dial up television programming, interactive video and movies, or download software, order flowers and arrange a package tour to Malaga.

The trouble is, that brave new world is still several years off, and it not yet clear what medium - cable, fibre optics, microwave - might emerge dominant. As well, not every branch of publishing is an obvious candidate for the infobahn. "Nobody wants to read a novel on the screen," Tim Hely Hutchinson, chief executive of Hodder Headline, said. "Electronic publishing is really only for reference titles."

There are broadly two schools of thought among publishers. The first, typified by companies such as Reed International, United Newspapers and Dorling Kindersley, has set out to be providers of content, prepared to make material available in whatever form the market demands. "Owning the copyright is the key," John Mellon, chief executive of Reed Publishing Europe, said.

The second school, associated with the big international players, has tended to make calcuated bets on the future of the information highway, investing in cable and television and forming joint ventures to explore online technology through expensive field tests. But even these companies - among them Viacom, Time-Warner and News International - understand the importance of product. "This is not about technology, this is about content," said News International's head of interactive media, Karen Potter.

In the interim, the favoured play for all electronic publishers is the CD-ROM, the compact disk that carries digitised information ranging from text to animation to illustrations to video.

CD-ROM is still in its infancy in Britain. There are an estimated 500,000 CD-ROM players in UK homes, hardly the kind of penetration to whet publishers' appetites. But that number is forecast to rise sixfold to 3 million in the next year. By contrast, there are 14 million CD-ROM players in US homes.

Most admit the push into electronic publishing has been a steep learning curve. "For a while, everyone thought you could just somehow pipe your books onto a CD at little cost and sell it on," said Allan Buckingham, who heads Dorling Kindersley's interactive publishing division. "It's a bit more complicated than that." DK has a staff of 170 to produce its CD-ROM titles.

New International is completing development work on several new titles, based on the archives of the Times newspapers. Ms Porter said most would be aimed at the schools market initially.

Analysts think there are a few more good years to be had for CD-ROM publishers, especially in markets like Britain where the consumer side has yet to take off. To date, the biggest CD-ROM market in the UK has been business-to-business reference, including medical and legal directories, and schools.

In the long run CD-ROM may turn out to have been an intermediate technology. Many publishers say that won't bother them, claiming they will easily shift to new media. "I don't don't care about these disks," said Dorling Kindersley's Allan Buckingham, tossing one across the table. "It's what on them that we are selling."