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Media Online: A Few Firms Thrive While Many Fail

Hear Part I.

Hear Part II.

July 3, 2001 -- The nation's old-line media - newspapers, radio and TV broadcast outlets - increasingly are controlled by a few corporations. The "new-media" Internet was supposed to be different, a wide-open realm where even a small budget could buy access to a worldwide audience of billions.

But it hasn't worked out that way, says NPR Cultural Correspondent Rick Karr. As Karr reports in a two-part series July 2 and 3 on All Things Considered, smaller Internet media companies increasingly are being subsumed or edged out by media conglomerates.

A new study by the research firm Jupiter Media Metrix shows that internet users spend most of their online time with just four companies: AOL/Time, Microsoft, Yahoo, and embattled music-sharing service Napster. The survey also shows that the number of companies that control 60 percent of online time has shrunk from 110 in 1999 to just 14 today.
Read the Jupiter Media Metrix study

Meanwhile, a number of independent online media companies (suck.com, feed.com, salon.com) are bankrupt or near bankruptcy, while others (mp3.com, emusic.com) have been purchased by old-media conglomerates.

A number of factors have led to this reversal, Karr finds. The collapse in dot-com share prices has turned many independent firms into attractive acquisition targets for cash-rich conglomerates. In other cases, old-media firms are using the brands they built in the "real" world to draw visitors to their online properties. Meanwhile, few of the independent sites have figured out how to earn enough money to stay afloat.

Still, observers say the survival of these independents is essential. "People like to know they're there," says Jonathan Potter, head of the webcasters' trade group the Digital Media Association. "Even if they don't listen, they like to know there's a diversity of voices available."

In the consolidating Internet media landscape, who's thriving and who's tanking? Here are Karr's avowedly subjective picks for the top five winners and losers.

Karr's Winners

1) AOL -- Merger with old-media behemoth Time-Warner (owner of Time magazine, the Warner Music Group family of record labels, CNN, etc.) has given the top Internet destination powerful "synergies" to keep users' attention focussed on its properties. Read the article in Time, click for more info on an AOL web site. The "walled garden" theory of the internet seems to be paying off, with AOL controlling 32 percent of users' online time, according to Jupiter Media Metrix.

2) Yahoo! -- A new media company that's successfully playing the old media's synergy game: Use Yahoo to search for news on sports or finance, for instance, and you're likely to be sent first to the company's own sports and finance sites. Yahoo branched out last week with the purchase of top webcaster Launch, which is the target of a lawsuit by the five major record companies.

3) Slashdot -- One Internet pundit says this site has revolutionized the way news and opinion are handled online. The innovation: A quarter million daily readers serve as its writers and editors, scouting the web for interesting content and reacting to one another's comments in lively and informative discussions. Fiercely independent, it dubs its content "News for nerds, stuff that matters" -- a tagline that embraces stories ranging from news about open-source and Linux programming and cyber-liberties to sci-fi films and Lego blocks.

4) Alternet -- This independent, left-liberal news and opinion site has seen a six-fold increase in traffic since the end of 2000. Executive Editor Don Hazen says that's in part because the Bush administration has prompted readers to look for liberal news sources, in much the same way that conservative media blossomed after the election of Bill Clinton. The site is funded by a combination of individual support and foundation grants.

5) IndyMedia -- A grass-roots network of activist and community information, it has grown from just one site in 1999 to more than 50 today. An increasingly popular, independent source, it touts itself as offering news the mainstream media won't touch.

Karr's Losers

1) Suck -- This groundbreaking Internet opinion site featured brash commentary and incisive cartooning and built a big, dedicated audience in the process. Unfortunately, it didn't build big revenues: It's in re-runs until co-founder Joey Anuff and his partners can secure additional financing. Meanwhile, a broader range of offerings couldn't save sibling Feed from the same fate; it's also on hiatus until more funding appears. Users of both sites remain dedicated to their sibling discussion site, Plastic, which Anuff says is running on nothing but "pure love" for now (i.e. the passion of its readers). Plastic is based on the Slashdot model.

2) Salon -- Salon Editor David Talbot recently told Wired magazine, "In the early days, we thought that there'd be literally hundreds of sites like Salon. We expected many publications that were capitalized sufficiently to support a professional newsroom, even a small one, something that prints compelling daily content. Now, I think we're the only independent one around." But a miniscule stock price (NASDAQ may de-list Salon shares) and a troubled subscription service (most Salon content remains free, prompting even sympathetic readers to ask why they should pay for content) seem to suggest a troubled future for this independent web magazine.

3) MP3.com -- Sued by record labels and buffeted by the collapse of dot-com financing, the online music company recently surrendered to its former courtroom adversary, the French media conglomerate Vivendi/Universal. Founder and CEO Michael Robertson once tossed rhetorical bombs at the major record labels. Now he works for one.

4) Napster -- Judge Marilyn Hall Patel's injunction against the ultimate net music rebel has cut the number of songs available by 99 percent or so, and many hard-core Nap-heads were dismayed when founder Sean Fanning announced a partnership with German media conglomerate Bertlesmann. Deals with two other major labels and a slew of independent record companies has done little to win back fans in advance of the launch of the "New Napster" (read: pay Napster) this summer.

5) Inside -- It sounded like a can't-miss formula: Cheeky journalism titans Kurt Andersen (co-founder of Spy magazine, former editor of New York magazine and host of the public radio program Studio 360) and Michael Hirschorn (former editor-in-chief of Spin magazine) would create a web-only magazine that covered the media with independence, wit and insight. First they retreated from the "web-only" component by launching a real magazine. Then they merged with Steven Brill's firm. And only around 5,000 people reportedly paid for site subscriptions.