-- New media: Publishers hope Internet venture will help them recoup lost ad revenues.

By Rory J. O'Connor

Mercury News Staff Writer

Eight major newspaper publishers formed a joint venture Wednesday to develop an on-line network that, within three years, could put 185 papers on the Internet and link them together.

Analysts said the company, New Century Network, eventually could offer the publishers a chance to recover national advertising revenues they gradually have lost over the past 30 years to direct mail, television and other broadcasting outlets.

The publishers also see it as a chance for local papers to attract people not now reading their publications, or who are spending little time with them, by offering those people a way to search the content of several newspapers at once for information that interests them.

But analysts said the coalition mostly represents an acknowledgment that the newspaper industry most do something collectively to protect its franchise in delivering local information from the growing encroachment by on-line services.

The publishers said the services spawned by New Century could go beyond information to other staples of the on-line business, such as purchasing concert tickets or even making telephone calls.

The partners include Advance Publications Inc., Cox Newspapers Inc., Gannett Co. Inc., Hearst Corp., Knight-Ridder Inc., Times Mirror Co., Tribune Co. and Washington Post Co. Among them, they publish newspapers in nearly every large U.S. city, including Atlanta, Chicago, Los Angeles, New York, San Francisco, San Jose and Washington. Knight-Ridder is the corporate owner of the Mercury News.

For now, the primary job of New Century will be to develop technical standards for newspapers to use in presenting information on-line through the World Wide Web. The Web is a subset of the worldwide Internet computer network in which information is presented in a graphic format, and a user can press a mouse button to connect to related information on distant computers.

New Century also will develop technology to tightly couple services among newspapers and perform services like billing consumers and tracking usage patterns. It will provide consulting services to individual local newspapers that want to develop an on-line presence.

What the coalition is unlikely to do is quickly improve the bottom lines of any of its partners, said Peter Appert, media analyst for Alex. Brown & Sons in San Francisco.

``I would characterize this as a giant R&D effort,'' he said. ``I don't see over the next six to 12 months that this will contribute new profit or revenue streams to newspapers.''

The first newspapers to go on-line under the plan should be available by the end of the year, according to Peter Winter, a Cox vice president who was named interim chief executive of New Century.

Each of the partners will invest an equal sum to start the company, although New Century officials refused to say how much. They did indicate the company, which is not intended to turn a profit itself, would require an investment in the ``tens of millions'' over the next five years.

Beyond that, however, the economics of the venture are unclear, except that consumers most likely will encounter a pay-as-you-go system with an emphasis on subscriptions to various papers. That will be supplemented by local advertising, and eventually national ads.

``My own personal belief is that this will evolve like newspapers, where the reader pays a little and the advertisers pay a good bit more,'' said Robert D. Ingle, vice president for new media for Knight-Ridder. ``But we need to know who these customers are. It can't be this freewheeling, come into the Internet and eat all you want thing.''

The very need to form a coalition underscores the uncertainty of the economics of the on-line delivery of information to consumers. So far, an on-line presence has been the nearly exclusive province of the wealthiest newspapers in the country, which have little black ink to show for their efforts. Mercury Center, the on-line service of the Mercury News, has operated for two years and has yet to turn a profit, although it expects to become profitable sometime in 1995.

New Century might raise antitrust questions because the eight companies control so much of the daily newspaper business in the United States. The Sunday editions of the 185 newspapers of the founding members boast a circulation of more than 23 million copies.

But Winter said New Century had been ``very conscious'' of the potential for antitrust violations during the formation of the company and is ``comfortable with our conformance to anti-trust statutes.''

--New Century Network news release on deal. B690

Published 4/20/95 in the San Jose Mercury News.