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ARLEN'S ANGLE ON INTERACTIVE FROM START-UPS TO BREAKUPS, VETERAN NEW-MEDIA WATCHER HAS SEEN IT ALL BEFORE

By Published on .

When it comes to interactive media, these days it's no longer hip to hype.

Highly publicized tests are being postponed faster than you can say manana. Pundits and interactive wanna-bes who popularized the cliche "information superhighway" last year are now talking about the information superhypeway instead.

Gary Arlen has been there before. A veteran newsletter publisher and interactive media consultant, Mr. Arlen has spent 20 years watching new media.

Today's false starts and failed mega-mergers are eerily reminiscent of the snafus surrounding the failed 1980s version of interactivity called videotext-an industry he spent several years hyping.

"It's `vuja de' all over again," quips Mr. Arlen, 49. "That uncomfortable feeling you're somewhere you never want to be-again."

Uncomfortable or not, Mr. Arlen is in the business of interactivity for the long term. As president of Arlen Communications, Bethesda, Md., he survived the videotext debacle to become one of the most visible-and most quoted-new-media gurus.

With only a four-person office staff and a small cadre of hired consultants, Mr. Arlen puts out reports on interactive media and consults with as many as 10 clients at a time. He also maintains a busy speaking schedule and offers his services in conference management.

Mr. Arlen points to several warning signs on the long and winding road to mass-market interactivity:

Tele-Communications Inc. and Bell Atlantic Corp. Marriage annulled.

Cox Enterprises and Southwestern Bell. Ditto.

Time Warner's Orlando trial. Postponed due to equipment problems.

TV Macy's. Planned fall rollout postponed an additional 12 to 18 months.

Bell Atlantic trials in northern Virginia and Toms River, N.J. Still waiting for Federal Communications Commission approval.

"We've all been calling it the info superhypeway," Mr. Arlen jokes. "But I'm not surprised by these delays."

Mr. Arlen remembers-perhaps too well-when videotext experimenters hooked up phone lines to home TVs so viewers could shop, bank and book trips from their sofas. Companies like J.C. Penney Co., Time Warner, Cox Cable Communications and Times Mirror Co. all tried videotext-and failed.

As today's mergers and tests get postponed or called off, "People start saying, `Aha, it's happening again. These guys make promises they can't keep. The business isn't real. Let's forget about it,'*" Mr. Arlen says.

But that's exactly the wrong attitude, he warns.

"I'm very concerned. The price tag is so high now," he continues. "The stakes are so immense that a lot of people who needed to be part of this business won't bother to take part because they say, `Why waste the money? I'll wait 'til the big guys sort out the problems. Then we'll come back in.'

"I'm very much a `skep-thusiast' about all this," Mr. Arlen laughs. "Yet what's happening now is very predictable."

His interest in new media began at Northwestern University's Medill School of Journalism in the 1960s, where he wrote a paper on cable TV and had to convince his professor that cable was a real medium.

He went on to work for Paul Kagan & Associates as a cable analyst, then started his own company in 1980. His newsletter, Video Text & , arrived at the peak of that new-media frenzy.

That publication evolved into Teleservices Report, which tracked transactional applications, both online and offline, pertaining to shopping and banking, during the mid-1980s.

By the late '80s Mr. Arlen had created Electronic Shopping News, and eventually, Interactivity Report, which he sold in 1990 to Business Research Publications of Washington, D.C.

Interactivity Report became the Information & , for which Mr. Arlen still writes a twice-monthly column as a contributing editor.

His clients range from the Direct Marketing Association to Citibank and AT&T. He has produced studies on upwards of four dozen flavors of interactive TV when most people have trouble visualizing just one.

"We use Gary Arlen to help us stay up to speed with what is happening in the interactive communications arena and with who's doing what and what are the likely innovations," says Gil Merkle, assistant VP for advanced technologies at USAA, an insurance and financial services company.

"We're in the exploratory, prototype-building stage," Mr. Merkle continues. "We don't have anything operating yet in terms of either screen telephone or interactive television, but we're very interested in making sure our systems can interface to any of those devices that our members might want to buy."

Mr. Arlen also participates in the new-media scene. He sits on the advisory board of ICTV, a Santa Clara, Calif., company developing interactive TV systems.

Some might question how he reconciles the two roles of consultant and compatriot.

"On the rare occasion when I've been confronted with writing something about a company I've been involved with, I simply pass that assignment over to someone else in the office," Mr. Arlen explains. "I recognize this thin line we're walking here. I'm sure I would have heard about it if we'd ever broken a confidence."

Despite his rebirth as an interactive TV guru, Mr. Arlen is haunted by memories of videotext.

"This was an equal-opportunity failure," Mr. Arlen says of Times Mirror's Gateway system in Los Angeles.

"Throughout the two-year test, participating households were asked if they would pay $10 per month to use the system," he recounts. "Consistently, customers said yes ... so when the test ended, the same households were invited to stay with the service and write a check. Very few actually did so, and the president of the Gateway project summarized the findings of all his expensive market research in two words about his customers-`They lied."'

Such experiences can leave unsightly blemishes on the most exalted careers.

"There are people who identified me with videotext because, unquestionably, in the early '80s, I had one of the leading videotext trade publications, and was out on the stump saying here's what videotext is all about, here's how to be in the game," Mr. Arlen says. "It became very clear by the late '80s that that was not the game to be in, so we refocused."

Just as many of the same players are giving interactivity another try, so is Mr. Arlen.

"I'm a strong believer in the theory of evolution," he says. "Many of the ideas evolved for the narrow-band videotext platform are being brought over to the broad-band interactive platform."

Again, Mr. Arlen finds himself in an industry searching for guidance. The audience for interactive services is vaguely defined, and the infrastructure for interactive TV behind schedule and still amorphous. In addition, there are few definitions of interactive advertising.

"The things you're going to start seeing first are some kind of on-demand commercial," Mr. Arlen forecasts, "where the viewer just calls up and sees the message, be it a infomercial for 2, or 5, or 20 minutes, or even a short spot. I don't think we'll be seeing 15- and 30-second spots anymore."

Mr. Arlen believes that with new pricing structures and new types of corporate alliances delivering interactive products into the home, advertisers and service providers could be competing for the same customers.

Questions will come up concerning ownership of data gleaned from consumer responses to interactive infomercials, for example. And intelligent agents that ostensibly put control in the hands of the viewer may in reality give control to the interactive TV provider.

As for the hype surrounding interactivity, Mr. Arlen fears the media will focus on the botched deals and miss the big picture.

"I am very enthusiastic that there is a business taking shape somehow, somewhere, and the fact that it's put off by six months, or a year, or two years, doesn't mean it's not going to happen," Mr. Arlen says.

"What will effect it not happening is if these lofty promises that are unkept deter content suppliers from participating, because consumers don't buy technology. They buy applications."

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