SIKES PULLS HEARST INTO INTERACTIVE

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Al Sikes, the former Federal Communications Commission chairman, soon will celebrate his first anniversary as president of Hearst Corp.'s New Media & Technology Division.

His charge has been to develop new media and seek interactive businesses that enhance Hearst's traditional media.

Mr. Sikes talked with Interactive Media & Marketing about Hearst's role in the future of interactive media.

Q: How do you define interactive media?

Al Sikes: Since all media today is one-way, the mirror capability of ordering a movie by using a remote control is defined by many as an interactive application. That's not what we're working on. That's a utilitarian, simplified version of the 800 telephone number business.

I don't mean to put that down, but we're concentrating more on developing new-media products.

The word I find most synonymous with interactive is personalization. That's the ability to customize information and entertainment as [consumers] want it. You can extend that to being able to pick the camera angle you want when you watch television. That's a simplified layer of personalization.

Q: Do you see your division specifically designed to expand Hearst-branded products such as magazines and TV shows into new media?

Mr. Sikes: We're [a] founding partner in a Canadian network. That doesn't have much to do with our brands. But anything we do, with content or advertising, is somewhat of an extension of our current assets.

We now occupy everything there is to occupy in content with books, newspapers, TV and radio. When you think about new media, it is hard to perceive anything we might do that would not have indirect linkage.

Q: Does that mean you will be creating things that are crossover versions of existing products?

Mr. Sikes: Some companies concentrate on line extensions. Others might take a magazine and turn it into an interactive product. We intend to be active in the former.

Q: Hearst is among six companies funding Groupe Videotron's two-way interactive TV system in the city of Chicoutimi, Quebec. Why did Hearst decide to invest in this project instead of tests in the U.S.?

Mr. Sikes: We believe the best opportunities to do business and to learn will be in the market-based ventures, not in trial-based ventures. Tests with 2,000, 4,000 or 6,000 homes are only a fraction of the market area and are of less interest to us than the sort of market-by-market de ployments that provide whole-market services.

You have to reach critical mass, and we believe the Ca nadian project does that. That gives us two things: the chance to make real businesses and the chance to learn.

Q: How does this particular project do that vs. others?

Mr. Sikes: The system in Canada will reach 35,000 homes or about 80% of the market's population. Customers will all receive the necessary in-home equipment without additional charge. There will be a critical mass of compelling services including banking, energy, postal, lottery, advertising, shopping, pay-per-view. We think that somebody or surely most people will find one or more compelling services and get into the system. Then they will branch out and use more.

Q: How extensive is Hearst's involvement?

Mr. Sikes: We are an investor. We are also helping in the design and implementation of the network and will provide interactive advertising services.

Q: Do you expect U.S. advertisers you now deal with to get involved?

Mr. Sikes: Sure, we'll work with American and Canadian advertisers. We'll provide an electronic version of new-media"yellow pages" services.

Yellow Pages come out once a year and are dimensionally flat. We will update daily, issue coupons, make appointments and reservations and be the gateway to an electronic shopping mall.

If you want a book, you find the bookstores and see the advertising. Then the bookstores are in teleshopping with an icon that can take you into a specific bookstore.

We have contacts with the advertising community. They seem eager to get in there and learn. I don't think it is that difficult. I don't think anybody wants to just sit on the sidelines.

Q: Microsoft, AT&T and others are developing online services. Is Hearst doing the same?

Mr. Sikes: That's in development right now. We've announced HomeNet. For the most part that will be a series of interactive programs to cover everything from design, construction, remodeling, additions, furnishings, financing, entertainment and cooking in the home. It will be what I would call a "how to" for the home.

Q: Hearst has also bought a minority interest in the software company Books That Work. How does that fit?

Mr. Sikes: They are in the do-it-yourself area. We think they are the best. And it's an area we have current franchises.

Q: By taking this job, I assume you've long had an interest in computers and interactivity.

Mr. Sikes: I began working with computers, micros or PCs back in 1980 or 1981 when the PC first was on the market. I had a Tandy Model 2. The entire set of peripherals cost $13,000 and it was slow, clunky and loud. The printer was in a close business environment and it had to have a noise shield. What you can do today vs. then is astounding. But I was astounded then.

Q: What do you have today?

Mr. Sikes: It has to be state of the art. We're using IBMs, Macs and others.

Q: Viacom employees can take classes to learn about new-media equipment, so they can think about ways to adapt their products.We will be. We will be finished with a new-media center in the next couple of weeks. We did it because we think it is important to diversify and grow.

Q: How does TV fit with new media?

Mr. Sikes: Eventually I believe we will have an interactive television network. There will be applications in the entertainment area that will be popular because it is interactive. There's on-demand news services and a number of future applications.

Q: Having been with the FCC, what impact do you think governmental regulations will have on new media?

Mr. Sikes: Currently there are a lot of restrictions on telephone companies going into cable and cable going into telephone. The bottom line is that these companies that have older networks deployed and want to expand need new revenue streams. If they are limited by laws enacted at a different period when the business was more monopolized, then it's going to be much slower than if those laws are changed.

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