<nettime> (fwd) Fall of the CyberGods is Predicted - The Johnson Case

["geert lovink" <geert@xs4all.nl>]

See for more: http://www.thedigitalasset.com/public/oct00/cyberguru.html

Wednesday, December 6, 2000
THE DIGITAL ASSET

The varying fortunes of CyberWorks' cyberguru
by Steven Ribet

     What has happened to Michael Johnson, the visionary behind Pacific
Century CyberWorks (PCCW) and creator of its Network of the World (NOW)?
According to spokeswoman Joan Wagner, PCCW's executive creative director has
been re-posted from the company's London studio to Hong Kong to "advise
Richard [Li]". Towards the end of November 2000, a revamp of the service
will see a "move away from being a producer to an aggregator of content".
Johnson will work on "migrating the English NOW to Asian language models".
     In mid-November, however, sources within the company said Johnson has
been effectively removed from his position at NOW's helm. PCCW will be
abandoning his model for the new media. From streaming video synchronized to
web content, the service will shift towards television-based financial news.
Johnson, it seems, has been withdrawn because of a growing realization - by
both the markets and within PCCW - that NOW has failed to live up to
expectations.      Both Wagner and Johnson reject the claim. "He is still
very much a part of the team," says Wagner. "It's not true," echoes Johnson.
"The synchronized model will still be at the centre of NOW."
     Yet questions remain. Why has Johnson been recalled from London? At a
time of crucial overhaul, why is he on holiday; "his first in three years",
according to Wagner? Against an insistence that "I was never actually in
charge", even a press release description of Johnson as "NOW's driving
force" looks like an understatement. "He was NOW," says a staff member.
"There was really only one person behind the operation. In the extent to
which we followed him, he wasn't a guru; he was a god. And right from the
beginning Richard Li was a convert to his vision."

A wild idea
     An American who studied film in New York City, Johnson's ties with the
Li family stretch back to the mid-1980s when he sold an idea to launch
Asia's first commercial satellite to Richard's billionaire father, Li
Ka-shing (see box). As a senior figure in the senior Li's giant Hutchison
Whampoa conglomerate, he then became something of a mentor to Richard. After
young Li graduated from Stanford University at the decade's end, Johnson
took a position at the budding tycoon's right hand in a venture into
leased-line satellite telephony.
     Johnson's next venture with Richard is now folklore in the Hong Kong
business community. In 1990 he orchestrated the establishment of STAR TV,
later sold to Rupert Murdoch's News Corp for a US$700 million profit. While
Richard used these gains to establish the Pacific Century Group (PCG), a
property development company, Johnson remained in media. He headed the teams
that set up MTV Asia and the BBC's world television service, before
rejoining PCG as Li's senior adviser in 1996, as the group shifted focus
towards the burgeoning new industry of the Internet.
     CyberWorks, as the new technology unit was named, caught the media's
attention by striking deals with Intel (in 1998) and the Hong Kong
government (1999). The real commotion, however, came with the 18-fold rise
in its stock towards the end of last year, making Li one of Asia's
wealthiest individuals.
     "At the time, investors perceived PCCW had developed two insights into
a highly valuable business proposition," says Greg Feldberg, head of
Indosuez WI Carr's convergence team. "First: satellites could be used to
provide broadband Internet connectivity to the entire continent. Second: a
presentation convinced the financial community the converged Internet and
television could amount to a compelling new form of media."
     If correct, such an account would again put Li's astonishing success
down to the efforts of two men. Li himself put together the hardware. In two
years he signed deals with the companies who would put each link in his
giant, continent-wide Web: from satellite manufacturers, to cable operators
and the engineers who would upgrade their networks, to the chipmaker that
would make television set-top boxes for a new kind of Internet access.
     Johnson, meanwhile, developed the software. Working with Lemon, a
cutting edge web design company located in Hong Kong's mid-levels, he
masterminded the creation of early prototypes for NOW. In twelve months
these evolved into the template for the portal today; a linear video
presentation intersecting simultaneously with a non-linear exploration of
the same subject via the Web. Unveiled to analysts a year ago, a specially
made 10-minute demonstration of this model was key to the company's dramatic
stock surge. Its future is now in question.

The right model
     As philosophers of the Internet like to point out, in these early days
of the World Wide Web nobody can predict what new media products will
eventually look like. Just like the detective novel, the soap opera and the
radio news bulletin - themselves the product of technological innovation -
formats for cybermedia will become established after a long period of
experimentation.
     Yet Johnson had very strong ideas about where he was going. The shape
and look of any new media, he figured, would be a product of the
technologies that make it possible. This has always been so. It has all been
part of a big pattern. Start four decades ago. Television content of the
1950s was expensive to produce because it took a large crew to carry around
and handle lots of bulky, expensive and complicated equipment.
     Eight-millimetre, hand-held cameras changed this. Taking their cue from
the new technology, the directors of French cinema's New Wave managed to
create more compelling content at lower cost. While subject matter became
more personal and direct, their work had a new quality, featuring jump cuts,
jittery camera angles and so on.
     The advent of 6mm Nagra portable recorders in turn enabled the gripping
photo-journalism of the Vietnam War, complete with its own aesthetic and
achievable with a crew of only three men. Production teams shrunk again with
Betacam in the 1980s. Digital video, the idea goes, continues the process.
Equipment continues to become cheaper, more portable and easier to use.
     To see the evolution's latest phase, take a look through the window of
NOW's Internet booth in Hong Kong's yuppie drinking district Lan Kwai Fong.
Sony DV camcorders retail for around HK$10,000 (US$1,284) and can be held in
one hand. No training, however, is needed to produce content as hilarious as
America's Funniest Home Videos, or as riveting as The Blair Witch Project or
the enormously popular recent American TV series Survivor. With a cheap PC
and Photoshop software, footage can be packaged into productions of
professional quality. Grainy, compressed pictures and shifting movement, the
look and feel is distinct and new.
     Most importantly, broadband Internet is a universally available
distribution channel, something that in the 50s would have been available
only to a handful of terrestrial broadcasters. A key corollary of Johnson's
theory is therefore that the Internet blurs the line between content
producers and content consumers. While the best footage of the recent
Singapore Airlines crash was taken with a handicam aboard an adjacent plane,
the freshest and most vivid reportage of a riot in Jakarta might be relayed
via email from friends in the city.
     But not only does "real time data becomes drama," according to Johnson.
As well as allowing "the workers" to seize the means of production and
distribution, today's technology enables easy and instant feedback through
forums and the like, to dictate the course or evolution of programming. The
Internet, in other words, will turn the traditional media landscape upside
down because, says Johnson, "the audience is now in charge like never
before".
     But how does all of this figure in NOW? Well, the style of digital
production is certainly apparent in the portal's video streaming. Footage is
shot in natural light. It has a less produced, more immediate and uncut feel
to it. Background graphics are likewise less slick; all part of the "web
aesthetic".
     As for user-generated content, take NOW's mp3TV, which invites
"viewsers" to email in their own songs. Studio staff select the best
submissions and create content around the group; biographies or
documentaries with links to relevant web-sites. The idea of "harvesting" the
Internet to aggregate content from the hottest home and community sites, is
an integral part of the production processes blueprinted by Johnson. "The
community drives the content," he insists, and with a thumb on the pulse of
the global cyber-village, NOW responds to emerging trends, presents them
while they are still cutting edge, and hones its menus with user feedback.
     Such a grand theory has captivated Hong Kong's financiers, including
the high profile Matei Mihalca. Merrill Lynch's head of Internet research
said in a recent report that "user-generated and interactive content will
prove to be more popular than professional proprietary content". This
conclusion, he admits, has been influenced by meetings with Johnson. "He has
thought about it and I agree with his opinions. Every time the cost of
production has gone down, it has created a new form of expression," Mihalca
says.
     The sway of the vision also extended to inside PCCW, where Johnson was
seen, according to one insider, as "part guru, part madman". "Do you think
Michael got his ideas by reading a book?" the staffer says. "Nope. I don't
think anybody has thought so logically or deeply about the New Media. He was
a true visionary."

Dream to reality
     To realize his scheme in Hong Kong, Johnson originally pushed to buy
Lemon. When negotiations failed, production was shifted to the leafy west
London suburb of Chiswick, where US$150 million has been spent to date. In
some ways the city was a more natural choice. A deal with sports programmer
Trans World International has given NOW easier access to content, and
artistic talent is more abundant. "London has edge," as Johnson puts it.
     Once in the capital, the intensity of Johnson's ideas was surpassed
only by the diligence with which he set about putting them into practice. A
designer at the new production centre recalls him working 12, even 16 hours
a day. Management was emphatically hands-on. "He knew what everybody was
doing," says one subordinate. "I reckon he knew the names of every one in
the 300 staff there, even the cleaning lady."
     At first, the studio boss's drive and sense of purpose was widely
admired. "His idea model for NOW was undoubtedly a strength," says a senior
manager. "We couldn't do what other sites were doing and we couldn't copy
television. Michael Johnson showed us the way. When you look at what portals
like sina.com or tom.com are doing, you have to give him credit."
     Such single-mindedness, however, cut both ways. "Somebody like that,"
says one staffer; "nobody disagrees with him if they want to work for PCC."
A manager agrees. "He was like a god," he says. "But there are only two ways
to approach such a man. You can either worship him and agree with everything
he says, or you can be told to get out." A colleague recalls this is indeed
what happened. "He shouted a lot. He was blunt and he would cut people
down," he recalls. "There was a lot of fear. If people were presenting
something to him and he felt they were bullshitting or they got something
wrong, he would come down very hard. He was a charismatic guy; but there was
another side to him."
     If good management is less about talent than attracting and getting the
most out of talented people, Johnson was doubly lacking. Senior staffers had
a habit of getting fired, resulting in a shortage of experience in NOW's
higher echelons. "Creative people want to feel empowered," says a staffer.
"Good ideas sometimes come from the bottom up, not always top down. With
Michael, people weren't entitled to their own opinions. He just wanted you
to agree with what he wanted and go and do it."
     Of course, not everybody did so. Web-synchronized television, some
objected, was too "burdensome". Too many resources were needed to produce a
limited amount of footage. "All those layers cost a lot of money. The demo
they showed investors took a whole team of designers six months to produce,"
says a manager.
     Another believes contradiction lies at the very heart of the NOW
concept. "We have a lack of deep content," he says. "We are supposed to be
accumulating a library for eventual recycling. Yet the stuff we produce -
immediate, up-to-the-minute and cutting edge - is highly perishable."
     Perhaps the passive nature of television might even be incompatible
with the more active behaviour of web surfing. Yet more resisted has been
Johnson's shift of production control away from professionals. "My friend's
five-year old daughter knows how to use a DV camera," says a director. "Do
you want to sit through half an hour of her stuff?" Whatever the truth, a
manager recalls that by late June Johnson's inability to accommodate
disagreement had divided staff at London into two camps; those who disagreed
with him on what convergence should mean, and those with "a blind,
unquestioning belief in his ideas, almost to the point of the Emperor's New
Clothes." "He had some crazy ideas," says the manager. "Lucky for him that
one of the only people taken in had the wherewithal to try them out: Richard
Li."

The dry run
     If this was true, Li's enthusiasm for Johnson's work in London was
tested on July 4, when the soft launch of NOW was greeted by a flat response
from the stockmarket. The world, by this time, was closing in on the golden
bachelor. Not only had the stock taken a pummelling during April's Nasdaq
meltdown. Investors were also increasingly nervous about the US$12 billion
PCCW was borrowing to take over Hong Kong's former telecoms monopoly, HKT.
     As the summer wore on, more analysts were waking up to the fact that
B2C e-commerce and advertising - two planned revenue streams - were very
difficult to make any money out of on the Internet. The third, subscription,
already looked like a complete dodo. Maybe NOW was even a "zero revenue
model". And if so, what about the company's IP backbone when, in the words
of executive vice-president Jeffrey Bowden, "Having content without
distribution is worthless, and having distribution without content is
worthless." NOW, according to Johnson himself, is "the glue that holds it
all together".
     From mid-August, the merged company's fortunes turned from bad to
worse. Judging Western Europe's hugely costly 3G auctions a huge mistake,
the markets turned on telecoms companies, destroying US$250 billion of
capital in two months. Business partners started to desert Li too. In one
day on September 8, CMGI, ERA Communications and Taiwan's GigaMedia all
pulled out of joint ventures. PCCW's stock now hovers below HK$6.00, more
than 77% down from its February high.
     While PCCW's salient preoccupation is debt rescheduling, NOW soldiers
on. A narrowband precursor to its Hindi service was launched early last
month. Jaleco, a Japanese gaming manufacturer has since been bought out and
renamed PCCW-Japan. The deals underline the fact that the service today is
essentially a dry-run. A "second generation" NOW, due for release towards
the end of November, will form the basis for the real thing. With or without
Johnson's involvement, the television/set-top box NOW is due for launch in
greater China, Japan and India next year.
     Yet in spite of an October 24 briefing on what to expect, scepticism
persists. "The market attaches zero value to NOW," points out Michael Leary,
an analyst at Lehman Brothers. "From the first month after launch, the
consensus within the company has been that NOW is a flop," echoes a PCCW
manager. Deriding the portal's disappointing ratings, unaudited but perhaps
200,000 visits per day, a joke now doing the rounds digs NOW as standing for
"no-one watching".
     Perhaps this is why at last October's analysts' call, CyberWorks' CFO
David Prince announced spending on NOW would be reduced "to what we can
afford".
     Whatever NOW's fate, the ongoing post-merger rationalization will
undoubtedly result in the bringing together of NOW with HKT's two other
interactive services. These are its broadband interactive television (iTV),
with its disappointingly slow subscriber growth (now at 90,000), and the
Netvigator portal (560,000 customers).
     And after that? PCCW's November 9 announcement of an online
stockbroking partnership with Chase JF is in line with a shift towards
financially-based web-TV. The markets would like this: not just because
stockbroking has turned out to be about the only type of B2C where money can
be made. Audiences around Asia have also shown they are prepared to pay for
this kind of content.
     As for Johnson himself, "the road to discovery is littered with the
bones of explorers", NOW's creator once observed. The question remains as to
who, exactly, this observation will apply.

 © The Digital Asset.

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