While your juggernaut plugs along at 15% annual growth, you watch in abject horror as Dr. Koop launches some sort of web site which inexplicably blooms to a $2 Billion capitalization overnight — with no revenue. Angry investors jam your voice mail with demands for 100% weekly returns, and inexplicably your cash business is eclipsed by the market capitalization of an Internet Services Provider who lays claim to 30 million internet users — at a time when, arguably, such quantity of ‘net surfers doesn’t even exist. Time for a vacation!

Before your toes even hit the sand, however, you’re yanked back into reality from your Cayman Islands hideaway by Wall St. rumours of a takeover bid from said ISP whose valuation has bubbled to make it one of the largest companies in the world. You find yourself sitting in a room as the tieless, Dockers-clad “visionaries” who run this ISP pick apart your company’s formerly impressive stable of assets as though it were the carcass of some wildebeast. You learn the mantra: “Old Media is Dead; Long Live New Media!”

Rather than fighting the inevitable and angering your investors even further, you decide to play the game and give ’em what they want. You check your retirement clock and remind yourself that it’s been a good run, you’ve assembled a nifty little media conglomerate; and you begin to search for the perfect 46′ sailboat in which to sink the better part of your fortune.

Like a hermit crab, the ISP’s prodigies dump their shell and slide comfortably into yours, expressing no particular interest in making movies (except for some strange production called “You’ve Got Mail”) or quality Lou Pearlmann(tm) productions. Instead, they gleefully continue to ship out hundreds of millions of CD ROMs to every penthouse, cathouse, outhouse, and doghouse in America; citing some fuzzy concept known as “customer acquisition”; and inexplicably writing off the whole thing as “capital expenditure”, so that it doesn’t show up on your company’s rosy EBITDA.

This all raises your eyebrows of course, but what are you to do about it? These, clearly are the methods of the New Economy; so it’s best to just keep quiet and continue picking out the perfect varnish for your schooner. These new kids are running the show.

Deep within the bowels of your huge conglomerate, some of those New Media kids write some software that allows people to share and copy your Old Media products. Rather than trying to sell the software, they give it away — in fact, they give away the source code. Your heart beats wildly out of control and your temples nearly burst. As your fellow old-media cronies happily stomp all over some other music piracy tool called “Napster” you are forced to the sidelines.

Then, one day, the bubble bursts. Advertising sales drop off. There are no more crazy start-up companies who can pay multimillion-dollar “slotting fees” to expose themselves (sometimes literally) to your 30 million (or less) ISP customers. Desperate, the whiz kids decide to explore “creative options” to keep the revenue train rolling. They make deals to exchange advertising with other companies, booking the trades as revenue. They broker ad space for other online companies and book that as revenue, too. Very creative accounting, they tell you.

But as Dr. Koop and Boo and DEN and eVoice and all the rest start to drop like flies the ire of the investment community turns to the Poster Child for all that is On-Line, and eyes the smoldering heap of what once was your company (now a quarter-over-quarter money-loser) suspiciously. “What’s wrong with the fundamentals?” they ask. “Things were looking so promising!” With 9 out of every 10 of your ISP’s business partners dead and buried, any answer you could provide is merely rhetorical.

You turn to the whiz kids who attached this parasite to your company for answers. Peering at you over the plans for their 13-room Chesapeake Bay mansions they offer no solution, save offering their resignation to “pursue other business interests”. As investors begin to lay siege to your voice mail once again you hire more bodyguards and call the suits back in to laboriously establish your restructuring plan.

During a late night session, one of the MBAs comes up with a brilliant idea: Using something called “Good Will” you can essentially shrug your shoulders and shed some of the needless expense from your balance sheet, thus justifying a diminished valuation and setting the stage for positive growth. You ask the MBA how much “Good Will” will be good enough? The MBA says: “All of it.”

So, you do it: you bite the bullet. You take the entire value of your parasite at the time of that once-hallowed merger and you kick it out the door, exonerating yourself from having to answer questions about its profitability (or the absence thereof) for the immediate future. “Good Will” indeed, but the market begins to hammer you into the dirt, and it hurts. You begin to think maybe a 30-footer would be good enough.

Luckily for you, some crazy fools fly 767s into the World Trade Centre and every company gets hammered. With the full-on stoppage in the economy, you take the opportunity to shed some of the cabal of twentysomethings that were installed by the Dockers-wearing set and build a team to restructure some of their now failed operations. Maybe broadband would be a good tie-in for all of your media properties, you surmise.

Things all seem to be hobbling along smoothly until some fools in Texas get caught pinching from the cookie jar, artificially inflating world energy markets, and generally wreaking havoc with the economy. As their own bubble burts, what remains of the investment community starts to scream — echoing their sentiment, every politician in the capitol declares that heads will indeed roll.

As the snowball rolls down the hill, gathering with it telecommunications players, software companies, hardware manufacturers, and any others in its path, you get a distinct tingling feeling. You remember something about writing off marketing campaigns as a capital expenditure. You wonder to yourself: “is that legal?” One of your expensive auditors buys you dinner one evening and reminds you about something to do with your ISP’s “creative accounting.”

It’s too late.

-Ian.

Netscape: We’re in media, not browser business now

By Reshma Kapadia

NEW YORK, June 6 (Reuters) – AOL Time Warner Inc (NYSE:AOL – news) is remaking its pioneering Netscape software business into an Internet media hub brimming with Time Warner artists and publications, aimed at office workers and Web purists not already using AOL services. ADVERTISEMENT

“The browser is a crown jewel. However, six months from now, you won’t consider Netscape to be a browser company,” Netscape President Jim Bankoff told Reuters in an interview, referring to its early role in creating the first popular tool for surfing the Web.

The shift recognises the overwhelming dominance of the Internet Explorer (IE) browser produced by arch-rival Microsoft Corp (NasdaqNM:MSFT – news), and frees AOL to focus on new media markets now taking shape on computers, phones and television.

The revved-up Netscape media strategy signals that AOL Time Warner is stepping up the integration of its varied business units following the completion of AOL’s $106.2 billion purchase of Time Warner Inc in January.

Netscape, which plans to embark on a brand advertising campaign later this year, wants to act as a hub for the wide array of core Time Warner media properties — such as Fortune and Time magazines and the 24-hour cable news network CNN.

So far about 18 Time Warner publication and programming sites, including CNNfn financial news and CNN.com, have been embedded in the toolbar that runs along the top of the Netscape media site.

NETSCAPE SOFTWARE TO ACT AS COMPONENTS FOR MEDIA SERVICES

Netscape is by no means a rejection of its software legacy, as components of its browser technology will continue to power new features of Netscape’s media services aimed at office workers, small businesses and sophisticated Web users.

“We have all been waiting to see if they stake the crown on the technology, on the name, or on the parent and it become more of an extension of a grander thing,” said Lydia Loizides, analyst at Internet research firm Jupiter Media Metrix.

“It’s not going to be Netscape, but rather Netscape.com,” Loizides said.

AOL Time Warner’s retreat from creating distinct Netscape browsing software figures in the on-again, off-again talks the company is holding with Microsoft to renegotiate its licence to embed the Internet Explorer in its AOL service.

The talks, which broke down last week but are said to have since resumed, would extend a five-year AOL-Microsoft browser deal that expired in January of this year, among other topics.

But in an industry that does not know how to stand still, the rivalry has shifted to instant-messaging services that incorporate browser-like Web surfing features with the capacity to swap messages rapidly among friends and colleagues.

Microsoft is incorporating an instant-message service it calls Windows Messenger into the next version of its operating system software known as Windows XP that offers audio and video conferencing, file transfers and text messaging. This change means customers of alternative instant messaging and Web browsers would have to go to extra effort to use such systems.

The expired Microsoft pact had allowed AOL’s software to feature on the desktops of many Windows PCs, helping fuel the growth of AOL services. AOL still relies on Internet Explorer as the built-in browser for its now 29 million subscribers.

Bankoff said Netscape’s strategy will not be altered regardless of which way the talks with Microsoft are resolved.

He confirmed that AOL has been testing “Komodo” software, which would let AOL and CompuServe Internet services support multiple Web browsers, including Netscape, as well as perform various other functions.

Netscape is also trying to increase the reach of its technology platform and has struck recent deals for its browser to be used in Sony Corp’s PlayStation 2 and direct computer seller Gateway Inc’s (NYSE:GTW – news) Touchpad.

“We are finding demand for more than the Internet browser in the marketplace,” Bankoff said, contrasting Netscape’s partnering moves to what he considers Microsoft’s winner-take-all model. “You will see more pacts like the one struck with PlayStation.”

NETSCAPE, THE ALTERNATIVE MEDIA BRAND IN THE AOL STABLE

The historic transformation of Netscape into media property has been underway since AOL bought Netscape in 1999 and Time Warner in 2000 to form the world’s largest media company, with interests ranging from music to film and across the Internet.

Netscape.com’s base of registered users has grown 37 percent to more than 40 million worldwide from 15 million in February 2000, the company said.

The Netscape target user typically surfs the Web at work, often on high-speed connections, and resists the packaged online experience AOL creates to draw mainstream audiences who find wide-open Web surfing confusing or overly complex.

“We call them the ‘a la carte’ crowd. (Netscape users) have a perceived interest in finding their own things,” Bankoff said.

Bruce Kasrel, a Forrester Research analyst who had yet to be briefed on the new Netscape plans, said ahead of the announcement last week that Netscape needed to pursue a hybrid media and software akin to that of Microsoft’s MSN Explorer.

MSN allows users to custom design the mix of Web searching, news updates, communication features and other services using Internet Explorer technology. Similarly, he predicted AOL Time Warner would fold Netscape software into its media properties.

The media hub strategy gives Netscape a chance to sell advertising across its many properties — something AOL Time Warner is well known for doing — and to test the waters for subscriptions rather than just free services, Loizides said.

“Because they are repositioning themselves, they are a bit freer to experiment than Yahoo! or other services,” she added. “Things they could test include subscriptions services” for unique Time Warner programming or special Web software.

The formula of using Netscape to create a central Internet meeting place for Time Warner magazine readers and broadcast viewers echoes in certain respects the push by Time Warner in the first half of the 1990s to draw users to a single site. That site, known as Pathfinder, failed to keep Time Warner readers within the site and eventually closed.

Netscape can tap an unprecedented wealth of exclusive media content ranging from music pop star Madonna to the hit crime-family drama “The Sopranos” now running on U.S. cable television, Loizides said.