"Don't Think of Microsoft as a Primary Competitor"
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Editor's note: The following is an edited transcript of the speech Microsoft Chairman Bill Gates delivered to the NAA Annual Convention in Chicago. Click here to view the full transcript. |
Microsoft Chairman Bill Gates makes a point during his speech to the NAA Convention. |
Over the last 20 years, the cost of computing has dropped by a factor of a million. In the next 20 years, we can say for sure that the cost of computing will drop again by a factor of a million. So everyone will own, for very little expense, computers hundreds of times more powerful than the most powerful computers we have today.
If you look at the newspaper industry as a user of technology, it was a pioneer. You were among the first to move to digital typesetting. You helped bootstrap a lot of technologies. The bad news is, those systems are very fragmented today. Some of them are very old and not very well integrated.
The idea of a platform is very important. By moving into the mainstream of PC technology, there is a very straightforward way to use inexpensive building blocks, systems that are dramatically less expensive than even maintaining the old systems.
Moving Windows into this publishing area has been a big focus for us--color management, font standards, getting the proprietary systems moved over so there is an evolutionary path.
Let me now shift and talk about the Internet, and what I see newspapers having the chance to do there.
The Internet has very low cost of entry. Anybody who gets a PC and gets a little bit of software can set up a Web site. That means that everyone is a publisher.
Now, the primary role of Microsoft is to provide cheap building blocks: Windows NT, Office, Front Page as an authoring tool, things to help you manage your site, software to rotate ads, software to see what is popular on your site, software to create communities, where people can come in and chat about issues.
Even very small newspapers, for a budget on the order of, say, $40,000 to $50,000, should be able to get the communications lines in and set up a wonderful Web site that covers a vast range of areas. There is no need to go to proprietary systems or even spend a lot of money. The building blocks are there. Once you have them, the rest is up to you in terms of editorial creativity and advertiser relationships.
Of course, what people have done with the Web is, primarily, taken print-based material and simply made it available. So the Web is just a distribution medium to get things out there at lower marginal costs and in great timeliness. As people are getting more experienced, though, their expectations are going up quite a bit, and republishing is no longer enough.
We have to take advantage of this new medium, and I don't think anybody knows yet its full potential. I think some of the key things are: always up-to-date, in-depth information, as much as you want by following links, and an experience that includes audio and video as well as plain text. Most important, I would say, is the ability to personalize content.
Now the Internet is a gold rush. Everybody is investing in it, so they go out there and do things without really understanding what the payoff is. Because of this incredible over-entry, it's pretty slim pickings right now in terms of incremental revenue. This gold rush-type atmosphere will stay around for the next four or five years. At some point, things will shake out. People will figure out what the revenue models are, and they will not fund start-ups at quite the aggressive level that they have.
For customers, this is great news. It means the amount of money going into building tools and experimentation is accelerating the market in a way that a rational set of investments might not. We are going to go through what should have been 10 years of evolution in about three or four years.
Newspapers are in a very strong position. People want depth. People want high-quality content. People want someone who has discipline when publishing under time pressure, and brand recognition is very important. I believe particularly in classified ads--the ability of the paper to deliver a print-based offering that includes being up on the Web--and they will be a dominant offering for a long, long time.
There is time to learn, time to get these things right, and newspapers come in with a lot of very strong advantages.
Microsoft's strategy is to learn and continue to play a primary role, which is building software technology. We are an over $12 billion-a-year software-tool company. That will be the primary source of our revenue and our profits forever. That is what we are good at.
We are doing an entertainment guide called Sidewalk. It is more of a competitor to a weekly entertainment guide than to what goes on in the daily newspapers.
So don't think of Microsoft as a primary competitor. Think of us as somebody who can provide technology and, in some areas, like Sidewalk, maybe there will be some overlap. It is not core overlap. We are not doing local news. We are not doing classifieds. In summary, I really see an opportunity for you to use technology. You have some fantastic strengths, I think, in terms of local information. Newspapers are going to lead the way, and the Internet will be part of your portfolio businesses. It will not replace the other things that you do, but it will be in there and be important.
There will be a lot of competitors, particularly in these next four or five years. You should not get overly paranoid thinking somebody is a broad competitor, and it is not possible to work with them in some ways. If somebody starts hiring local reporters, OK, then you should get worried. Then they probably are trying to duplicate the whole thing. I dare somebody to do that. It just would not make any sense.
We are at the beginning of the information age. I'm sure many of the people here are going to be the pioneers who show us what the potential is, and we are looking forward to working with you.