Portals Take Lumps at Digital-Media Seminar

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New York -- It might be time to heap
"portal" on the discarded-buzzword pile, along with "information
superhighway" and "interactive-TV service."

Judging by panelists at last week's Kagan Seminars
Inc. Digital Household Summit here, both the word and the concept are becoming anathema.

The word -- hung lately on companies like Yahoo! Inc. and
Infoseek Corp., which are frequent first stops during Internet searches -- is unpopular
because it implies a doormat that people step over to get to someone else's site. No
service provider wants to be a doormat, and Wall Street analysts have trouble recommending
doormats.

"It's really tough to make the portal case,"
PaineWebber Inc. media analyst Christopher Dixon said, although media companies such as
The Walt Disney Co. (Infoseek) and NBC Inc. (Snap!) have been buying portal stakes.

Dixon said he prefers companies such as
streaming-video-technology provider InterVu Inc., which are using digital technology to
help clients cut operating costs.

Scott Kurnit, CEO of The Mining Co., said on another panel
that he prefers the term "trust broker" to describe his service, which employs
human guides to help searchers find Internet content. Of course, when seminar leader Paul
Kagan said that portals, by definition, have huge public-market capitalizations, Kurnit
quipped, "I'm a portal."

Dixon said picking the right digital-service stocks starts
with making core assumptions about customer-acquisition costs and penetration rates.

For example, assume that a cable operator takes in $30 in
average monthly subscriber revenue. If that operator adds a $10-per-month digital tier and
achieves a 30 percent-penetration rate, that's another $3 in monthly revenue, and
probably $1.50 in monthly cash flow.

Transactions such as AT&T Corp.'s deal to buy
Tele-Communications Inc. and various consolidation deals within the cable industry are
based partly on cutting per-unit equipment costs and accelerating penetration rates, he
said. That adds up to more incremental cash flow from new services, justifying higher
prices for cable stocks.

Sanford C. Bernstein & Co. analyst Tom Wolzien said he
hasn't noticed that consumers are gaining leisure time. Instead, there are more
"media-access" opportunities vying for that limited time, so investors have to
"start making judgments here as to what's going to go down and what's going
to go up."

Often, those judgments are wrong, Wolzien said. Many
assumed that Blockbuster Video was dead, but it's coming back strong, he said. If
video-on-demand services are going to grow, what's going to shrink: Blockbuster?

Following on Dixon's point about equipment
availability, Wolzien said TCI's concept is to drive advanced-digital set-tops into
more than 90 percent of its homes, and then to drive viewers to electronic-commerce sites
-- "going right over the top of the established portals."

Dixon said that among transporters of digital data, he
favors cable over the phone companies, which probably won't build
digital-subscriber-line services into a serious threat to cable modems.

Among content aggregators, he favors more established brand
names such as America Online Inc. and Yahoo over Lycos Inc. and Excite Inc. But he added
that even among the likes of AOL, @Home Network and Road Runner, not all will survive.

Warburg Dillon Read analyst Edward Hatch pleaded the
portals' case, saying that consumers will start searches at topical sites, such as
ESPN SportsZone or Cable News Network's CNN Interactive, but they will still return
to more generalized "card-catalog" sites to see what's new.

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