Digerati - Chapter 5

Digerati - Chapter 5

Doug Carlston [10.1.96]

Chapter 5


Doug Carlston

THE IDEALIST (Denise Caruso): Doug Carlston does good things, and does them well, and people like them. He doesn't have to be a jerk about it‹it's kind of amazing. He's like that Rodin sculpture. You can feel him thinking.

Doug Carlston cofounded Brøderbund Software after starting a career as an attorney. Today he is its chairman and CEO. 

For Doug Carlston, the Internet is a communications medium. "It's an electronic mail and messaging tool, it's for people to move stuff back and forth, it's anarchistic, it's decentralized. There's no there there.There's a million different theres," he says.

We first met at the Brøderbund booth at the West Coast Computer Fair in San Francisco in 1983. The personal computer scene then was dominated by enthusiasts, which was probably the reason the fair was a such a highenergy event. I don't recall many people wearing business suits, certainly not around the very lively Brøderbund booth, run as a family affair by Doug, his brother Gary, and his sister, the late Cathy Carlston Brisbois.

It wasn't communications that brought Doug there. He'd been programming computers and creating games since the '60s, throughout his years at Harvard Law School and his five years as an attorney in Chicago and Maine. Doug, who cofounded Brøderbund with Gary in 1980, understood from the beginning the notion of authorship. While a piece of software in the business-applications arena can take huge teams of people years to write, the game business is driven by the efforts of individuals or small teams. In this regard, Doug has always been sensitive to the authors' positions and treated them well. He even extended this courtesy to me when he defended my role and the role of the agent in general before an industry association of software publishers in 1984. This was around the time Mitch Kapor of Lotus was calling me "the Darth Vader of publishing," probably in retaliation for my comment in PC Magazine ("Show me someone who uses a spreadsheet and I'll show you someone I don't have to talk to.")

Doug is steady, levelheaded, and deep. He takes his time. He is patient. He is "The Thinker." I have known him as a friend and in a number of different kinds of business relationships, and he is one of the class acts of the industry. He is a genuine enthusiast about his company, his people, and their products.

In recent years, with the brilliant success of Brøderbund, Doug has been spending a great deal of time playing the mogul, working on mergers, attending to the many corporate matters that require his attention.These are reasonable and expected pursuits at this stage in his career, but I have to believe that his heart is still closely tied to the creation of great software products.

Doug believes that people who come to a Web site do not want to be an audience; they want to interact. "They don't want to spend more than a minute to read something," he says. "They want to do something. They want to click on things and make things happen. They don't want to sit there and be talked to or preached to." He stresses the need to engage people in an interactive process. "Again, that contentword gets in the way," he says. "This is not the medium for the deliverable.You can deliver stuff to people‹technically it's possible.But that's not why people are there.When they're online and engaged, they want to find something and move on."

Brøderbund has become a giant consumer software company because Doug knows what it takes to create a successful product (such as Print Shop, Myst, and Living Books). He thinks like both a programmer and a customer. Current developments on the Internet are only a first phase, he says, "a building block for a much more robust and technically rich environment in which people are going to participate."

THE THINKER (Doug Carlston): Environments like the Net tend to grow organically.They expand not according to any one person's conscious design, but because the Net is by nature a collection of individuals all making contributions to it. The growth is at an exponential rate, though not as much in terms of size asin terms of features and feature sets.Once you get standardization and consistent ways of displaying information, you've suddenly got millions of people with a common set of tools.Today's Web will be unrecognizable in five years.It will essentially be modeled on the real world and involve a three-dimensional prospectus, full-motion video, and avatars.
One of the biggest misperceptions about content is that it's an asset that endures, that has value, like catalogs, libraries, film records, music records, or written archives.However, as Esther Dyson points out, the time value of information on the Net is extremely short. Things degrade instantaneously because you're on the world's largest copying system.Esther suggests that you may not be able to charge for information at all. Not only does information want to be free, as Stewart Brand has said, but information is going to be free, whether you want it to be or not. What has value on the Net is the creative ability to unfold, to create new content on the fly.

People are definitely on the Net to find a community and to interact with other people, not just with content.The nature of the interaction is important. There are things that build a sense of community and things that do not. Esther has argued that purely commercial transactions do not foster a sense of community. You can have a marketplace, but you really need noneconomic transactions, what she calls gift transactions, to strengthen the community. You need a free interchange of ideas so that ideas become part of the common glue that holds everybody together and creates value. Online communities like The Well really are communities. Over time, a couple of defining characteristics have emerged from these communities. One is that they weren't too big, so the people involved tended to get to know one another.A second is that there was a lot of sharing, rather than buying and selling. Marketplaces, although socially useful, probably don't create the kind of ties between individuals that you would want to see.

If you want to build a location‹a homepage or a community‹on the Net, I would argue that you need to have noneconomic as well as economic transactions occurring all the time.Authors might come to Author Night and interact with people, not just to get people to buy their books, but because people want to see the name behind the product and want to interact with the author. That makes the relationship more special.People are probably more likely to buy a book from someone they've interacted with in one way or another. More than that, it makes them value the place they went to engage with the author. Bookstores know this; that's why they have author events. You can do that so much more effectively on the Net.

Providing books to the public electronically or on the Net is not likely to be very successful.The cost of delivery of a printed book to the average user is extremely low now; it's at an impulse-purchase price. The convenience factor is overwhelming. You can take a printed book to the beach; you can pop it in your pocket. I can have five hundred books on a CD that I carry with me but I go on very few trips where I need to read five hundred books. I don't see a CD being a more convenient way to access written text.

The force that drives a book into digital form has little to do with repurposing content and has everything to do with the mechanical process of printing.Publishers are finding that their costs drop dramatically if they can produce digital copy rather than printed copy for typesetters.You introduce fewer errors in the process, you get much quicker turnaround, you get exactly the kind of page layout you want, and you can even come up with standard templates. The mechanical part of publishing, not the sudden access to an electronic book market, is going to drive the digitalization of the printed word for book publishers.

Publishers are trying to redefine themselves by securing the electronic rights to books, because even though opportunities are still limited, the profit margins and overall revenues for digital books will be substantially higher than the typical profit margins for printed books.On average, we can move many more consumer PC products than the average book publisher can move books. Publishers will try to shift their sales forces to give salespeople experience in selling at these much higher price points, at $40 consumer price points instead of a tenth of that. The once-clear division between retail bookstores and retail software stores is starting to erode.Software stores carry books, and a lot of bookstores carry software.

The problem withbroadcast businesses is that they fall over into the part of the network currently occupied by broadcast devices, cable into the home to television sets. They've been thinking in terms of set-top boxes, slightly increasing the interactivity, delivering five hundred channels to the home, and so forth, but what's exploding now is the other side of the picture: the PC side, the telephonic side, the communications side. Exponential growth is occurring in this area, regardless of bandwidth. People are going off the curb there on bandwidth, still tapping in at 2400 baud, without being held back.They don't really care about the latency or response time. They want symmetry and real interactivity.People don't want just to be on the receiving end of a whole bunch of content. They'd rather participate.Furthermore, they want to be able to give as good as they get.The telephone companies understand that they're in the communications business.

One business that is going to be enormously affected by the Web is direct sales.Because of postage, printing, and other costs of getting your marketing materials to the customer, you have to get a 2 percent response on your mailing in order to break even. If you want to send your materials to one more person, you still have to pay for printing and postage.On the Web, your costs at the margin are very low. Adding another person to your direct-marketing or sales list isn't going to cost you anything. Instead of requiring a 2 percent return, you can be profitable at a .0001 percent return if you have a large enough base. This is a profound and dramatic change in the world of commerce. If major players in the catalog business can put a catalog in front of 50,000 people a day and get them to place orders by using a mouse to click on the chosen items, they're in business. They direct-mail the items to the customer using the back office they've already got, and they're infinitely better off.Furthermore, it is possible to target a specific audience in ways that would have been impossible before the Web.

The real question is going to be how to get customers to walk by your homepage on the Web. Suppose Brøderbund puts a button on each of its products that says, "Press this to get customer service for Brøderbund products." When you press it, you connect to a free Web site. While you're there, getting technical support and customer service, you're surrounded by a bunch of stores that sell products related to typical Brøderbund customers, such as parents with young kids.Say we go to Fisher Price, or another company that sells stuff for kids, and we offer to set up a little store on our Web site. "You put your catalog there, and we put a hot button next to every item on the catalog so people can impulse-buy.You handle the fulfillment, and we split the profits with you.Easiest idea in the world, isn't it? We'll have a flow of guaranteed customers; your cost is nothing.You have the same back office you've always had. You don't need to know anything about technology. It's a major business and it can be set up tomorrow.It's not hard, as long as you've got a flow of customers."

Money can be made on the Net by advertising on your homepage in your particular area, though it may not be an efficient use of visual space. People have limited attention spans. Their limit is probably more than one page, but when they go to your site they see only your homepage and you want them to look at other pages. And, your homepage is valuable real estate. You want to do things that will keep people there, within your domain.Can you put a banner in front of them? Sure, but it's a little dangerous unless you have the space right there to convert that into a direct customer relationship such as an order. I'd rather put up three hot buttons selling different kinds of services, products, stores, or catalogs, and get people deeply enmeshed in the process. That homepage real estate is too valuable to me.

The problem with most of the large companies thinking of themselves as content companies is that it doesn't get them anywhere. What Turner Broadcasting really has is customers, and what it has that's marketable to a group of customers is brand identity. More effective is to ask, "What are the natures of the underlying businesses in which I participate?" Turner has a number of good businesses. Probably the best of these is ESPN, which is a brand name to Turner's customers. A lot of people look for ESPN when they want to see sports. That's very powerful. If Turner's assets are redefined as name recognition and a strong customer base, rather than last year's football games or sumo matches stored in its library‹content that is not necessarily proprietary‹you can start to get a sense of where the company can go.

You have to think of the convergence companies in terms of their multiplicity of functions. For film and television, the locus of control historically has been distribution. They have direct access to theaters in a way that independent producers can't match or onto the airwaves in a way not available to others.That distribution function has been the source of most of the profit in film and television over the years.Most film and television companies have been spinning off productive capability to small independent studios so they can fob off a lot of the risk and then pick and choose the more successful projects.Distribution is a whole new game on the Internet, and it's not clear how controllable it is.If the Net stays as anarchistic as it is now in terms of access, then distribution may not be a good way to control it. A better route may be controlling productive capability. In this case, the people who are going to succeed are the ones who get very good at investing in new products and new ideas, and at being right in a commercial sense.

Another thing that the Net changes about the marketplace is that it now becomes possible to sell narrowly targeted products aimed at a particular niche. The marketplace used to be divided geographically. You had X number of movie theaters in X number of towns, and every town was a cross-section of America, with different characteristics. On the Net you have a new world divided into affinity groups. Lesbians under the age of thirty go to one area, and parents with children between the ages of nine and twelve with an income over $60,000 go to another area.With that kind of targetable market, you can start narrowcasting your content.You can build software aimed at a much more specific consumer profile, and the Net will help you get to that group of people.That ability will probably change the nature of content. It will probably mean that a lot more will be written for people who hold very strong beliefs (the National Rifle Association, the Mormons), and see themselves very strongly as a group, even if they're geographically dispersed. Diaspora doesn't matter anymore as long as people can hook up with a Web site or through the Net. If I were one of the convergence companies, I'd focus on getting very good at building new content and creative capability.I'd be less sanguine about maintaining the same kind of distribution control that I've had in the past.I'd see myself as a financing engine for new content.

THE CITIZEN (Howard Rheingold): Doug is an example of someone who started doing something he loved, and it swallowed his life. Fifteen years later, Brøderbund is one of the giants. As opposed to your hippie-esque intellectual revolutionaries like Stewart Brand or Steve Jobs, he didn't come from a change-the-world tradition. Doug is your Midwestern, upright, God-fearing, Middle American entrepreneur. He has good values, and he runs a solid ship. In a world of a bunch of crap I believe they call "edutainment," Brøderbund continues to make some very interesting tools for kids.

THE CATALYST (Linda Stone): Doug is one of the most stable, steady hands in the computer industry. From the time he started Brøderbund, he's been very conservative, and yet he has an organization that understands how to bring content and technology together. He doesn't take huge risks, he moves step by step, and I think he understands the consumer better than a lot of people in the PC business. He also understands consumer software and tries to make products that are evergreen, products that provide interesting experiences again and again.

THE SAINT (Kevin Kelly): Doug has a great heart for the young, new start-up and what they need, and has a very good eye for detecting the kinds of things that people are going to want five years from now. I don't know how he does it.

THE GENIUS (W. Daniel Hillis): Doug proves that nice guys can do well in business. Everybody I know who's worked with him,worked for him, or gone into a business partnership with him has nothing but good things to say. I would be willing to do any type of business deal with Doug without a contract. It's nice that there are successful people in the business who operate on that basis. His company, Brøderbund, has raised the quality level in children's software; it's invented whole new product categories, like living books.

THE SEER (David Bunnell): The smartest business people play their cards close to the vest, and Carlston is a great poker player. I suspect that his opponents consistently underestimate him.

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Excerpted from Digerati: Encounters with the Cyber Elite by John Brockman (HardWired Books, 1996) . Copyright © 1996 by John Brockman. All rights reserved.