A billionaire can indulge his whims.
Movie buff Paul Allen renovated the Cinerama Theater. Paul Allen, a Jimi Hendrix fan, is building a museum as a tribute to the musician. Paul Allen, owner of a professional football team, is spending millions on a new stadium.
But then there’s Paul Allen, investor, who lately has been spending billions, buying something every week or so, from Internet sites featuring Oprah Winfrey to cable companies in Georgia.
What is the man once derided as an “Accidental Zillionaire” doing with his money?
Following through with a decades-old idea, his supporters say.
Internet link by Internet link, cable network by cable network, the Microsoft co-founder is assembling the building blocks of an electronic empire. If his hunches are right, he stands to create a global realm more influential than any of his projects that edge the Seattle skyline.
In Allen’s futuristic “wired world,” fast Internet connections plus easy-to-use technology and cheap computer devices will deliver a simple and universal way for people to shop, enjoy entertainment and communicate. People will call up “Seinfeld” reruns at will, buy a compact disc after watching a music video on TV, and send pictures to family members by punching a remote control.
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But so far, that wired world is one-third vision, two-thirds money.
Lots of money.
Since January, through his cable company, Charter Communications, and his investment firm, Vulcan Ventures, Allen has embarked on a $12 billion-plus spending spree, buying or investing in more than 20 Internet, cable and technology properties.
With other challengers emerging on the national scene, Allen and his team are making an ambitious push to convert the sketches of his dream into hard-wired connections to a future with no certain arrival date.
“More than anyone else I’ve met in this industry, he has the greatest vision for what, ultimately, the user experience is going to represent,” said Russell Horowitz, chief executive officer of Seattle-based Go2Net, in which Allen owns a controlling interest.
“He’s had the vision for years and has been waiting for the rest of the world to catch up.”
Allen has had to wait a long time.
The man who persuaded high school friend Bill Gates to drop out of Harvard University and get into the software-writing business has had the idea of a wired world for decades.
The fuzzy notion gained definition in the early 1990s, with roots grounded in one of Allen’s biggest failures.
Allen, already rich from his Microsoft holdings, invested millions in 1991 in a Kent, Wash., company called SkyPix. The venture sought to broadcast pay-per-view movies and other entertainment to homes via satellite, a technological novelty at that time.
The company flopped.
“It was a disaster,” said Bill Savoy, who headed up Allen’s investment in SkyPix. “It took 90 days to lose all the money.”
But SkyPix gave shape to Allen’s dream of a wired world.
Allen was fascinated by the ability to send information to an individual instead of mass broadcasts, said Savoy, who now heads Allen’s Vulcan Ventures investment arm. Allen declined requests to be interviewed.
Savoy said Allen recognized that connecting low-cost computers to a network represented not only a major shift in the computer world, but also in the way people could communicate with one another.
He wasn’t sure, however, which technology would be the best way to string together the planet. So he invested in several communications companies, including Metricom, which transmits data using wireless technology. He also devoted cash to entertainment properties such as DreamWorks, a programming venture with Steven Spielberg.
But his buckshot approach to investing had contributed to a portrait of Allen as an “Accidental Zillionaire,” as Wired magazine characterized him in 1994. The World Wide Web was in its earliest days then.
Today, Allen’s vision is taking on definition with each purchase, said Adam Schoenfeld, vice president and senior analyst for new-media firm Jupiter Communications.
“There is a design behind it,” he said.
Cable as a growth industry
The first step for stringing together a wired world is choosing the wire.
In April 1998, Allen chose cable. He bought Dallas-based Marcus Communications, the 10th-largest cable operator in the country.
Three months later, he folded Marcus into his newest purchase, St. Louis-based Charter Communications. Then the deals started to fly.
Since January, Allen’s cable empire has leapfrogged to the fourth-largest operator in the country–once all pending acquisitions are completed. In the past six months, Allen has snapped up 11 cable companies with networks from California to Massachusetts, bringing Charter’s total subscriber base to 6.2 million.
But the company isn’t planning to stop its spending spree as Allen competes with major players such as AT&T and Time Warner in a race to build massive cable networks. And AT&T Corp. and Time Warner Inc., with even deeper pockets than Allen, the world’s third-richest man, are devoting billions to build their array of Internet and communications holdings.
Cable television itself is a profitable business. Add the possible sales from offering telephone service over the lines and tapping television-top boxes as a “personal computer in disguise,” Savoy said, and you’ve got a wealth of opportunities.
The thick cable lines that are already installed in many homes offer a way to carry more information via the Internet than thin phone lines allow. This broadband connection to homes is becoming an increasingly valuable channel to deliver retail services, movies-on-demand and other entertainment to consumers.
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But cable by itself is just a “dumb pipe,” said Horowitz, the Go2Net executive. It needs to carry something–programs, services, information–to the consumer. That’s where his business and other Internet companies join the wired world.
Similar to Yahoo!, Go2Net is a destination for Web users, combining popular stock, business, entertainment and informational Internet links in a common Web site. Go2Net would become a strategic part of the wired world as a stepping-off point into cyberspace–a navigational index to sift through and search for all the services and entertainment available on the Internet.
And although the Go2Net name was virtually unknown a year ago, the company has climbed in popularity in recent months. Go2Net’s rapidly expanding family of Web sites most recently ranked 15th among the most-visited networks on the Internet.
It is also a rarity in the Internet world. It makes a profit through advertising and membership fees on some of its sites.
Go2Net is now working on a “broadband portal”–an information-rich site or stepping-off point that helps users navigate the on-line world.
The effort is more than a tinkering with Go2Net’s current Web site. It will take advantage of the high-data capacity of Allen’s cable networks, Horowitz said.
Besides Go2Net, Allen, through Vulcan Ventures, has financed other Internet information or program-oriented sites, such as Oxygen Media, which is developing programming geared to women. That company also has backing from television host Oprah Winfrey and others.
A third corner of the wired world involves the retail sector. Vulcan has developed or invested in Internet-commerce sites that seek to expand ways of shopping on-line.
For example, Mercata, a Bellevue, Wash., company funded by Vulcan, allows multiple customers of the same products to band together and secure a lower price per item than they could as individual customers. The more people who buy an item, the less it costs.
“(Allen) looks at technology as a foundation to deliver value,” said Maggie Wilderotter of Wink Communications, another Vulcan-backed company, which allows television users to request information and order products by simply clicking buttons. “It’s a bold strategy and it’s a great strategy.”