Marketplace: News Archives

Software giant Microsoft has met its match...and it's NOT the antitrust police at the Justice Department forcing the company into a major shift in strategy. Today, Microsoft admitted that the future lies not in its own membersonly online community but in the Internet, the hodgepodge web of data connections that's been growing at light speed over the last year. Robert Smith reports from Seattle.

Smith: "Less than two years ago Microsoft was planing to compete with the Internet by starting a rival Microsoft network. When that service was launched three months ago the company had backed off the domination threat but Microsoft the Network was still seen as a major competitor to Compuserve and America Online. Now it seems the massive growth of the Internet has humbled Microsoft. The company announced today that the Microsoft Network would become just another part of the Internet and much of its content would be given away for free. In the announcement today, Bill Gates acknowledged that the Internet would not provide many new revenue opportunities for Microsoft. He says the company should focus on making access to and use of the Internet easier from the companies flagship products, Windows 95 and Microsoft Office. Analysts had predicted that Microsoft would try and be the company that set the new standard for the Internet but Gates made the surprise announcement that they would endorse another company's standard. The Java programming language developed by Sun Microsystems will be adopted by Microsoft in its new Internet products. Microsoft's Internet strategies are being watched very carefully by the computer industry. The growth of networked computers is considered one of those paradigm shifts that can topple a big company. Gates is trying to prove that he understands that reality and that Microsoft is willing to go with the flow. In Seattle I'm Robert Smith for Marketplace."

Chip Bayers is Managing Editor of Hot Wired, the online incarnation of Wired Magazine. He says Microsoft has come around to a view that rivals CompuServe and America OnLine cottoned onto months ago.

Bayers: "They did not anticipate that the Internet would take off the way it has; they were basically trying to create a parallel Internet strictly for Windows 95 users using Microsoft Network and it hasn't worked. People want to be able to connect to everyone....not just to those few people who are on Microsoft Network.

DB: "So what they'll really sell, through the thing that comes bundled with Windows 95, is Internet access. They won't be stressing this Microsoft Network anymore?

Bayers: "I think that's exactly what we're going to see and I think that you'll see some of the programming that they were planning to develop for Microsoft Network is already beginning to migrate to the Internet. I think that their partnership with NBC news, for example, I think you'll see them developing content for the Internet, not content exclusively for Microsoft network."

DB: "Now let's be clear. When you say that you're creating content for the Internet, you don't necessarily mean for free on the Internet?"

Bayers: "Well, for free to the user, who knows? If you look at what we're doing, and what a lot of other so called "web magazines" or web sites that are commercially supported right know are doing, they are effectively free to users. We don't charge at the front door for HotWired; we sell sponsorships. And people can see those sponsorships, click on the hypertext links in them and they effectively function as advertising on the Internet. I don't know if they're developing content, or if they are going to be able to charge people for content that they're offering on the Internet. I think it's also curious to look at Microsoft as a content provider. There are not many companies that are successful both selling the pipeline and selling the access, which is what they're trying to do with Microsoft Network now. If it is just converting to an Internet access service and then also trying to be a content provider at the same time, I don't see Microsoft ultimately being successful on both ends of that equation." Chip Bayers at Hot Wired.

The Clinton Administration today released its 1996 Budget, Mark Three. The first one didn't balance, the second one was designed to balance in 10 years. The latest one balances in seven...as Congressional Republicans have demanded. Compared to the G.O.P. spending plan, the new White House budget offers far fewer tax cuts, but spends more for job training, student loans and welfare. The administration proposed to trim Medicare and Medicaid spending about half as much as Republicans..the President also wants to freeze federal salaries and cut more deeply into transportation and roadbuilding programs. There's also a bid to save 29 billion dollars by limiting tax breaks for businesses. Congressional Republicans immediately criticized the President's proposal, saying the White House is using rosy predictions about where the economy is headed. But as Marketplace's Washington editor John Dimsdale reports, the administration thinks it has an answer to that.

Dimsdale: "The President wants to sidestep the sticky issue of whose economic forecast is more reliable...so he's proposing an enforcement mechanism to make sure that over the seven years the budget stays on the down slope toward balance.

The GOP favors more conservative economic forecasts made by the Congressional Budget Office, while Democrats say the Office of Management and Budget numbers are more reliable.

White House Chief of Staff Leon Panetta explained the enforcement mechanism for Republican negotiators this afternoon. He said if any year's forecast of spending and revenue turns out to be wrong, the budget could be tweaked at the end of that year.

If the deficit is higher than projected...the following year's spending would be cut or taxes raised. Should there be a surplus, the White House proposes to increase the tax cuts given to the middle class.

Panetta: "And we think using an enforcement mechanism can assure that we achieve balance, so it makes the CBO/OMB differences moot."

The White House is also proposing to save the government some money by lowering future increases in the consumer price index, Social Security, and federal salaries.

The President's latest budget includes some policy changes which are likely to end up as bargaining chips...such as a 90cent per hour increase in the minimum wage, an increase in the debt limit and a line item veto. I'm John Dimsdale in Washington D.C."

There's word today that factory orders were down threetenths of a percent in October, the first decline in three months. But factor out volatile transportation orders, and the number increased...one isolated sign of steady growth. Such signs are hard to find in Germany, the biggest economy in Europe. A poor third quarter there is forcing analysts to revise growth estimates down from three to two percent this year. Lower German interest rates could be on the way, as Marketplace's Peter Laufer reports from Berlin.

Laufer: "Berlin's stores are jammed with shoppers as are the traditional open air Christmas markets selling art and crafts all over Germany; but the economics ministry is out with statistics that seem to promise lumps of coal rather than candy in Christmas stockings. There was no economic growth during the third quarter here and unemployment is up slightly to 9.3 percent. This, the worlds thirdlargest economy, is in neutral in various surveys of business suggest growing pessimism. There is one bright piece of news for an important segment of this economy: earlier in the week independent researchers announced that Germans are out drinking the rest of the economy with an average burgher downing 35 gallons of beer each year. In Berlin this is Peter Laufer for Marketplace. And that's the top of our news for Thursday, December 7th. Today the Dow Jones Industrial Average FELL almost 40 points. Lots of details when we do the numbers.

Japan's New Audit Rules for Religious Organizations

Japanese authorities have new powers to pick through the bank accounts of religious organizations. The law's been changed in response to the gas attack by the Aum Shinrikyo sect last spring.....it turned out the cult had a ten-million dollar treasury. Tokyo bureau chief Jocelyn Ford reports.

Dalkon Shield Claims

The trust that is paying claims against the Dalkon Shield has mailed 800-million dollars in bonus checks to 47-thousand claimants around the globe. Business editor Sarah Gardner reports.

Tough Times For Small Town Newspapers

Small town newspapers are cutting back and paring down, and a few are just plain closing up. Leif Enger reports from Minnesota that it's not just competition from other media....it's yet another sign of the skyrocketing cost of newsprint.

Medicare Cuts

Commentator Barbara Koeppel explains just who the recipients of Medicaid and Medicare are, and how they'll be hurt by whatever budget plan ends up getting passed.

Look Ahead 12-08-95

LOOK-AHEAD for Marketplace on 12/08: Host David Brancaccio talks with Art Fry, the inventor of Post-It Notes, about his accidental discovery of what is now one of the most ubiquitous office supplies....and how 3-M tried to quash what would end up becoming one of its best-known and most successful products ever.