Terminal Anxieties

At the time of its June 1995 launch, The Spot was a sensation. Viewers could log on to this cyberspace Melrose Place to read the updated (and insipid) diaries of its young, hip and sexy inhabitants. This "show" was created by the upstart Marina del Rey start-up American Cybercast, where the beautiful people also included those working behind the screen. Programming honchos cavorted like TV executives, with rumored six-figure salaries, fancy office suites and Friday-afternoon parties.The Internet had gone Hollywood -- and corporate. Investments poured in from mammoth computer-chip maker Intel Corp., electronics giant Sony and Hollywood powerhouse Creative Artists' Agency.But just one year later the company filed for bankruptcy, cutting back production of The Spot and letting go 25 employees. The Spot collected and spent plenty of investment capital all right, but never really figured out how to make money. Hoped-for advertisers never came.This rags-to-riches-to-rags tale embodies a nasty truth of the high-tech industry: No one is making any money off the Web. If they tell you they are, they're lying.Although the details vary, vast sectors of the high-tech industry have a similar boom-or-bust, California-gold-rush quality to them. Even the profitable mega-giants such as Microsoft are hedging their bets, using their own workers as dispensable collateral.Yet you can't change the TV channel or pass a newsstand without being inundated by the message of false prophets celebrating the impending cybertopia. But for all the hype of a computer-driven, better-than-ever future, not much has been said about those who stoke the fires of search engines, or who's really benefiting from programmers' wizardry.From the recently folded start-up in Marina del Rey to Turner-backed Web ventures in San Francisco to the 800-pound gorilla of the industry, Microsoft, high-tech workers report hollow promises of stock options and unsavory contract-employee arrangements. Working conditions in World Wide Web businesses bear a striking resemblance to the era of breakthrough technologies around the turn of the century: Unionization is rare and job stability rarer.Perhaps the most telling industry trend in recent years has been the ascendancy of temp agencies. The nation's largest civilian employer is Manpower Inc., a temp agency whose work force recently surpassed that of General Motors. Closer to home, fully 25 percent of the 800,000 workers in Silicon Valley's computer industries are contingent workers, and 32,000 of those are employed by temp agencies, according to a study by the South Bay Labor Council, a group working to organize temps.So much for the high-tech good life. The picture only gets worse when you look at the details. A computer programmer at a major digital-imaging firm in Silicon Valley says that at his last job, in San Francisco's "Multimedia Gulch," near South Park, he and his fellow employees swallowed pay cuts and pay freezes almost as often as caffe lattes. His job was to create the computer programs that others would use to paint and animate figures; the work has many applications for film, television and the Internet. But he had hired on to a swiftly growing company that just as quickly stopped growing. "They expanded rapidly but didn't have the sales to support it," he says. Eventually, the firm cut salaries by 15 percent, promising to pay employees back with stock, a hollow trade-off. "The irony," says the programmer, "is that I just paid taxes on stock that was worth nothing."This programmer, like most other high-tech workers interviewed for this story, would speak only on the condition of anonymity, so afraid are they of being blackballed by the industry. But the programmer's theme of boom-gone-bust is common enough, particularly among those with jobs related to the Internet, a linked network of computers accessible to anyone with a phone line.Designer Marc Brown and his partners ran a cash-strapped online magazine called Buzznet in association with another digital-media firm that promised "when we get money we'll start paying you." That day never came, and Brown and his partners ultimately quit to start a new online magazine, minus the name recognition of the prior publication that their hard work had earned.Part of the reason for this industry instability is that, unlike cable television or magazines, almost all Web sites come to the consumer at no charge, thereby erasing a major source of income that is available to other media. One online magazine that threatened to charge after an introductory period, Microsoft's Slate, was publicly humiliated into "postponing" the day that it would demand a credit-card number for access. Slate finally abandoned the plan to charge subscribers in January in a red-faced announcement by editor Michael Kinsley.Another possible source of income, advertising that pops up on users' screens, hasn't fulfilled its early promise either. This was the fatal flaw for The Spot."None of the little men behind the curtain really knows how to make money from all this," wrote Hunter Madsen, director of commercial strategy for HotWired, a popular Web site started by Wired magazine, the monthly bible of the digital age. Madsen went on to estimate that only 20 percent of a typical Web site's expenses are covered by advertising. Last summer, agencies responded by creating the Internet Advertising Bureau. Although ad spending on the Web increased 347 percent over three quarters in 1995 and 1996, it's still less than 1 percent of the $60 billion spent on advertising annually.To make matters worse, the consumer at the computer terminal isn't as jazzed at being online as the high-tech industry expected. Even hardcore users spend only about one-fifth as much time online as the most fervent watchers of television. Most people's equipment makes moving around the Web incredibly tedious; it's hardly the same as switching channels or flipping through a magazine. Until the technology for receiving data catches up with the technology for sending it, all users can do is hurry up and wait. As they do so, they're abandoning the major online services, torpedoing another presumed high-profit arm of the Internet industry.Compuserve, an online service offering Internet access, was losing 10,000 members a day early this year. Sears and IBM, early investors in Prodigy, another online service, lost $1.6 billion before they sold their interest in it. America Online, the nation's largest online service, is losing members almost as fast as it's gaining new ones.Simultaneously, Web publishers from Naples, Florida, to Marina del Rey are laying off workers in droves. Turner Network Television pulled the plug on its Web site, Spiv, in August after just seven months. On January 14, Prodigy pulled out of Stim, another Gen-X Web site launched last May, and turned over its assets to the editors. While a press release gushed about the "great opportunity" for the new owners and how "pleased" Prodigy was with Stim's "success," they obviously weren't pleased enough to stick around.The state of the industry is even enough to give pause to Microsoft, the world's largest software company. Microsoft's software runs 92 percent of the world's computers -- an engine that drove 1995 revenue higher than $6 billion. CEO and founder Bill Gates tops the Fortune 400 -- worth an astounding $20 billion -- and employs 18,000 people in a sprawling 30-building glass-and-steel campus in Redmond, Washington. Company stock has risen more than 100 percent since the company went public in 1986, yet Microsoft makes regular and frequent use of temporaries -- hundreds at any given time -- as a hedge against a sudden downturn in business. And we're not talking about the secretarial pool.C.L. hoped she was on the way to a full-time gig when she went to work at Microsoft's technical-support division recently. Her job was to answer calls from customers who needed help with their Microsoft software. Her supervisors told her that "they liked to have people work as temps first as a sort of long interview," C.L. says. "Most everyone in my group earned $10 an hour, worked up to 80 hours a week, but got paid for 40."C.L. was eventually let go -- because she got sick. When she returned to work after healing, C.L. says, "They terminated me. They told me that they had more than enough people who didn't get sick who could work for them. Which is true."Temps are also part of the work force at the Microsoft Network (MSN), Microsoft's online service (whose billboards you may have seen if you've left the house since October). One Seattle-area high-tech worker formerly employed by Microsoft says the company "is undergoing a religious conversion to Internet stuff"; MSN already reports subscriptions in seven figures, and recently set the goal of 3 million subscribers -- about a 40 percent increase from current levels -- by the end of '97. According to informed estimates, about 40 percent of MSN employees are contract workers. (Microsoft declined to confirm or challenge that number.)People with job titles like editor and associate producer are as likely to be temps as regulars. Microsoft lets temporary workers know they aren't part of the gang in ways both material (excluding them from benefits and stock plans) and symbolic (excluding them from company sports teams and the health club, not inviting them to Christmas parties and other company shindigs). Temps can't even put their office plants in company-issue flower pots, which means that maintenance workers won't water them.Microsoft's practices scotch any inklings of unionization, allowing the company to get more work for less pay by holding out the possibility of "full time" employment if a temp is a "team player," e.g., willing to work long hours without overtime pay. "If you don't leap at it and take on extra responsibility without flinching, they let you know you're not welcome," says one current temp.A recent court decision, however, in a lawsuit brought by former Microsoft temps, may alter this equation. A three-judge federal appeals panel in San Francisco ruled that since Microsoft temps had done the same work and reported to the same supervisors -- and even wore the same ID badges -- as "regular" employees, they were essentially Microsoft employees -- and deserved to be compensated that way. (The badges have since been changed. Regulars wear blue badges; temps, yellow.) Microsoft's appeal of the decision will be reheard by a rare, 11-judge panel. The outcome could be worth millions of dollars in back pay and benefits and future costs that are virtually impossible to calculate."We believe we've treated all employees in a fair and equitable manner," says Microsoft spokesperson Mark Murray. "Often, temps and independent contractors are paid at a much higher rate than so-called regular employees, based on a clear understanding on both sides that the worker is responsible for his or her own benefits." Another spokesperson says that many temps prefer the arrangement because they can take months off at a time, and they have the freedom to pursue other employment opportunities. However, according to the federal Bureau of Labor Statistics, two-thirds of temps prefer regular work but are unable to find it.Another recent development that should give the cybertopians pause is the stock offering of Wired Ventures Inc. Last spring, investment-banking firms Merrill Lynch and Goldman, Sachs & Co. announced they were to escort Wired from South Park to Wall Street with an initial public offering (IPO) of stock worth $435 million, a staggering figure for a small, 5-year-old company to claim as its worth. The IPO was withdrawn in July, reconfigured, then withdrawn again in October -- that time, apparently, for good.It was the economic equivalent of a train wreck -- too gruesome to watch, but too compelling to ignore. The debacle occurred after Wired sank $105 million into HotWired, its online publication. HotWired, according to reports, has been taking a bath ever since the launch. A company source says the creatives have been updating their rŽsumŽs ever since the IPO was dropped, and speculates that management spent the company into the red with money it had expected to recoup from the stock offering. Still, investors remain captivated, and in early January, Wired announced the securing of a $21.5 million investment."There's an illusory quality to the whole thing," says Joey Anuff, of the hype-tempering online journal Suck. "It's not just the temps not getting benefits who are fucked; it's everyone else too. It takes a real fluke IPO for people to come out winners." Even in the fluke successes, such as Netscape, employees know better than to dump their stock for profit, because that would damage the public perception of the company, he adds.The newest romance of American capitalism is a vision of Doc Marten-wearing 20-somethings scurrying amid computer cables in unconverted warehouses, doing what they love and willingly subjecting themselves to poverty-level wages.But unless the Web publishing industry figures out how to bring in some revenue, it can't be long before these scenes begin to look like the denouement of La Boheme.

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