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Up Front


"I've never seen anything like this. This is really quite an unusual phenomenon"

--Alan Greenspan, commenting on market conditions before a business groupEDITED BY ROBERT McNATTReturn to top


THE HEAT IS ON THOMAS RYDER, new CEO of the Reader's Digest Assn., to quickly bring about a turnaround in the sagging fortunes of the venerable publisher, based in Pleasantville, N.Y. According to sources close to Time Warner, one change now being considered is a spin-off of Reader's Digest's direct-marketing operations into a joint venture between the two companies.

The direct marketing of books, music, and videos is a far bigger part of Reader's Digest's business than its namesake magazine. And direct-marketing sales of $1.6 billion were down 11% from 1997 in the year ended June 30, while the division's operating profits sank 58%, partly reflecting increased promotional costs.

The contemplated alliance could provide some help fast. Time Warner is already planning to launch a new World Wide Web retailing effort for Time Life books and videos, the Book-Of-The-Month Club, and the company's other direct-sales units.

Time Warner Chairman Gerald Levin has said that his company has the customer service and product fulfillment operations that other Web sellers lack. Time Warner already has 250 Web sites through which it could promote its wares. Both Reader's Digest and Time Warner declined comment on any joint venture.EDITED BY ROBERT McNATTReturn to top


MICROSOFT CORP. IS GETTING TOUGH with what it says are illegal leaks from E-mail and other documents under court seal in lawsuits against it. On Oct. 6, the software giant took its most aggressive step yet against leaks by serving Dan Goodin, a reporter for the C/Net online news service, with a subpoena. Microsoft demanded that he turn over materials referred to in two recent stories published on Sept. 23, one of which describes Microsoft's heavy-handed tactics in a "holy war on Java."

Goodin declined comment. But C/Net attorney Kent Raygor, of the Los Angeles law firm of Sheppard Mullin Richter & Hampton, says California's strong shield law will protect Goodin from being found in contempt of court for refusing to disclose information used in publishing the stories. "It looks like they're trying to find out where the leaks are coming from," says Raygor.

A Microsoft spokesman, Mark Murray, says the company isn't trying to find the leaks, but just wants the documents back. "This is information that was designated as confidential by a court protective order," he says. The material was from a Sun Microsystems suit accusing Microsoft of violating the terms of its Java programming language licensing agreement, Murray says. This is the third time this year Microsoft has taken legal action to combat unfavorable leaks.EDITED BY ROBERT McNATTReturn to top


THERE'S A NEW DOG PLAYING some old nasty tricks. AT&T's new Lucky Dog phone service is offering the supposedly bargain-basement rate of 10 cents a minute plus a 10 cents connection fee for customers who dial seven extra digits before making a long-distance call.

But wait a minute. Competitors Sprint and MCI WorldCom already offer a 10 cents rate--and you don't pay any extra connection fee. Even AT&T already has a 10 cents-per-minute rate, though it charges some customers $4.95 a month for the program. Think of all the brief, one-minute calls you make: With not-so-Lucky Dog, you'll pay 20 cents, or twice the best rate at AT&T, Sprint, and MCI.

So why is AT&T pushing this plan, known as a dial-around? Because it's getting killed by other dial-arounds, notably MCI's 10-321--which can also be wildly expensive. Daytime rates for calls of less than 20 minutes are a sky-high 28 cents a minute. That dial-around numbers are often rip-offs, says industry consultant Jeffrey Kagan, is "the best-kept secret in long distance." But the companies say that certain customers may still benefit from the dial-arounds.EDITED BY ROBERT McNATTReturn to top

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