Is Delphi Finally Out Of The Starting Gate?

There's a dark-horse challenger in the world of online services that could come from behind. With an array of killer "content," huge marketing clout, and vast sums of money at its disposal, Delphi could pull folks into cyberspace by the megadroves--perhaps grabbing large chunks of the market from America Online, CompuServe, and Prodigy.

Delphi? You mean that stodgy, low-tech service that has been around since 1981 and hardly anybody uses? Well, not exactly. This is an all-new Delphi that has been redesigned from the inside out. Two years ago the service, based in Cambridge, Mass., drew lots of attention by becoming the first consumer service to offer complete access to the Internet, just as the feeding frenzy over that worldwide public network began. The company even changed its name to Delphi Internet Services. But Delphi's screens were text-only--even when perusing the hot, multimedia World Wide Web. As a result, the company lost its Internet lead and is stuck with only 110,000 subscribers--trivial next to the Big Three's millions (table).

Delphi's early move into the Internet, however, did have one major consequence: It caught the eye of media mogul Rupert Murdoch and his vast News Corp. For an estimated $12 million, Murdoch picked up the lagging service two years ago with hopes of putting News Corp. material--stories from its tabloid newspapers, snippets from Mighty Morphin Power Rangers and other Fox TV shows, photos from TV Guide and other magazines--onto the Information Superhighway. News Corp.'s purchase of Delphi excited, then disappointed analysts, who saw few outward signs of progress.

That began to change last summer. In June, News Corp. announced a $2 billion joint venture with telecom giant MCI Communications Corp., allowing Delphi to merge with MCI's own emerging Internet unit. More important, the combined unit was placed in the hands of Scott Kurnit, formerly No.2 at Prodigy and one of the executives who had pushed for big changes at that troubled Sears-IBM service.

ACHIEVING ONENESS. So far, Kurnit has moved aggressively on Delphi's all-encompassing revamp. The service has moved its headquarters to New York City's trendy Flatiron district, where dozens of multimedia companies hang out their shingles. Anthea Disney, the high-profile former editor-in-chief of Murdoch's TV Guide, was brought in to head up editorial operations.

The strategy? The new Delphi is seeking to become "one with the Internet." In fact, says Kurnit, the Delphi identity will eventually fade, to be replaced by a News Corp.-MCI Internet service. The revamped service is still being tested, but it will likely lure customers with low-cost access to the Internet and Web. Kurnit and News Corp. officials won't comment on pricing yet, but Mark Mooradian, an analyst with New York-based Jupiter Communications Inc., speculates that to grab market share the company may charge as little as $10 per month for unlimited connect time. "Delphi all along has offered unlimited access for as low as it can," he says. "What if they undercut all the Internet access providers and use the MCI marketing muscle to do it?"

However, for all the resources that MCI and News Corp. are pumping into Delphi, analysts are not sure the public will bite. Says Lorraine Sileo, an analyst with market researcher Simba Information Inc., based in Wilton, Conn.: "You can't just throw money at the thing and expect it to work." Like other Internet access providers, Delphi still needs to figure out how to generate revenue on the "free" Internet. Kurnit is keeping his answer close to his vest. One way would be by linking Delphi Net surfers to MarketplaceMCI, an online mall where, using Netscape Communications Corp.'s so-called secure Web-browsing software, shoppers can buy flowers or CDs with a credit card.

Another way to bring in revenue is by selling advertising space on Delphi's home page. If the MCI-News Corp. venture can guarantee a certain "readership," then it can lease out spots that would draw surfers to an advertiser's own home page. Delphi had one limited trial of advertising with Strange Days, a Fox movie now making its way into theaters. Delphi officials are mum about the test results, however. "We're clearly in the development phase," says Kurnit. "It's still unclear what percentage of revenues will come from ads and what will come from subscriptions."

The surest way to lure consumers to your corner of cyberspace is the same way you use to get them to read your magazines or tune in to your TV station: by offering lots of attention-getting content. That's where Disney comes in. In addition to putting up links into the various News Corp. media units, such as Harper Collins, Disney is ginning up new online content. She has hired a staff of 20 writers and editors who report and write stories and create features from the Flatiron headquarters--or wherever the news may occur.

"MASS-ME." During the recent United Nations' Fourth World Conference on Women, held in China, for instance, Delphi offered commentaries on the conference topic, "Action for Equality, Development and Peace." Such luminaries as Patricia Ireland, president of the National Organization for Women, and Camille Paglia, author of Sexual Personae and other works, weighed in. There were also daily first-hand reports, filed by a staff reporter attending the conference in Beijing.

"One of the things that we're trying to do is to make [the service] intimate for consumers," says Disney. The online TV Guide, for example, invites Web surfers to submit their own reviews of television programs. And just in time for the fall football season (viewable on the Fox network), the Delphi home page is hosting football trivia contests for Web surfers. And by creating conversational forums and areas geared toward niche interests--ones people are passionate about--Disney thinks that it could generate a massive group of loyal subscribers who will log on to Delphi just to get at the stories they want. "`Me-news' is better than `mass-news,"' says Disney. "What we want is `mass-me."'

While leaping from 110,000 into the multimillions of customers may seem a stretch, analysts say the parent companies' marketing muscle could make it happen. With the millions MCI reaches through its Friends & Family calling program and the pull News Corp. has with its publications and Fox TV, the new Delphi could promote itself all over the place. Which means your next calling circle could include your PC.

Before it's here, it's on the Bloomberg Terminal.