Two of the biggest players in the once-promising videotex industry have closed down their operations in the last month, suggesting that the time may not be right to sell the technology, company officials and industry observers said this week.
Videotex uses television sets or personal computers to bring news, stock quotes, home banking and other services into the home.
Lack of consumer interest and high fees for access to the service and the equipment that makes its delivery possible made it unsuitable for today's marketplace, videotex analysts said yesterday.
This week, Knight-Ridder Newspapers Inc. decided to close its Viewtron videotex venture, which had attracted some 22,000 subscribers, after finding there was not enough demand for the service. Knight-Ridder will begin to phase out the venture, which employs 139 people, starting Friday. An analyst said the company invested $60 million in the venture, and it never turned a profit.
Two weeks ago, Times Mirror Co. discontinued its Gateway southern California videotex service after losing an estimated $30 million. The service was being tested in Los Angeles and Orange County and failed because of a lack of subscribers.
Martin Lane, director of videotex planning at Link Resources, a New York market research firm, said, "It's the end of the era of videotex as part of electronic publishing."
Knight-Ridder President James Batten said, "We no longer have sufficient confidence that Viewtron can be made into a viable business in the next few years -- the time simply was not ripe."
The service was launched in October 1983 and provided subscribers with news, stock prices and shopping information, first using a dedicated terminal attached to a TV set and then later through personal computers.
The Times Mirror service, which provided subscribers with home banking and shopping, electronic mail, education and travel services, and stock quotes, had signed up nearly 3,000 subscribers since its inception in 1983. Its 120 employes are being laid off after losses in the venture, estimated by one analyst at about $30 million.
"The reaction among consumers, while gratifying, was not sufficient to warrant full-scale development of Gateway as an ongoing business," James H. Holly, president of Times Mirror Videotex Services, said in a statement.
Keycom, a home videotex service launched in a joint venture of Centel Corp. and Honeywell Inc., was discontinued last summer in its Chicago market.
Newspaper publishers got involved in the business "for defensive reasons," fearing electronic publishing would displace newspapers, Lane said. What they didn't understand was that users want a two-way interaction and not just information retrieval. "It turns out people chat to each other and send messages back and forth; it's not just information retrieval," he said.
Gary Arlen, editor and publisher for Videotex-Teletext News, an industry newsletter, said many publishers also thought the service would generate advertising dollars, which it didn't. "Times Mirror found that neither the threat nor the ad income materialized so it chose to cut its losses."
Other factors included a daunting $600 price tag for a terminal that plugged into a TV set to make the service work and a steep hourly access fee, Arlen said. "Why pay $5, $6, or $8 an hour to look at something you get in a newspaper that costs 25 cents?" he asked.
By the time publishers tried to eliminate at least the $600 expense by offering the service over personal computers, the computer market had bottomed out, he said.
The next frontier is making the service "interactive" or capable of monitoring energy use in the home, switching appliances on and off, and performing other useful functions, Arlen said. The companies most likely to make that happen include utilities and telephone companies -- but not until the 21st century and not until Americans get over their "technophobia," he said.
Other more specialized services that have a subscriber base do exist including Dow Jones News/Retrieval, with some 250,000 subscribers who receive financial and business information; CompuServe, a subsidiary of H&R Block that provides a variety of services, including computer information services, to 280,000 subscribers; and The Source, a Reader's Digest Association service that has about 65,000 subscribers, Arlen said.
There also are three research projects under way: International Business Machines Corp., CBS and Sears Roebuck & Co. have joined forces to research the service; American Telephone & Telegraph Co., Chemical Bank, Time Inc. and BankAmerica Corp. are cooperating in Covidea, a system that will concentrate on home banking; and RCA Corp., Citicorp and Nynex Corp., a regional telephone company, also are researching home information services.
Bob Smith, executive director of the Videotex Industry Association in Rosslyn, said more than 160 companies belong to the association and the industry is not giving up. "You need to be persistent in this area; it took the telephone over 20 years to get a 1 percent market penetration."