Steve Perlman, WebTV, and the long-term value of integrity

Don’t back down from the truth. Even if you disagree with people, your integrity will win them over in the long run.

So, it’s 1996 and my bosses at Forrester have insisted that I write a report about non-PC Internet devices. I’m so dubious about the idea that the original title of the report is “The Web Appliance Hoax.” We change the title to “Internet Appliances” so as not to be inflammatory. When talking to a Wall Street Journal reporter about it, I let slip that what the original title was, and she publishes it. Well, now everybody knows what I think.

A few months later, this guy named Steve Perlman shows up at our offices. He’s got a pedigree from Apple and some other promising startups. At his urging, I make sure we have a TV set ready in the demo room. (This is the same TV set that caused me so many problems a few months later.) He demos a prototype of what will become WebTV — a set-top box plus remote that dials up to the Internet and shows the Web on your TV set.

After the demo, I tell him two things. First, this is by far the best implementation of Web browsing on a TV set that I’ve seen. And second, I cannot figure out why anyone would pay for it. Dial-up Internet is burgeoning and Web browsing and email work pretty well on PCs — there is no need to put them on TV sets.

We shake hands and vow to keep in touch.

WebTV launches in July, 1996. There is a wave of press coverage. Each article includes a quote from me. (Reporters call me because they have learned to search the Web and see that I’m quoted in the other articles.) Here’s me in The New York Times in July, 1996:

“The TV is not a very good way to look at the Internet,” said Josh Bernoff, an analyst at Forrester Research, a technology market research company in Cambridge, Mass. “It’s my belief the whole market segment will be a real disappointment.”

My contacts with the company, WebTV Networks, go through a PR person whom I’ll call “Jane.” Jane is quite unhappy with all my quotes. She schedules additional phone briefings; I learn a lot from Steve, but don’t change my assessment. Then Jane changes tactics and threatens to cut off my access if I give one more quote about the company’s poor prospects. I get quoted in Time and that’s the end of that.

In March of 1997, about a year after that first demo, I go to the NCTA cable conference in New Orleans. WebTV has a huge booth, even though it’s sold less than 100,000 units so far. I set up meetings with all the technology companies there. Jane won’t set up a WebTV meeting for me. I drop by the booth and ask for Steve; he makes time to meet with me. We have a great conversation. Steve seems to value someone who challenges him from a reasoned perspective.

About a month later, I get a call from Steve. He gives me the heads up that the following day, they’ll announce that they’re selling the company to Microsoft for $425 million. He will stay around to run it as a division of Microsoft. The deal closes and I write about it and, of course, get quoted in every article. I still think WebTV won’t take off, regardless of who owns the company.

After the tumult dies down, I get a call from Jane. She’s got no future at Microsoft. Can I help her find another job? I tell her that no matter how much I rack by brain, I just can’t seem to think of a company that’s a good match for her skills.

After this, I meet once or twice a year for strategy sessions with Steve’s team at Microsoft. They go on to build some pretty cool technology that integrates with cable systems. Steve leaves Microsoft and starts a new company; he briefs me while it’s still in stealth mode. He also tells me some names they’re considering, including “Moxi,” which I like. (When he announces the product and the company name, I find some outfit down south that ships Moxie soda and send him a case. They send it in a box labelled “pork products” which mystifies the whole company until, months later, they open the box and Steve guesses that I sent it.) I meet with him regularly at Moxi until he sells it to Paul Allen’s company Digeo. That’s the start of a whole new set of adventures, including a meeting with Digeo’s new management team on Paul Allen’s private island in Washington state, which I need to get to by seaplane.

It’s been a great relationship with Steve, who’s always working on something interesting, and I get to see those things ahead of time.

All this because I never relented in my analytical critique of WebTV. I was right; they never got more than a few million subscribers. But Steve didn’t give up on me, and I didn’t give up on him.

As for Jane, I haven’t spoken with her since that phone call in 1997 . . .

Photo: WebTV founder Steve Perlman via Business Insider