2000 Trend Forecasts and Outcomes

1. Webcasting will begin to have a serious impact on the television industry.
   This year should see the first signs of direct competition between the High Speed Internet and traditional television broadcasting via cable, satellite, etc.
   
   Outcome: The predicted trend occurred less rapidly than expected; nevertheless several events confirmed the inevitable, especially in Canada, where nearly 20 percent of households connected to the Internet currently use High Speed access.
   • January 31st - 10 Hollywood studios, 3 television networks and 2 professional sports associations obtain an injunction against iCraveTV.
   • February 29th - the iCraveTV Web site is shut down following the combined court proceedings on the part of the NFL and the Canadian and American television industries.
   • May 16th - RecordTV.com offers video recording via the Internet, effectively reopening the Internet television debate.
   • Webcast events began to attract viewers in numbers to rival television:
     3 million Paul McCartney fans watched his concert at The Cavern; 2 million viewers saw the Victoria's Secret fashion show; and Madonna selected MSN over several television networks for her November 38th concert, which drew some 9 million watchers.
2. The Internet will do to cinema what MP3 has been doing to the recording industry for the past two years.
   The first important signs will appear in 2000: wide-scale distribution of pirated commercial films; promotional distribution of blockbusters over the Web etc.
   
   Outcome: The predicted trend has been proven accurate, with many occurrences confirming this: the growing availability of pirated films over the Web (more than 10 percent of DVDs are freely available, made possible by the DivX compression technology and peer-to-peer file exchange); the film-industry's initiation of court battles similar to those undertaken by the RIAA; and an increasing number of short films and feature excerpts made available over the Internet. Even though we have yet to see mega-production promotions as predicted, 2000 saw the first film produced for and launched exclusively on the Internet: "The Quantum Project", available on the SightSound.com Web site and distributed over the Gnutella network.
3. E-commerce will go from being an issue for the future to a priority for the present.
   Momentum will build after the Christmas holiday shopping results are in; and the successes of the early adopters will lead to greatly heightened concern (if not panic) on the part of latecomers. Here in Quebec, many large companies will come to realize just how far they are behind their competitors, especially in such sectors as insurance (compared to Belair Direct), food services (vis-a-vis IGA), and sporting goods (compared to Michel Pratte Sports).
   
   Outcome: 2000 saw traditional "bricks and mortar" companies investing heavily in their Internet presence in order to make up lost ground, at the same time that their virtual competitors were suffering outright failure or were facing increased commercial difficulties as the dotcom boom imploded.
   
   Actually, traditional companies were notably more successful than their upstart e-competitors. In the US, major retail chains such as Wal-Mart and Home Depot launched on a grand scale their e-commerce strategies; likewise in Quebec large commercial entities began investing heavily in such activities. After Archambault, it was the turn of Admission, the SAQ, RONA, Dumoulin, Jean Coutu, Remax and a host of others to spend tens of millions of dollars transforming themselves into "clicks and mortar" operations to satisfy consumers more and more willing to shop and buy over the Internet.
   
   Note however, that we were way off the mark on our sectorial activity forecast; maybe we should have stuck to simply trendspotting :!
4. E-commerce's leap from the whiteboard to the real world will incite companies to gage their Internet activities' results on the basis of quantifiable metrics (revenues, conversion rates, customer loyalty levels, profitability etc.).
   Many companies and their advisors will be confronted with dramatic results.
   
   Outcome: 2000 was a shakeout year. The major trend has been the market ruthlessly casting aside companies that could not re-establish the primacy of profit.
   
   The Internet news journal, Le Journal du Net, counted 142 major e-commerce bankruptcies in Europe and the US, with significant layoffs occurring at lesser enterprises. Meanwhile, the hunt for profits is back at the top of the preoccupation lists of venture capitalists, stock markets and corporations. To such an extent that financial analysts and advisors who have often drawn up or touted fanciful dotcom business plans and Internet projects for traditional companies now are faced with radical shrinkage in their incomes. In addition, consultants have been hit with the kind of rarely-seen astronomical losses that have driven their worth down to the level of that of their "dotcom darlings."
   
   Another feature of 2000 is the number of major corporations questioning the worth of their e-commerce site (for instance Kodak, Wal-Mart, K-Mart) or even their entire e-commerce strategy (such as Toys "R" US).
   
   The effects cited above have been delayed in Quebec; only firms active in the US are feeling the pain of e-commerce falls. Thus Nurun saw its profits morph into losses and its stock lose 93%, while PTM sold off its Web division and re-focused on its virtual mannequin. But at the end of this year Quebec e-commerce projects (and their financial promoters) will be confronted with uncompromising results.
5. France will leave its corporate mark on the Quebec Web.
   Backed by a specialized stock market, a broadly based national economy, and a government-coordinated national strategy, French firms will carve out positions in the Quebec Web market. And acquisitions may see ownership of some prized Quebec Web entities passing to the other side of the Atlantic.
   
   Outcome: Events trnspired more slowly than predicted, and they were accompanied by many American companies implicating themselves in the Quebec market.
   
   In January, Kaziboa bought the Quebec Web site L'Escale; a month later Infonie acquired 50 percent of Francité, which had just bought out Webséduction and 4adate.net. Concomitantly the Americans introduced Quebec versions of Yahoo, Amazon and AOL, and Compuware acquired Nomex. Notwithstanding the fact that the transaction is a significant Internet-related French-Canadian transaction, we do not include here the Vivendi takeover of Universal-Seagram; the latter is not considered a "prize Quebec Web entity." For the same reason we exclude Infogames' buyout of DTI (in the games sector).
6. A stock exchange exclusively trading in high technology firms will represent one of the major economic issues in Quebec and Canada.
   Key players in the economy, particularly Finance Minister Landry, showed a lack of vision in reorganizing the Canadian stock market without foreseeing a technology stock exchange; establishing the latter in Quebec is a major pre-condition for maintaining a solid Quebec component of the francophone Internet.
   
   Outcome: The effort deployed by the government to ensure having the Canadian NASDAQ in Montreal clearly reflects the accuracy of our trend forecasting. Unfortunately, it will take several years before the exchange is fully established and can directly affect the financing capabilities of Quebec high technology firms. In the meantime reverse takeovers-the only route available for young companies to have access to the exchange-are multiplying, with Invention Media, ZAQ Technologie, Lyre-Tech, NetCréation, nStein and ClicNet following in the footsteps of Netgraphe.
7. While many companies will undertake disproportionate expenditures to set up transaction sites, early adopters will maintain their lead by revising operations as well as their overall business strategies based on the Internet and its associated economic upheavals.
   
   Outcome: The actualization of this announced trend remains unclear.
   
   On one hand, success has been concentrated on the first movers who knew how to take the lead over their competitors and learn more quickly than them the recipes for success. Thus Amazon remains the unquestioned leader in e-commerce retailing; Yahoo is the symbol of Internet success with regard to both usage-level and financial results; and eBay consolidates its recognized front-runner position as the company continues to rack up profits.
   
   On the other hand, several promising Web pioneers have closed shop, have been or are at the point of being bought out, as is the case with Garden.com, APB Online, Mortgage.com, Reel, or Deja.com.
   
   In fact, the winning formula seems to derive from the combination of being one step ahead of the marketplace (allowing for rapid acquisition of both a reputation and market share) and having a profit-oriented business plan.
8. Computer technology companies will turn to the Internet in large numbers to try and make up for contracts lost relating to the rollover to 2000.
   A delay of five years will be difficult and, especially, costly to recover from. Their clients will often pay the price, while the owners of consulting and Internet development firms will reap huge profits from a wave of repeated purchasing that can be expected to last at least a year.
   
   Outcome: The trend was fully confirmed this year.
   
   While computer technology consultants' stock tumbled the day after the Y2K bug proved to be that much hot air, the Internet-firm acquisition juggernaut continued apace. Compuware bought Nomex, Cognicase took over ACME, Enter.Net, RealWave, Cactus and FireWorks, Informission swallowed up Intellia to become Nurun, CGI bought out APG and its Web division Uniglobal, and DTM acquired half of FokusGroup. Thus the computer technology consulting market subsisted according to the rhythms of Internet acquisitions. And this is likely to continue.
9. The advertising sector will (finally ;-) experience accelerated growth due mainly to e-commerce development and to the need to maintain usage levels for sites listed on the stock exchange.
   Advertising agencies have not yet integrated the Net into their overall approach; and media that is little more than the reproduction of content in HTML format will turn out to be a losing proposition in the changing advertising landscape.
   
   Outcome: Despite the dotcom meltdown and the end of related and characteristically exaggerated advertising campaigns, Internet advertising continued to show strong growth in 2000. There is however, no guarantee that this will continue in the years to come.
   
   Actually, there was a nearly 100 percent growth in the US Internet advertising market: estimates are of $9 billion for 2000 compared with $4.6 billion in 1999. And the number of new advertisers on the Web went from 949/month to nearly 2500/month, proving the generalized acceptance of the Internet on the part of advertisers. In France, the advertising market increased 156 percent to reach a value of 600 million francs (CDN$120 million); and for Europe as a whole growth was more than 100 percent. Nevertheless, disturbing signs lay in the fact that this growth is less than last year's 148 percent, and this year saw the first absolute quarterly reduction (minus 6.5 percent) from the second to the third quarter.
   
   Quebec's situation is disturbing; insiders estimate that this year's growth will be only 50 percent, well below what the Quebec content industry requires. This consistent weakness in the Quebec market means agencies avoid paying the cost of their belatedness, especially since most have speeded up integrating the Internet with their activities. The lack of hard numbers for the Quebec Internet advertising market is another indicator of the industry's problems.
10. The Cité du Multimedia will begin to show its true colors.
    "Cheap labor" phenomena such as UBISoft will multiply, likely in conjunction with Forecast #5. Brainpower, added value and profits will remain elsewhere, while the low-paying, government funded jobs will be "ghetto-ized" in Old Montreal. Statistics available relating to similar techno-projects, "Alleys" and "Valleys" show that the number of jobs created in Montreal is negligible when held up against the size of the industry; note that in 1998, 100 000 positions were created in the Web industry alone in New York.
    
    Outcome: This forecast has been fully borne out.
    
    The Cité du Multimedia project has actually been highly controversial as the downward pressure on salaries accentuates throughout the industry; and in fact, many companies are turning their backs on grants entirely. It is mainly due to the aerospace and biotechnology sectors (both unaffected by such projects' grant programs) that Montreal has become known in the area of new technologies.
    
    Yet despite this, the government has adamantly gone ahead with its E-Commerce Cité, which is generating even more controversy and whose successful conclusion is considered by many to be a highly doubtful proposition.
11. Finally, here's a hypothetical prediction, given that the stock market is even more difficult to understand than the Internet.
    There will be a stock market correction, but it will cause quite a stir as it will in large part be highly deliberate: Stocks that are overvalued or based on superficial impressions will collapse, leaving only those whose company valuation is based on tangible results, in particular the bottom line.
    
    No further comment ;-)