Cringely on "Pirates" and the AOL-Hughes Deal.

I Find Karma (
Sun, 27 Jun 1999 19:42:08 -0700 (PDT)

Cringely's article at

is cut and pasted below.

I agree with Cringely: "Pirates of Silicon Valley" was as subtle as a
sledgehammer, as dumbed down a version of "Triumph of the Nerds" as I
could have conceived, and as interesting as watching the price of gold
drop to a 20-year low.

I also agree with Cringely: AOL's "investment" in Hughes stinks like
yesterday's diapers. To me, AOL pumping $1.5 billion into Hughes is all
about the leverage AOL can bring to the table to bully every telecom
player except for AT&T. The big get bigger, and the small get crushed.

Speaking of which, look for Paul Allen's 54% stake in High Speed Access
( to get a short-term pop when the IPO underwriters
issue "buy" recommendations for the stock when the quiet period is over
in the next week or two. I still don't understand Allen's obsession
with cable, which still seems like a losing business to me once
satellite, high-speed wireless, fibre optics, and DSL kick into
overdrive. Of course, between Gates and Allen, they have all of those
bases covered, too, but is bandwidth really a way the big guys are gonna
make any money off we unwashed masses in the future? Or is this a loss
leader to get us addicted to other forms of the information crack pipe?

> Never Trust a Pirate:
> How Bad TV Movies and Misrepresented Business Deals Prove Once Again
> That Nothing is As It Seems
> By Robert X. Cringely
> If you were scanning cable TV channels on the night of June 20, it would
> have been nearly impossible to miss Turner Network Television's "Pirates
> of Silicon Valley," a movie nominally about Steve Jobs and Bill Gates.
> TNT ran the show over and over again that night so you could, with very
> little effort, see it in almost any order. Many people saw a similarity
> between "Pirates of Silicon Valley" and my own "Triumph of the Nerds."
> Me too.
> "Pirates of Silicon Valley" is about people who, for the most part,
> didn't live in Silicon Valley. Perhaps a better title might have been
> "Triumph of the Geeks," and that WAS the title until my rabid lawyer,
> Claude Stern, went into action. "Pirates of Silicon Valley" was based,
> instead, on a very good book called "A Fire in the Valley" written by
> Paul Freiberger. Alas, Freiberger's book was published before at least
> half of the events in the movie even took place.
> The movie producers said in published interviews that they deliberately
> chose not to do interviews with any of the actual characters. Noah Wyle,
> star of "ER" and the actor who played Steve Jobs in the movie, said he
> was convinced to take the role when the producers played for him the
> "Triumph of the Nerds" video. Certainly "Pirates of Silicon Valley"
> looks a lot like my show. Some words seem to have been taken verbatim.
> Certain camera shots are almost identical. If imitation is the sincerest
> form of flattery, then I should feel very flattered, but I don't.
> If, like me, you grew up on Superman comic books, then you know the
> difference between green, red, and gold kryptonite. You also know about
> Bizarro Superman, a jaggy copy-of-a-copy of the man of steel who kinda
> sorta looked like Superman but did everything in a backward, dorky kind
> of way. "Pirates of Silicon Valley" seemed to me to be a bizarro version
> of "Triumph of the Nerds." The characters were all there, but they
> didn't look quite right. The facts were there, some of them, but a lot
> of it was backward (IBM, for example, came to Microsoft for an operating
> system, not the other way around).
> The problem with bizarro reality is that it's simply wrong. People will
> look at this movie and think it portrays history when it doesn't.
> "Triumph of the Nerds" portrays history. At best, it is an
> impressionistic view of the life many of us have led for the past two
> decades. I only wish the impressionist had a better eye.
> They could have called me, these "Pirates" producers. They could have
> called almost anyone who was actually near these events and done a
> better job. Noah Wyle was a good Steve Jobs, but the rest of the show
> was seriously flawed and a great disappointment to me. The other
> characters were more caricatures, especially Bill Gates.
> And here's why I am disappointed. Certainly it's not because Paul
> Freiberger was paid something and I wasn't. I am disappointed because
> most people who see this movie will think it represents actual events
> rather than some screenwriter's attempt to be entertaining. People will
> think this is history when it's not.
> Going further, there is the risk that Hollywood will think this very
> interesting story has been "done" and might never look at it again.
> There is in this story far more than the producers of "Pirates of
> Silicon Valley" could ever know -- a story of such depth and texture
> that it has epic status. Not only is this the story of the greatest
> fortune in modern history, but a story of such complex and dark
> relationships that are almost beyond belief. This could have been --
> this could be -- a great subject for a film, but now it might not ever
> happen. The theatrical possibilities of this subject go far beyond
> "Pirates of Silicon Valley" and even beyond "Triumph of the Nerds."
> And I'm the guy who knows it all. If you happen to be a friend of Oliver
> Stone, please give him my number.
> That's enough about movies. There is so much happening in the news of
> late that I can hardly contain myself. Did you see the item about
> America Online investing $1.5 billion in Hughes, the division of General
> Motors behind Direct TV, the satellite TV company. What the heck is
> going on there? I think this is a fascinating item.
> Direct TV has satellites capable of carrying about 200 video channels,
> though this number keeps increasing with improving technology. At least
> 175 of these channels are in constant use, with the rest devoted to a
> variety of video and data services, including the Direct PC Internet
> service. AOL is paying $1.5 billion ostensibly for access to some form
> of Direct PC for AOL customers.
> That's fair enough. But Direct TV's big competitor is another fleet of
> satellites called EchoStar and home of the Dish Network. EchoStar has a
> capacity of 2000(!) channels with only about 175 in constant use. With
> ten times the capacity of Direct TV, EchoStar is trolling for data
> customers. AOL could have the same deal with EchoStar that it purports
> to have with Direct TV WITHOUT having to cough up the $1.5 billion.
> Is AOL stupid? Hardly. As we frequently see, there is more to this deal
> than the principals are saying.
> AOL is investing in Hughes, buying special shares that carry a 6.5
> percent dividend. That's about what AOL pays to borrow money at the
> prime lending rate. And since the collateral is Hughes, itself, this
> investment presumably won't hurt AOL in any way. It will be able to
> borrow just as much as ever. I'm willing to bet, too, that Hughes -- or
> Hughes's GM parent -- has guaranteed AOL will not lose on its
> investment. So there is only an upside for AOL in this deal. If Hughes
> stock goes up, AOL makes money on an investment that costs them nothing.
> But doing a favor isn't enough to make AOL bother to do this deal. The
> other reason is to scare the very people who ought to be worried about
> the prospect of satellite access taking over the Internet -- the
> telephone companies and major fiber supplies like Qwest and Level 3.
> This AOL investment looks on the surface like a major commitment. It
> isn't, of course, but it looks like one. And the next time AOL
> negotiates with any non-satellite network providers, Steve Case and
> company will demand (and get) enormous concessions.
> And THAT's why the deal had to be done with Hughes and not with
> EchoStar. A threat without that $1.5 billion behind it wouldn't be
> viewed as a threat. Going with EchoStar would have gained AOL only
> satellite Internet access, which probably isn't of real interest to
> Steve Case at all.
> So we have a bizarro TV movie and a bizarro Internet deal. Nothing is as
> it seems.
> There must be a lot of bad kryptonite going around.


America Online customers are upset because the company has decided to
allow advertising in its chat rooms. I can see why: you got computer
sex, you can download pornography, people are making dates with 10
year-olds. Hey, what's this? A Pepsi ad? They're ruining the
integrity of the Internet!
-- Jay Leno