July 28, 1991|By Arlene Ehrlich
Or (900) 909-5KID, which offers recorded conversation among members of New Kids on the Block about -- what else -- the New Kids on the Block. Not surprisingly, after you pay $2 for the first minute and 45 cents each minute thereafter for the privilege of eavesdropping on the New Kids as they chew the fat, you get additional numbers to call for fan club information and merchandising offers.
Interactive recordings, on the other hand, offer customers a menu. For example, callers to Telemedical [(900) 860-9082] can choose recordings on topics ranging from arthritis to dermatology. Submenus are also available; choosing "dermatology" will invoke a second menu allowing callers to choose between, say, acne and skin cancer.
Live recordings, of course, offer real people to answer callers' questions, process orders, or simply breathe heavily and moan.
You can even get legal advice on simple questions involving landlord-tenant disputes, family law and wills. Tele-Lawyer, the largest legal audiotex service, employs six lawyers working in shifts. At $3 a minute, callers pay $180 an hour -- substantially more than they would pay most attorneys for an office visit. But most calls to Tele-Lawyer last only about 10 minutes.
The American Bar Association and its local affiliates are debating the ethics of pay-per-call legal advice. Most of their concerns involve conflicts of interest, in which an attorney could wind up advising both parties to a dispute, and situations in which callers with complex problems are advised to seek regular counsel. If the caller is referred to the dial-it lawyer's own firm, has a breach of ethics occurred? The jury is still out.
It's getting so that any entrepreneur with a bright idea and a stack of information can sell it over a 900 line. Despite the youth of the audiotex industry, however, and the seemingly unlimited growth potential, it isn't necessarily all that easy to make a killing.
First of all, the information provider (IP) has to rent or buy a computer to answer the phone lines, and that can cost anywhere from $25,000 to $100,000 right off the bat. Then there are hookup charges and software programming charges, and space brokerage charges, and salaries if you're using live conversation.
In fact, most IPs wind up using an audiotex service bureau, which acts as middleman between the information provider and the long-distance carrier. "The big advantage," explains Brooks McCarty, a former Baltimorean who now owns INFO-900, a California service bureau, "is that you don't have a huge capital expense. Service bureaus already have lines installed in their facility and hooked up to the computers. So you don't have the delays and installation and start-up costs of going on your own. And service bureaus can offer dynamic allocation, which saves IPs the cost of ordering dozens or hundreds of phone lines. Instead, the IP can share the bureau's lines with other providers."
Mr. McCarty claims that for an initial investment of $1,000 to $3,500, an entrepreneur can set up an audiotex program through a service bureau. Thereafter, service bureau costs range from a low of $1,000 per month plus 5 cents per minute, or several thousand dollars a month plus 20 cents or more a minute. In all, the service bureau generally gets about 13 percent of the IP's gross revenues.
An additional 30 percent of the money goes to the long-distance carrier -- AT&T, Sprint, MCI or Telesphere Communications -- with which the service bureau has contracted. And the carrier, in turn, must pay about 40 percent of its take to the local phone company for processing the charges as part of the customer's monthly phone bill.
Even that doesn't take into account the single biggest expense for any audiotex operator: the cost of getting people to dial the 900 number in the first place. Advertising, even in newspapers and on late-night television, costs money. On a national level, even $100,000 a week is a bare-bones advertising budget. With the average audiotex service generating fewer than 375 calls a week and less than $5 in charges, it's hard to stay afloat, much less make a fortune, in pay-per-call.
"A lot of people come into the business with the impression that it's the newest license to print money," says Peter Brennan, a New York-based consultant to the audiotex industry. "Well, it's not. It's like investing in the theater. If you have a hit, you make a lot of money. But most people don't have hits."
Then there's the image problem. Many people still associate 900 dialing with soft-core pornography. And just about everyone seems to know someone who knows someone who heard about a 9-year-old kid who ran up thousands of dollars of charges on his parents' phone bill, forcing his family to sell the house and declare bankruptcy to pay the phone company.
