The NewsHour with Jim Lehrer

JIM LEHRER: Good evening, I'm Jim Lehrer. On the NewsHour tonight, we look at the wild time on Wall Street, Terence smith reports on the new world of digital television, and Gwen Ifill begins a series of discussions on the legacy of Vietnam. It all follows our summary of the news this Wednesday.

NEWS SUMMARY

JIM LEHRER: This was another busy and uncertain day on Wall Street. The end result for the NASDAQ Index was a 20-point gain, to close at 4,169. The Dow Jones Industrial Average fell 130 points, closing at 11,033. Yesterday, the stock market had its most volatile day ever. Both the NASDAQ and Dow fell 500 points before staging rallies. President Clinton held a White House conference today on the new high-tech economy. He heard from bankers, businessmen, and Wall Street leaders, and he said the economic transformation has given the country an unparalleled boom. But Federal Reserve Chairman Greenspan said he's concerned about the inflation risk caused by all the wealth being produced. He said the Fed would be vigilant.

ALAN GREENSPAN: Only a balanced prosperity can continue indefinitely. One that is not will eventually falter. A change in market interest rates is an important element of the balancing mechanism of a market economy.

JIM LEHRER: We'll have more on the markets and the new economy right after this News Summary. The federal judge who ruled against Microsoft set a schedule today for deciding a penalty. Details were not announced, but according to court papers, the judge has also said he might "fast track" a Microsoft appeal directly to the Supreme Court. He said he hopes to avoid delays that might disrupt the economy. On Monday, he ruled Microsoft violated antitrust laws. Overseas today, the new prime minister took office in Japan. We have a report from Richard Vaughan of Associated Press Television News.

RICHARD VAUGHAN: Yoshiro Mori was sworn in with a traditional ceremony carried out by Emperor Akihito. It brings to an end to days of confusion about who would lead Japan after the former prime minister, Keizo Obuchi, collapsed on Sunday. He had a stroke and fell into a coma, leaving a leadership void. Earlier in the day, the upper and lower houses of parliament chose Mori to be the country's new premier, until a general election could be held. It was a strong vote of confidence for the former trade minister. At a news conference, Mori said he would continue the work of Obuchi, and he praised his economic policy.

YOSHIRO MORI, Prime Minister, Japan: (speaking through interpreter) I will continue to tackle with issues such as restructuring of the economy that the Former President Obuchi was working on. In particular, I will do my best to fix the Japanese economy, which is finally back on right direction, thanks to the exhaustive efforts by former LDP President Obuchi.

RICHARD VAUGHAN: Once in position, Mori drove to the hospital, where his predecessor is still in intensive care. He's on life support. His wife and three children are at his bedside.

JIM LEHRER: On the Elian Gonzalez story, the American lawyer representing the boy's father arrived in Havana, Cuba early today. He'll discuss Juan Miguel Gonzalez's possible travel to the U.S.. Gonzalez has been issued a visa, but he's set two conditions. He says he will go alone if he can pick up his son and return immediately. Otherwise, he wants a 27-person entourage with him. So far, the State Department has issued visas for only five of those people. Labor Secretary Alexis Herman was cleared toy in a criminal investigation. Independent Counsel Ralph Lancaster said he would not seek an indictment. His two-year investigation focused on whether Herman solicited $250,000 in illegal campaign contributions. Herman said she was gratified at the outcome. President Clinton said he always knew she had done nothing wrong. The House again voted to outlaw some late-term abortions today. The 287-141 vote was more than the two-thirds majority needed to override a threatened presidential veto. Supporters said they want to stop the procedure they call "partial birth abortion." Opponents argued the bill would undermine the U.S. Supreme Court decision that legalized abortion. They spoke on the House floor.

REP. NITA LOWEY: We believe that women matter. We believe their lives are irreplaceable and worth protecting, and that's why we oppose this ban. Let's reject this assault on our values and our health and stand up for the principles embedded in "Roe V. Wade." Vote "no" on this bill.

REP. TOM DeLAY: Americans wouldn't this done to a dog, yet the White House and others turn their heads away as it's done to babies. The abortion industry has gone too far. And on this issue, the conscience of this country has been pricked. A vast majority of Americans now believe that partial-birth abortions should be illegal. Mr. Speaker, the President needs to listen to the conscience of America and sign this ban.

JIM LEHRER: The Senate passed a similar version last fall, but not by enough to overcome a veto. If President Clinton carries through on the threat, it will be the third time he has vetoed such a bill. The Senate today rejected an effort to create a Medicare drug benefit before cutting taxes. The budget amendment failed on a largely party-line vote. Democrats said it showed Republicans care more about reducing taxes for the rich than helping the elderly pay for medication. Most Republicans said it's irresponsible to add new benefits to Medicare before ensuring its solvency. And that's it for the News Summary tonight. Now it's on to wild days on Wall Street, our digital television future, and the legacy of Vietnam.

FOCUS - WILD RIDE

JIM LEHRER: Kwame Holman begins our look at the markets. (Bell ringing)

KWAME HOLMAN: Caution was in order this morning on Wall Street, a day after a record-setting roller coaster ride. All eyes were on the NASDAQ exchange, home to stocks of many high-tech companies that make up the so-called "new economy," companies like Amazon.Com, Dell Computer, and M.C.I. WorldCom. Earlier this year, NASDAQ moved generally upward, peaking at 5,048 on March 10th. But it's been volatile and downward since then. Yesterday, it plunged 14% at midday, before rallying to close down 2% for the day. Much of the money flowing out of NASDAQ's new economy stocks went into so-called "old economy" companies, particularly those represented by the Dow Jones Industrial Average. The Dow, which includes companies like Coca-Cola, Eastman Kodak, and American Express, retreated early in the year, when NASDAQ was moving up. But since, the Dow has moved higher. Yesterday, the Dow followed NASDAQ, moving down, then back up, ending down 0.5%. (Applause) Today, broadening the new economy was the topic at a White House Conference of prominent economists, entrepreneurs, academics, and government leaders.

PRESIDENT CLINTON: How do we keep this expansion going? How do we extend its benefits to those still left behind in its shadows? What could go wrong, and how do we avoid it?

KWAME HOLMAN: Federal Reserve Chairman Alan Greenspan said it is an open question whether high-tech companies will continue to lead the markets, and the economy, upward.

ALAN GREENSPAN: The gap in expected profit growth between technology firms and others has persistently widened. As a result, security analysts' projected five-year growth of earnings for technology companies now stands nearly double that for the remaining S&P 500 firms. To the extent that there is an element of prescience in these expectations, it would reinforce the notion that technology synergies are still expanding, and that expectations of productivity growth are still rising. There are many who argue, of course, that it is not prescience but wishful thinking. History will judge.

JIM LEHRER: We get some judgments of our own now. Ash Rajan is senior vice president at Prudential Securities; he will join us in a moment. We're having technical problems from New York. We hope that he will be joining us in a moment. E. David Ellington is here. He is the chairman and CEO of Netnoir, an Internet web site focusing on black culture. Hugh Johnson is chief investment strategist at First Albany Corporation, a brokerage firm. And Robert Shiller is an economist at Yale University and author of a new book on financial markets, "Irrational Exuberance." Both he and Mr. Ellington attended today's White House Economic Conference.

Mr. Johnson, what's your reading of what's happening right now on Wall Street?

HUGH JOHNSON, First Albany Corp.: Well, I'd say the simple version, Jim, is that, you know, we had the market go a long way very fast and reach levels that are arguably overvalued. And now it's sort of coming back down to earth, not the overall market, but primarily these technology stocks and Internet stocks. The more elaborate version is we've gone through a period of fairly elaborate speculation, where individuals have been, you know, borrowing lots of money to buy stocks at prices that were arguably overvalued, with the dream or fantasy that they'd become even more overvalued, and financial market history tells us that, when you have a period of speculation, it's often followed by a period of distress, revulsion, where prices come down and we come back down to earth, so to speak. So it's really a simple version of what goes up must come down, and we're seeing that right now, so to speak, played out in front of us with those technology stocks and Internet stocks.

JIM LEHRER: There were a lot of folks who said quite openly yesterday, they were scared, this whole thing was scary. Did they have good reason to be scared?

HUGH JOHNSON: Well, they've got... I think they've got good reason to be scared because, when you see prices come down that fast, it's obviously a very scary and an emotional experience. But if they check financial market history out, they'll see that they shouldn't be scared, primarily from the point of view that this kind of pattern gets repeated over and over again. It might mean that there's more ahead of us in the way of sort of an adjustment down in prices. But this is not unusual in terms of what happens in financial market history. Again, what goes up goes up fast, comes down and comes down very hard, and it can be very emotional and very scary.

JIM LEHRER: Ash Rajan has joined us. Mr. Rajan, welcome.

ASH RAJAN, Prudential Securities: Thank you.

JIM LEHRER: Where do you come down on the scare market here? I mean is this something that people should be worried about, or is this just something that's understandable and should have been expected?

ASH RAJAN: In fact, I think you hit the key word "expected." We were all anticipating some sort of a pullback and a correction. It happened. But Wall Street is not known to be sober. We tend to overreact both on the positive and in the negative, and we did exactly that yesterday afternoon. I think there was a lot of a very climactic type of selling that's typical, that the technicians would argue that's typical of a bottoming of the market.

JIM LEHRER: Well, now, Alan Greenspan said today that, I mean in typical Alan Greenspan fashion, he said, you know, the technology stocks, or the technology companies that are driving the market, they could continue to grow and grow forever, or that could be wishful thinking. Where are you on that?

ASH RAJAN: I'm right in the middle of that sentiment. I certainly believe that technology, telecommunications, e-commerce, are central platforms for growth, not just to this economy in the U.S., but certainly the global economy, Jim, and I'm very, very convinced that the participants of those three sub-sectors of the economy will do very well from an investment point of view.

JIM LEHRER: Mr. Johnson, who's getting hurt by this volatility?

HUGH JOHNSON: You've got -- anybody that's over focused or concentrated on technology stocks. The real lesson of this is you need to diversify your investment portfolio, if you're overexposed in large-cap, or not even large-cap, but all technology companies, Internet companies.

JIM LEHRER: What's large cap?

HUGH JOHNSON: Large cap is really larger companies, companies like Oracle, Microsoft, Texas Instruments, Sun Microsystems, some of those. But most importantly are the Internet companies, Internet companies like Priceline.Com. You've heard names like e-bay, America OnLine, Amazon. Those that owned too big a percentage of their portfolio in just those stocks found out, first of all, the lesson of diversification, but it was a very painful experience for them.

JIM LEHRER: Mr. Ellington, they're talking about you, you're in the Internet...

E. DAVID ELLINGTON, CEO, NetNoir Inc.: I know, and I'm, like, a little surprised. Well, I mean clearly there are some serious issues there, and we think that, at least in my space, that there's still a great deal of opportunity. We are not... I think the lesson to learn is really the margin issue. I think that's really what's profound.

JIM LEHRER: Explain that.

E. DAVID ELLINGTON: The idea that people borrow money to actually buy equity, to buy stocks. And I think...

JIM LEHRER: And hope it goes up.

E. DAVID ELLINGTON: And pray it goes up because you get that quality from the...

JIM LEHRER: They do more than hope, they pray?

E. DAVID ELLINGTON: Yeah, so that ultimately they'll be able to benefit, and make some money out of it. I think clearly...

JIM LEHRER: Excuse me. Let's explain why that's a problem. If you already have money and you put it in the market, you can afford to go up and down and up and down. But if you're borrowing all the time, you can't?

E. DAVID ELLINGTON: In theory, you're only supposed to use money in the markets that you can afford to lose. So that's in theory, but this has been a frothy market for some time, so a lot of people have been participating in a lot of different ways.

JIM LEHRER: But you're in the Internet business, and you hear people like Alan Greenspan or anybody say... Well, Mr. Johnson just said, "hey, be careful in the technology area." And that this may not be the peak. We may have already peaked here. Do you feel that way?

E. DAVID ELLINGTON: Not at all. Coming from the Bay area and I drink the Kool-Aid, as I say, a lot. Bottom line is, we think that there's a still... We're in transition. We've come from the old economy into this transition period into the new economy. I'm not naive. This is clearly, when you have... you know, the metrics here are completely different. We are focusing on price-to- earnings ratios and that kind of stuff, typical companies. But here in the Internet, it's more based on momentum, size in the market, strategic relationships, growth. You know, Yahoo came out today with some numbers, they beat their numbers. So there are some bellwether stocks out there that are really showing great growth and great growth potential.

JIM LEHRER: And it's not even close to being over, in your opinion?

E. DAVID ELLINGTON: Oh, no. I mean, again, we're in transition. This is only... This is year 5.5 of the Internet phenomenon. It started with Netscape's IPO back in November of '95.

JIM LEHRER: That's an initial stock offering, right?

E. DAVID ELLINGTON: Exactly. I'm sorry, their initial private offering... public offering.

JIM LEHRER: Public offering.

E. DAVID ELLINGTON: The bottom line is that this is a great period, there's growth, there's going to be a lot of volatility. I don't... you know, we, none of us deny that. And there's going to be a lot of g out. And I think what the market is saying... A lot of people are betting on the future, you know, deciding who's really going to be the player and that player will seriously dominate. Look at the position of America OnLine. It was able to buy Time Warner. And hopefully that will be approved, and we all expect it will be. So the bottom line is there's a real transition, there's a real new economy out there, and it's...

we're in a transition period.

JIM LEHRER: And it's real, and it's nothing to worry about?

E. DAVID ELLINGTON: It's real, we all... It's going to be very volatile, but there's a lot of opportunities still out there.

JIM LEHRER: Professor Shiller, where do you come down on this?

ROBERT SHILLER, Yale University: Well, the Internet economy is real and is important, but people today are exaggerating the importance, losing sight of the fact that everything has its price, and some things can be overpriced. The Internet is exciting. The whole family loves it, right? They play on it. That excitement conveys an exaggerated sense of value to the market.

JIM LEHRER: In what way? How does it do that?

ROBERT SHILLER: You've got to compare the Internet revolution with other technological revolutions that have also a very important impact. I was thinking just the other day, vending machines, candy bars, that's an important innovation. It's not exciting, right? We've had lots... in history, lots of important innovations that don't have the excitement of the Internet, and they didn't have an impact on the market.

JIM LEHRER: Well, now, how does the excitement get translated into a stock price in a way that it shouldn't be?

ROBERT SHILLER: Well, the thing you've got to remember, a stock price is the price at which all of the shares are demanded. So it's determined by what do people want to pay for it? And so the kind of decision that people are making is very emotional, personal, you know, "do I want this or do I don't?" It's like walking into a restaurant and deciding what you want on the menu. And a lot of people now want these stocks.

JIM LEHRER: But hasn't it always been that way, or are you suggesting in the new economy, there's more emotion, there's more of that than there has been in the past?

ROBERT SHILLER: We are in a very unusual market situation. The market has never been this overpriced. There have been other periods in history...

JIM LEHRER: Now, I hate to keep interrupting you here, but what does overpriced mean? How do you say that a stock is overpriced or not?

ROBERT SHILLER: See, what people forget, they look at a stock and say, "this is a wonderful company." But that doesn't mean it's a wonderful investment. Everything has its price, and the feeling that I have and that many people express who look at this, that the market... the public has just valued things too highly, and so in the long run... look, we're forgetting that on this S&P, we're getting a dividend price ratio of 1.1%.

JIM LEHRER: What does that mean?

ROBERT SHILLER: That means that the only thing that you get from holding the stock from the company is 1.1% a year. That seems low. I mean, why would people want that investment?

JIM LEHRER: So you're essentially... everybody who's into these stocks is betting on the stock going up and eventually selling them, and that's how they're going to make money? It isn't holding them for a long... And clipping coupons they used to say. Forget that idea, right?

ROBERT SHILLER: What people forget is that the reason stocks historically have been great investments is because they pay a lot of dividends. Typically, stocks pay 5% dividends in history. That's a good return. Now they're paying 1%. That's a bad return, but people think it's going to go up and make up for it.

JIM LEHRER: -- Mr. Ellington -

E. DAVID ELLINGTON: I mean the bottom line is in this particular segment of the stock, of the stock market, in the technology sector, specifically in the "doctor" sector, the market has decided that this is how this area will be dealt with, the way you make money is to sell and trade your stock. It isn't necessarily waiting for a dividend. Now, I understand how a lot of economists feel uncomfortable with that. We were just at the conference today and we were joking around that the economists were more pessimistic than some other folks. But the bottom line is, is right now this is the transition. If you believe in the free market, it seems to be speaking loud and clear.

JIM LEHRER: Mr. Rajan, what does that market say to you is going to happen to you from this point on? Take from us say, here to tomorrow and the next day?

ASH RAJAN: I think the market's already beginning to fall into a sense of compromise between the so- called old economy and the new economy. The market is now demanding that a new economy does not necessarily have to be analogous to companies that don't make the money. So they would rather invest in those companies or enablers that make the old-economy companies sort of enter the portals of the new economy. And that to me is a terrific investment idea, and a very, very solid economic concept because...

JIM LEHRER: How do they do that? How does that happen? What do you mean?

ASH RAJAN: Well, you invest in companies like the Sun Microsystems, like one of our colleagues alluded to earlier, or Oracle. These are enablers. They actually make it possible for the old-economy companies to enter the so-called new world, but this way they're still making the profits, they're still making the revenues, and gives you a perfect investment opportunity that's a lot more tangible and accountable.

JIM LEHRER: For instance, Mr. Johnson, it was widely said on this program and elsewhere in the world that, when AOL bought Time Warner, that was a classic case of an old economic company being purchased by a new economy company. Do you agree?

HUGH JOHNSON: Yeah, I think that's a good case. But I think the lines of distinction between old and new should be really blurred. You have companies like General Electric, for example, which are users of the new technology that are being produced by new companies or new-economy companies, but they also are in a sense a new-economy company and one that's sort of an... they produce with the new technology and they also use the new technology. So I don't know about those distinctions. I don't know if they're very useful.

JIM LEHRER: Some people have suggested, Mr. Johnson, that an old company is not going to survive if it doesn't get into the new economy.

HUGH JOHNSON: Well, I think that's very clear, and we've seen some companies more recently announce that they're not going to have the kinds of sales, and most importantly, earnings, and the reason they're not is because they, quite frankly, haven't been using technology to the extent, and driving their costs and driving their profits by using technology. And those companies, quite frankly, will be left behind in a very competitive economic environment.

JIM LEHRER: Mr. Ellington, how do you see this? Do you see companies like yours eventually becoming part of the old economy, or the old ones coming and joining you?

E. DAVID ELLINGTON: Well, actually, I think in terms of the overall market, I think that's the trend that's happening. And that's what's going to create the... business webs are going to be really exciting and the whole... I know you have to explain every term-- the idea of the old businesses, old-economy businesses transitioning to the new economy and how can you facilitate that and create businesses to help them do that?

JIM LEHRER: But that's an exciting future to you?

E. DAVID ELLINGTON: Oh, that's... I can't imagine anything more exciting. It's revolutionary, it's a paradigm shift. It's becoming more efficient. It's actually maintaining leadership position for the economy for this country. I think that's really a great kind of opportunity.

JIM LEHRER: You see this the same way, quickly, Professor Shiller?

ROBERT SHILLER: I think it's wonderful, I love the Internet, I love these new sites, but I think some people are paying too much for something and they're going to get hurt.

JIM LEHRER: All right, thank you four very much.

FOCUS - FUTURE VISION

JIM LEHRER: Still to come on the NewsHour tonight, how technology is changing the way we use television and the legacy of Vietnam.

JIM LEHRER: Media correspondent Terence Smith has the television story.

SPOKESMAN: Action, adventure, romance...

TERENCE SMITH: Every year, network executives and Hollywood movie moguls gather at this New Orleans Convention Center to schmooze and to peddle their programming wares. The star at this year's convention was not a famous face, but a technological innovation called a Personal Video Recorder, or PVR This innocuous box has the potential to change television as we know it today.

SPOKESMAN: This is not the future of television... Television. This is now.

This is now.

SPOKESMAN: Replay TV.

SP0OKESMAN: All that technology, all of the awards all are about helping people have fun with their television sets.

TERENCE SMITH: Replay Networks is one of two companies currently making these new machines. Steve Shannon is vice president of marketing.

STEVE SHANNON, VP, Marketing, Replay Networks: It completely changes the way people watch TV when you have one, because what you do when you have a replay TV is you watch all of your shows whenever you want. You watch them on demand from a local hard disk.

MAN: I mean they can the first few seconds of...

TERENCE SMITH: The PVR Is a smart set-top box, the equivalent of having a personal computer linked to a television. These devices can download and store on their hard drive between 14 and 30 hours of programming, as currently designed, much more in the future.

SPOKESPERSON: Welcome to Tivo, the exciting personal TV service that...

TERENCE SMITH: Tivo is the other company making personal video recorders. Their product is already in retail stores across the country. Stacy Jolna is vice president of programming for Tivo.

STACY JOLNA: Everything that I've recorded winds up in a place called Now Playing List, and these are all of the shows that I've explicitly asked Tivo to record for me. I can come home after a hard day's work, plop down on the sofa, don't have to flip through network after network anymore. I just go right to my Now Playing List.

TERENCE SMITH: So, in theory, you would come home in the evening, let's say, and have available to you all the programming that you've selected anyway of what, the last 24 hours?

STACY JOLNA: It could be for the last week.

TERENCE SMITH: And that's not all.

STACY JOLNA: We can go to live TV, and here we are. We can - for the very first time - pause live television, and we have full control over our television experience now.

TERENCE SMITH: So much so that watching a live basketball game, you can freeze the action, go answer the doorbell, come back and watch the play, once, twice, if you like, with instant replay, then pick up the game where you left off. The hard drive in the Personal Video Recorder is continuously downloading the signal so nothing is missed...nothing is missed...nothing is missed.

TERENCE SMITH: The units vary in cost. The Replay Box, that has 20 hours of storage, will sell for $699. Tivo costs from $399 to $999, depending on the storage capacity, plus a small monthly fee. The prices are expected to drop sharply as more units are produced. Gary Arlen, who's been analyzing new media technologies for over 20 years, says these machines will change more than just viewing habits.

GARY ARLEN, New Media Analyst: It changes the whole dynamic of a 50 year old television industry. TV is the one medium that forces everybody to watch the same thing at exactly the same moment. I mean you can read a newspaper any time you want, television show, appointment TV, you have to be there at 8pm to watch it, this changes, you can watch it whenever you want and that really is a different dynamic for this medium after fifty years.

TERENCE SMITH: The new technology has one feature that is giving broadcast executives heartburn.

TERENCE SMITH: You have a quick skip button that lets you skip commercials?

STEVE SHANNON: Yeah, with this technology, it is definitely a shift of control over towards the viewer.

TERENCE SMITH: Garth Ancier, president of NBC Entertainment, says this feature is threatening to the

GARTH ANCIER: If enough people do skip all the commercials, then I think, obviously, all of us in broadcast television will have to find a new way to finance the kind of high-level, expensive product that we make.

TERENCE SMITH: Ancier says the networks may have to look for alternative revenue streams.

GARTH ANCIER: We may have to move to a different model. Cable television has a different model. Most cable networks get the majority of their revenue directly from subscribers. You know, maybe you'll have to subscribe to an NBC in the future.

SPOKESMAN: Now if I choose the movie zone, I get a list of different genres.

TERENCE SMITH: And it won't be long until the personal video revolution catches the public's fancy, says Gary Arlen.

GARY ARLEN: This business of the Personal Video Recorder is coming faster than almost any technology we've seen. Right now, there's fewer than 200,000 of these boxes in American households. By the end of the year 2000, it will probably be two million. A year later, there will probably be six or seven million. I mean, it's growing that quickly, so that we're seeing easily, 10%, 15% of households having these in the next three to four years.

SPOKESMAN: John, how are you?

TERENCE SMITH: Les Moonves is president and CEO of CBS Television. He says it's only a matter of time before the impact of this new technology is felt.

LESLIE MOONVES, President & CEO, CBS Television: We in the broadcast business, as a businessman, we're going to have to change how our thinking... How we've been doing business for 40 years.

TERENCE SMITH: The networks see these machines as such a threat that they have formed a coalition to protect against the recording of their copyrighted material. At the same time, they have invested in the technology.

LESLIE MOONVES: As the Tivos and the Replays are coming into our world-- and they're coming-- it's better to be inside the tent, and figure out what they're doing to work hand in hand with them, as opposed to saying, "you know what? The automobile is not going to work. I'm going to stick to my horse and carriage, you know."

TERENCE SMITH: And are you minority partners going to these organizations and saying, "Don't skip the ads -- that's our bread and butter?"

LESLIE MOONVES: To a certain extent, yes. To a certain extent, yes. We're saying, "there is a way to give your service, and still not cut us out of the business."

TERENCE SMITH: Replay has already agreed not to promote their quick skip button as a way to zap commercials. The networks aren't the only media companies investing in Replay and Tivo: America OnLine, Time Warner, Disney, Discovery networks and others, have put money into one or both companies. And satellite TV providers are incorporating Personal Video Recorders into their set-top boxes. Some experts are skeptical about whether PVR's are the next big thing. Advertising executive Jon Mandel.

JON MANDEL, MediaCom: Over 50% of people felt that "I would have one if it was part of my TV, I would have one if it were a part of my personal computer, I would have one if it were part of my set-top box," but as a separate box, you get into this cat-in-the-hat, you know, "leaning tower of boxes" problem, and "it's one more g I don't know how to connect, and another remote I'm not going to know how to work."

GARY ARLEN: They suffer from the usual first generation problems. They're a little too big. They're a little too awkward. They're a little too hard to install, but these problems are likely to be solved in the next couple of generations, the next couple of months is what that amounts to in this fast-moving business.

TERENCE SMITH: Beyond the so-called Personal Video Recorders, companies like Web TV, a subsidiary of Microsoft, are offering a service that combines digital recording with Internet access and interactivity that threatens to convert a nation of coach potatoes into mouse potatoes. Web TV has got the fast forward and taping capabilities of a Personal Video Recorder, plus...

SPOKESMAN: I've got interactivity directly with the TV.

TERENCE SMITH: Andrew McMasters, a demonstrator at the Web TV booth.

ANDREW McMASTERS: This is actually one of my favorites. This is "Judge Judy." I can actually become a part of the criminal justice system, right here. Here, when this is on TV with me. And there's a small eye that actually comes up in the corner, and that's what indicates the interactivity, and those come up at various different times.

TERENCE SMITH: There's one.

ANDREW McMASTERS: Based on the program, and then I can choose to go interactive. I can choose to buy her book, which I have on here, so I can purchase the book right off of this. I can also participate in a poll, or I can go into a chat room. I can go down here, and I can decide...

TERENCE SMITH: As to guilt or innocence.

ANDREW McMASTERS: Who I think... Yeah, and I get to be a part of the American justice system, right here, that easily. You know, and then I can vote, and I get to see who Judge Judy actually votes for. You know, I can decide who I want to vote for, and what I've usually found playing here for the last couple of days, Judge Judy and I, we vote the same.

TERENCE SMITH: Do you?

ANDREW McMASTERS: Yes. Which is good. So, I don't know...

TERENCE SMITH: She's tough, you know.

ANDREW McMASTERS: And I don't know whether she listens to me, or what it is, but you know, something about Judge Judy. She knows when I vote. And see, there we go. I win again.

TERENCE SMITH: One thing I understand you can do, but I don't think we've quite seen yet, is you can watch television, and have e-mail, or other Internet services, on the side.

ANDREW McMASTERS: Basically, I can still be surfing the Internet and then, I could still be watching whatever I was watching on TV.

TERENCE SMITH: So this is the broadcast television?

ANDREW McMASTERS: Right. Right now, what I have here is this is the Discovery Channel. (Doorbell)

SPOKESPERSON: Hi.

SPOKESMAN: Sputnik Pizza.

TERENCE SMITH: And you can even order a pizza, without getting off the couch.

ANDREW McMASTERS: I've got my commercial here for Domino's. I see the "I" up here in the corner. It means I can go interactive with it. All I have to do is enter in a pin number that I had set up and it remembers what kind of pizza I ordered before, what my entire order was. I actually had the ham and beef last time, but actually what I am thinking about this time is, I am actually going to go with the beef and beef special. And so I've got all the information here. I've got all my stuff down. I go ahead and press "next." Now what this does, is this automatically charges it to the credit card, and now I know the pizza and soda are going to be on their way.

ANDREW McMASTERS: (talking to pizza delivery person) Oh, thank you very much. Here it is, my beef and bacon special.

PIZZA DELIVERY PERSON: Thank you very much.

TERENCE SMITH: Many broadcasters are already putting their programs on Web TV.

PRESIDENT CLINTON: In the Northeast, the impact has been particularly harsh, because..

TERENCE SMITH: The "NewsHour" also can be seen on Web TV, through a webcasting project funded by Microsoft.

LESLIE MOONVES: You will be able to watch a sporting event, shortly, and be watching an NFL football game on CBS, and press a button and you'll say, "okay, Dan Marino, let's find out more information. Where did he go to school?" And there will be on one third of your screen, biographical information on Dan Marino.

TERENCE SMITH: WebTV has a little over a million subscribers today. Its president, Bruce Leak, says advertising models will change dramatically with this new version of television.

BRUCE LEAK, President, WebTV: The exciting things around the commerce opportunities and the advertising opportunities, is they don't necessarily just have to be between the programs. The sponsorship can actually move inside the program-- now that it's interactive-- and be part of the program.

TERENCE SMITH: And when does the brave new world of television arrive?

SPOKESPERSON: This isn't a future reality. It isn't weeks and months from now. If you had this box, you could go home and play "Jeopardy" and "Wheel of Fortune" today.

TERENCE SMITH: It's already here

JIM LEHRER: And We have a part two of our look at the digital future and it focuses on moviemaking. And we'll have that story tomorrow night.

SERIES - LEGACY

JIM LEHRER: And finally tonight, we begin a new series of discussions about the legacy of the Vietnam War. This month marks the 25th anniversary of U.S. withdrawal from that country after the longest war in American history. Gwen Ifill has our opening discussion.

GWEN IFILL: Nearly 60,000 names etched in black granite, each name a life of a man or woman killed in places with names like Hetong and Quantri - the black granite legacy of a war and an era: Vietnam. 25 years later, the images remain searing for those who lived it, obscured by time for the generations born after the war ended. Helicopters lifting off from the roof of the American embassy in Saigon; the U.S. retreating...

SPOKESMAN: Get out! (Gunfire)

GWEN IFILL: ...The North Vietnamese taking over, decades after the first American military advisers arrived to fight a shadow Cold War. A conflict that began slowly in the 1950's escalated dramatically throughout the 1960's, leaving horrific memories in its wake: Buddhist monks immolating themselves to protest the South Vietnamese government.

NEWSREEL: The United States Marines head for security duty in South Vietnam.

GWEN IFILL: U.S. Combat troops arriving, nearly 200,000 of them by the end of 1965, up to nearly half a million only two years later. Although undeclared, Vietnam had become a war, while on the home front, a different kind of war exploded: Massive demonstrations, some peaceful, some not. Many young men began to protest the draft.

YOUNG MAN: I don't want to go to Vietnam because I don't want to get killed. (Gunfire)

GWEN IFILL: While on the battlefield, resentment grew.

SOLDIER: Everybody just wants to go back home and go to school. Know what I mean?

GWEN IFILL: A turning point: The 1968 Tet offensive. 70,000 North Vietnamese soldiers launched a series of brutal attacks, breaching even the walls of the U.S. Embassy. The streets of Saigon imploded, the pictures telegraphed home, a public opinion disaster for U.S. policy makers, fueling even more antiwar protest.

MAN: There's a struggle going on in the world today between young people and between those old menopausal men who run this country, and it's a struggle about what the future of this country's about.

GWEN IFILL: Two months to the day after the Tet Offensive, President Lyndon Baines Johnson became the war's major political casualty.

PRESIDENT LYNDON JOHNSON: I shall not seek, and I will not accept, the nomination of my party for another term as your President.

GWEN IFILL: And the political fallout was just beginning. As Democrats picked Johnson's successor that summer, antiwar chaos spread to the streets of Chicago.

RICHARD NIXON: To you, the great silent majority...

GWEN IFILL: Americans elected Richard Nixon, who won popular support in part by promising to "win the peace" in Vietnam. But Nixon expanded the bombing war to Cambodia instead, and new atrocities came to light: U.S. troops killing innocents at My Lai. And at Ohio's Kent State University, National Guardsmen killed four student protesters. The nation erupted. Against this backdrop, National Security Advisor Henry Kissinger launched secret peace talks in Paris, and a peace accord was finally signed in 1973. Long-held prisoners of war came home. Still, the Vietnamese civil war continued for two more years after American combat troops left. The North prevailed. Vietnam eventually became one nation, but its war left America divided, generations later still coping with the cultural and emotional backwash from the first foreign war America ever lost.

GWEN IFILL: Now, five American historians join us to discuss the cultural, political and emotional legacies of the war in Vietnam: NewsHour and Presidential historians Doris Kearns Goodwin and Michael Beschloss; journalist Stanley Karnow, author of "Vietnam: A History"-- that book became an award- winning public television series; Richard Norton Smith, director of the President Ford Museum & Library in Grand Rapids, Michigan; and Jonathan Holloway, an Assistant Professor of African American Studies at Yale University.

Stanley Karnow, I want to read you a quote from your book. You wrote "the names of the dead of the dead"-- speaking of the Vietnam wall, the memorial-- "the names of the dead engraved on the granite record more than lives lost in battle; they represent a sacrifice to a failed crusade, however, noble or illusory its motives. They bear witness to the end of America's absolute confidence in its moral exclusivity, its military invincibility, its manifest destiny." America still bears the scars of Vietnam.

STANLEY KARNOW, Author: It certainly does. And the legacy of Vietnam I think cannot quite be understood if you don't understand how we got involved in the first place. I traced the involvement back to the Truman administration, when President Truman decided to help the French. The French had been... had colonized, controlled Vietnam as a colony. And after the Second World War, they were trying to retrieve it, fighting against a communist-led nationalist movement. and Truman decided to give them what seems a paltry sum today, of $10 million, $15 million. But it was the first step in, and that's followed by President Eisenhower, and then of course Kennedy escalates it and Johnson and so forth, and we'll go through all that. But during this all, the public really doesn't know very much about what's going on. And..

GWEN IFILL: You wrote that we "oozed our way into Vietnam."

STANLEY KARNOW: We oozed in. And those were the days when people didn't ask questions. People had confidence in the government. I mean one of the great speeches was Kennedy's inaugural address, "we will help any friend, oppose any foe," and so forth, it was to assure liberty in the world, and everybody thought it was marvelous. It was just - what happens eventually - as the war goes on and there is no progress, and Americans are getting killed, and you begin to see what some reporters in those days called a credibility gap between the public statements and the realities on the ground. And as a result of that, just to fast-forward, I think people look back and realize how much the leadership lied, and so forth. You have just one example, Robert McNamara, who was the defense secretary during the Kennedy and Johnson administrations, writes a book saying, "We were wrong, terribly wrong." I mean, that's cold comfort for the families of the Americans who were killed.

GWEN IFILL: Well, let me pick up on that, Michael Beschloss. Obviously, people felt disillusioned. They felt that Presidents, a succession of Presidents had lied to them about the war. How are we still feeling the reverberations of that now?

MICHAEL BESCHLOSS, Presidential Historian: Well, you know, part of it, we always talk a lot on this program about the fact that we don't have much confidence in our system. A lot of it goes back to that period. You know, one of the ideas of the American system is that, if we Americans are going to make a sacrifice like sending 56,000 of r people to die in a war in Vietnam, that that should be something that our presidents should tell us about in advance and give us a choice. The 1964 election, LBJ versus Goldwater, Vietnam was not discussed very openly. I've been listening to LBJ on these tapes he made of his private conversations. Even during the '64 campaign, he's saying, "I can't really level with the public and say that we may have to get involved in a big war next year, '65." '68 was even worse. A lot of those voting for Richard Nixon thought that he would get us out of the war quickly. If they had had any idea that he was going to extend that war for four years, probably 25,000 Americans more dying and also expand it beyond Vietnam, they never would have elected him. So when you go through an experience like that, you begin to think that the votes you cast may not have very much connection to the kind of policies America follows.

GWEN IFILL: Doris Kearns Goodwin, there seems to be such an ambiguity about how people... There's no blame that can be properly laid, or at least that people can happily lay -- McGeorge Bundy called it "Gray is the color of truth," when talking about the ambiguities of the Vietnam War -- how does America cope with that now?

DORIS KEARNS GOODWIN, Presidential Historian: Well, I think that the most important lesson that people have to take from the war, which has partly just been said, is that no foreign war can succeed without that large domestic support. Franklin Roosevelt understood that way back in the 30's when he "quarantine the aggressor speech," and the country didn't respond to want to go get involved in Europe's war. Later he said it's like looking back in a parade and no one's following you. You can't go forward. So wherever we lay blame or not, I think there's no question that the lesson to be learned is you have to level with the country, you have to make them understand the price they're paying. Somehow the country got the feeling with each new endeavor in Vietnam that it was going to be over soon, that there was light at the end of the tunnel, instead of being told that it might be a long war, and what the reasons for that war were. You know, you just think about the emotional response to McNamara's book, when he finally came out and said, "we were wrong, we mis-estimated the situation in the North. We overestimated the strength of the South. We should have gotten out in '63 or '64." Imagine what the parents of those solders who died felt when they thought that their kids died in vain without a reason. So unless you in a democracy give a reason for people's lives being put on the line and then after the fact, the emotional out coming from that is so terrible, even though McNamara was trying to do a good thing, "look at the lessons of why we were wrong," the impact of it was so deeply felt on the part of the people who wanted to believe that their children, their lovers, their wives and husbands died for some good reason.

GWEN IFILL: Professor Holloway, you hear us talking about the incredible deep scars of Vietnam, and yet you teach at a college campus where students have no contemporaneous memory or scars, other than it's some dark family secret that nobody wants to talk about. Is it something that we're missing here, or something that they're missing?

JONATHAN HOLLOWAY, Yale University: Well, I don't think any of the commentators are missing anything. The Vietnam War was the end of American innocence, as far as thinking about political culture. The students I teach are part of a generation, that they grew up with the Vietnam war as being "Apocalypse Now" on the big screen, they grew up with Rambo as being some sort of post- Vietnam survivalist ethic, and so you see a whole cultural shift in terms of what one expects out of war, there are no good wars left. You see a whole cultural shift in terms of people's expectations of a political process or even any sort of notion of justice on this kind of international scale.

GWEN IFILL: Is there also a basic and fundamental distrust now of government, that government is going... Means what it says and can be trusted to say what it means?

JONATHAN HOLLOWAY: I don't want to say there's a fundamental mistrust, but there is a first step that's missing, that the first step used to have been, "we'll trust our president, we'll support the president," where the first step now is a cynical and skeptical first step, I which I think actually is fairly health. And then maybe we'll trust our leaders after that.

GWEN IFILL: Richard Norton Smith, it seems that when we talk about the cleavages that's left from Vietnam, we often break it down into left versus right. Is that a correct formulation?

RICHARD NORTON SMITH: Certainly the culture war continued long after the military war ended, and in fact, it could be argued, it's still going on. Certainly those on the right who fundamentally distrust the 60's, indeed who blame the Clintons as the personification of what they see as 60's excess, and those on the left who have retreated to a kind of neo-isolationism. But there's one factor I think we haven't mentioned that I think cannot be over exaggerated. And that's television. This very medium, after all, brought us the Vietnam War. Contrast how we're observing the 25th anniversary of the end of our involvement in Indochina with, say, the 25th anniversary of the Korean Armistice. Korea today conjures up memories of what, "MASH" reruns? - and a memorial in Washington that was overshadowed the day it opened by the Vietnam Wall. This was a television war, and American foreign policy for the last 25 years, and particularly the projection of American military force, has been governed in many ways by the television pictures. Think of an instance, perhaps aside from the Gulf War, where government was willing to commit large numbers of American ground forces for more than a few days in a life-threatening situation.

GWEN IFILL: It just doesn't happen that way anymore.

RICHARD NORTON SMITH: No. And it's interesting, you know, the historical legacy, every generation will interpret it for themselves. One of the ironies of this whole discussion is that it was the generation obsessed with Munich that got us into Vietnam. I suspect there's a generation of those who fought in the war and those who protested the war here at home who are as obsessed with Vietnam as their fathers and grandfathers were with Munich.

GWEN IFILL: Mr. Karnow, you said that there was relief and humiliation when the war ended. Does that continue to kind of dog our steps now as we consider other military or any other kinds of national movements?

STANLEY KARNOW: Well, we're trying to reconcile ourselves, of course, with what happened in Vietnam. At the time the war ended it was relief. Let me just try to answer your question in an indirect way. I think there's a kind of silver lining, if you want, to the Vietnam tragedy, which is that people are much more skeptical today. They're asking questions leadership. Yes, on the one hand it's eroded faith in government, but after all, people are realizing that the leaders are our employees, we pay their salaries, right? We have a right to know what they're doing. The second point I want to make is... And I might have to amend someday what you quoted from my book - the fall of Saigon was a debacle but it wasn't a disaster. Sure, it shocked us when it happened. But look what's happened to America since then. I mean, America's economy is the strongest in the world, people look to America... It's a beacon for all sorts of things, the surge toward democracy in all sorts of countries. I mean, Communism is finished. High-tech-- America is the cornucopia of high-tech, and so forth. So you go everywhere in the world today, you see kids, you can't tell whether they're American or German or French or whatever, I mean they're all in blue jeans, they all look like Americans. Everybody wants to imitate America today.

GWEN IFILL: And that's a good thing, in your opinion?

STANLEY KARNOW: Well, yes I like the differences in the world, and I'm not sure I like French kids going on skate boards, wearing New York Yankees baseball caps, or as Doris would prefer, Brooklyn Dodgers baseball caps. But there is... I mean, we've been projected differently... When you go back to the days, the Cold War days, we were basically thinking of ourselves in military strategic terms. Now, America has a great role to play economically, culturally and morally, too. I mean, people do look to America.

GWEN IFILL: Professor Holloway, speaking about the moral question, there seemed to be a broken social contract a lot of people saw between the United States government and minorities and poor people, who felt they had to go and fight this war. Is that something that you still see people worried about?

JONATHAN HOLLOWAY: Oh, absolutely. I think... Well, first of all, I want to offer a corrective. I'm not sure that America ever had a real contract with black America, except for on the bottom of possession of a slave title, so I think that when you talk about black America or other minority populations and poor white America, you have to talk sometimes at cross-purposes. But the fact remains that there is, I think, a very real skepticism about who's going to be called up first when something happens. We do have a voluntary armed forces, but even during the Persian Gulf, I remember seeing black troops complaining to hopefully, Colin Powell, I think they were trying to get his attention, about the way that they were being treated when they're overseas in Saudi Arabia. So I don't think this is a story that's actually finished.

GWEN IFILL: Michael?

MICHAEL BESCHLOSS: It was, it was a war that, especially as it went on, was fought by Americans who were poor and African American, and it also generated this cultural divide because you had a situation where 18-year-olds who were not even able to vote were sent to war by Presidents who had been votedin by other people and by Senators and members of Congress, to the extent that they acquiesced. And so there really was that generational divide, and that was so powerful, it exists still. Just take a look at the year 2000, how much we've heard about George W. Bush and Al Gore and their draft records or what they were doing at the time of Vietnam, how they met that challenge. This is something that we're still asking about people, and we look at it, I think, too much as a litmus test to give you some insight into their inner selves.

GWEN IFILL: Doris Kearns Goodwin, when we talk about Vietnam, is there anything positive we can say about... That binds us together instead of splits us apart as a result of that war?

DORIS KEARNS GOODWIN: Well, I think one of the saddest chapters has now been turned around a little bit, and that was the contempt with which the soldiers were greeted when they came home from that war. I think that's the most humiliating, horrible memory of it all. Here they had fought for us, and were treated so badly by so many people who were against the war at the time. And I do think in the last couple of decades, there's been much greater empathy, much greater reaching out, much greater understanding. The wall partly did that. Our movies have partly done that I think to make us understand what they went through more. I still think that one legacy that's left from that, however, is that we let the draft go because we didn't want a selective draft, as we had in the war, because it seemed to weigh so heavily on those who were poor and working-class and the middle-class, better educated kids got out of it. So we turned to a volunteer force, and that sometimes to me still to be a form of economic conscription because poorer, working class kids are still the ones joining the army. So maybe these wounds have been partly healed, but I think there's still a lot of open questions that it raises for us to answer.

GWEN IFILL: Richard Norton Smith, open wounds or good news that we can get out of any of this?

RICHARD NORTON SMITH: Oh, I think Doris is absolutely right. I think there is real healing going on. I see it every day. You know, in the lobby of the Ford Museum here, we have an amazing relic of the war. We have the actual original staircase that led to the rooftop of the Saigon Embassy, which was torn down two years ago, and which was the last means of escape for thousands of Vietnamese and Americans, as the city was encircled. And it's an amazing thing, day in and day out, to watch people approach that artifact. Some of them physically recoil. Them are deeply moved. To some people it will always be a symbol of military humiliation, but to other people, including by the way, Gerald Ford, it's a symbol of the desire to be free, every bit as much as the Berlin Wall that's out in front of the museum.

GWEN IFILL: Mixed messages that don't seem to actually go away. Thank you all very much.

JIM LEHRER: And our Vietnam legacy series continues next week with a discussion on the impact the war had on the U.S. military.

RECAP

JIM LEHRER: Again, the major stories of this Wednesday, Wall Street had another busy and uncertain day. The NASDAQ Index gained 20 points. The Dow Jones Industrial Average lost 130. And the American lawyer representing Elian Gonzalez's father traveled to Havana, Cuba. He discussed possible plans for Juan Miguel Gonzalez to the U.S. to get his son. We'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.