Stormy Weather
AccuWeather pioneered the business of forecasting, and for years its outlook was sunny--until the Weather Channel appeared on the horizon. Here's how AccuWeather lost its lead and what it's doing to win it back.
By Paul Keegan

(Business 2.0) – "Happy weekend, everybody!" chirps the bubbly weatherman in wire-rimmed glasses and a gray suit, facing the cameras in a television studio in State College, Pa. "I'm AccuWeather.com's meteorologist Jim Kosek. No weather-related travel delays in Atlanta as we head on into the weekend ..." Standing to one side watching the taping is a tall, bespectacled former meteorology professor named Joel Myers, who founded AccuWeather 43 years ago while a graduate student at nearby Penn State. It was Myers who pioneered the concept of branded weather forecasts by manipulating and analyzing free government data to create what was, for a time, the largest and most recognized name in the commercial weather-services industry.

Myers's enduring legacy is that wherever AccuWeather forecasts appear--and Kosek's face is now popping up on cell phones and PDAs across the country, predicting a lovely weekend with a few scattered showers--chances are, they'll be right. And being right, more than anything else, is what drives Myers. While no independent research exists comparing the accuracy of private forecasting companies, Myers can reel off statistics showing that he has beaten the National Weather Service in 206 out of 208 months dating back to 1988. He has released detailed studies that he says show that his forecasts are more reliable than those of his biggest competitor, the Weather Channel (which disputes those findings but essentially concedes the point by declining to release its own internal studies).

Establishing an unchallenged reputation for accuracy is not an insignificant accomplishment, given that weather affects an estimated $2.7 trillion worth of U.S. economic activity each year and the forecasting business has mushroomed into an industry worth more than $1 billion. But surprisingly, even as AccuWeather has improved its offerings in recent years--with unprecedented 15-day forecasts and snazzy new features like its RealFeel temperature index--the Weather Channel has been eating Myers's lunch. Today the Weather Channel has eclipsed AccuWeather in size and brand recognition through its flagship cable channel and wildly popular website and has also successfully invaded Myers's once sacrosanct turf of newspaper, radio, local TV, and corporate clients.

"It's a great thrill being right," Myers likes to say. "And it's an even greater thrill beating everybody else." But being the best is no guarantee of being No. 1. Though he's now trying to stage a comeback, the story of Myers's stumble from the pinnacle of success to struggling No. 2 offers a cautionary tale for companies that focus on quality so intently that they lose sight of dramatic technological changes that rewrite the rules of their industry.

As Kosek finishes his taping, Myers continues his tour of what he calls "the main operations area"--an enormous open room crammed with computers where most of the company's forecasting is done. "People here are working 24/7," he says, pointing to where his staff of more than 100 meteorologists serves AccuWeather's 150,000 clients. Those clients include about 180 Fortune 500 companies (many in transportation, agriculture, and energy), state and local governments, and media outlets with a combined potential audience of over 100 million people, including MSNBC and CNBC, local TV stations in 45 markets, 200 radio stations, 850 newspapers, and 600 websites.

It's a compelling business model. Weather entrepreneurs like Myers and his competitors over at the Weather Channel let Uncle Sam spend hundreds of millions of dollars a year on far-flung satellites, radar, high-tech aircraft, and weather balloons that make 123 million observations around the world per day. That data is ingested by National Oceanic and Atmospheric Administration supercomputers that perform 1.75 trillion sustained calculations per second, and the results are offered to the public free of charge. All a guy like Myers has to do is hire crack meteorologists and computer programmers and get designers to create splashy color graphics and video simulations, and presto--he's got himself a weather company.

Since everybody has access to the same raw government data, Myers decided that his company's competitive edge would lie in the accuracy of its forecasts. That suits his personality: He's a hypercompetitive fellow who has always been obsessed with the weather. Growing up in Philadelphia, he began recording daily conditions in a diary at age 7. At 11, he brashly declared that someday he would start his own forecasting company. When he arrived at Penn State in 1957, Myers introduced himself to Charles Hosler, an instructor in its renowned meteorology program, by explaining why Hosler's prediction of rain in the Carolinas the following day was off base--and, sure enough, the storm soon slid out to sea.

In 1962, when executives at a local gas company asked Hosler to recommend someone to provide customized temperature forecasts, the 22-year-old Myers got the call. He phoned in his predictions for $50 a month and later added ski areas and local governments to his client list while getting his Ph.D. and teaching meteorology at Penn State. A few years later, he started delivering forecasts on a local TV station in Wilkes-Barre, Pa., and named his company AccuWeather, one of just a handful of small firms in the nascent weather-services industry. By 1981 the business was taking up so much of his time that he retired from Penn State.

As AccuWeather grew, Myers became increasingly dissatisfied with the quality of the data coming from the National Weather Service. Until World War II, the agency was the nation's only source of weather forecasts, but as a commercial industry emerged during the postwar years, a debate broke out about whether the federal government should continue spending taxpayer money on routine predictions like "sunny and warm tomorrow." The weather-services industry argued that the National Weather Service was hampering its growth because media outlets could just recycle the agency's predictions rather than pay companies like AccuWeather. The government's money would be far better spent on the more thankless task of accurately gathering and quickly disseminating the raw data that those companies could then decode, reformat, and analyze to create their own forecasts.

But while Myers was complaining about the National Weather Service stealing his business, he completely missed the storm that was brewing in Norfolk, Va., where a 24-hour cable network called the Weather Channel was launched in 1982. Frank Batten Sr. was no meteorologist, but as CEO of a media company called Landmark Communications, he understood that the emerging technology of cable TV eliminated the need for the media outlets and other middlemen that were the mainstays of AccuWeather's business, since it could deliver weather reports directly to the American consumer and businessperson. And rather than spending money on a battery of high-tech equipment, he could just get the forecasts for free from the National Weather Service.

Though the Weather Channel launched to hoots of derision and nearly went bust in 1983, when it finally took off during the '90s, it simultaneously thrived on and fed Americans' hunger for instant weather information and became one of the nation's top cable networks, today watched by 20 million people daily.

Nobody seemed to care that the Weather Channel was simply regurgitating government forecasts until another disintermediating technology came along that once again made AccuWeather's business-to-business model look archaic. Like cable, the Internet allowed an entrepreneur to reach the public directly with free government forecasts--except this time it didn't require millions of dollars to launch a TV network, just some computers.

Because that forum was already churning with plenty of sites that served up the government's forecasts for free and AccuWeather was jumping in with its superior offerings, the Weather Channel had to scramble to become a real weather-services company. So it beefed up its staff of meteorologists and created proprietary forecasts. In 1997 it began working with the University Corporation for Atmospheric Research, an academic consortium in Boulder, Colo., to develop its own content with a "weather engine" system that creates forecasts based on multiple databases.

With the Weather Channel behind it, Weather.com proved impossible for Myers to match. Today the site regularly ranks among the top 10 with about 25 million unique visitors per month, compared with just 7 million for AccuWeather.com. "The advantage they have is that they are promoting Weather.com 24/7 on television," Myers complains.

Like everybody else, Myers says, he thought the Weather Channel would probably fail. And besides, AccuWeather didn't have deep enough pockets to start a cable channel. He's a weatherman, he says, not a media mogul--ignoring the fact that the man who first conceived of the Weather Channel, John Coleman, was, in fact, a TV weatherman who took the idea to Batten and briefly served as the company's president.

The truth is, Myers still hasn't recovered from being beaten to the cable market in the '80s. Though both companies are privately held and decline to disclose revenue figures, most estimates put AccuWeather's revenue at just under $100 million and the Weather Channel's at more than double that. Now the Weather Channel is going directly after AccuWeather on all fronts and has signed up 500 radio stations and 153 newspapers (including USA Today and the Los Angeles Times). And, thanks to the 2000 acquisition of Weather Services International, it now boasts a blue-chip corporate client roster that includes eight of the top 10 U.S. airlines, 400 local TV stations, and national TV outlets such as The Today Show and the Fox and Bloomberg cable networks.

And yet, when you ask Myers to assess the competitive landscape, he still can't seem to focus on the Weather Channel, the upstart company that has taken him to the cleaners. "Our main competition," he says, without a hint of irony, "is the National Weather Service."

Sitting in his office, surrounded by his large collection of antique barometers, Myers gets positively apoplectic about his archenemy, the National Weather Service. He returns again and again to his theme: The government should get out of the forecasting business and focus on improving its data gathering. So why isn't the government doing a better job of collecting data? "Because there's no glamour in it!" he says, interrupting. "It's unbelievable!"

"To produce a severe-weather warning, you have to produce a forecast," responds Edward Johnson, director of the National Weather Service's strategic planning and policy. "It's like saying we should only plug the clock in when we want to know what time it is."

The Weather Channel, meanwhile, declines to follow Myers in biting the hand that feeds it. "We think of the National Weather Service as our partner, and it's an important, positive relationship," says company president Debora Wilson.

Even if Myers is right and the agency is botching its job of collecting raw weather data, he neglects to note that the Weather Channel used the exact same information to overtake AccuWeather. But there are signs that Myers is beginning to understand that for content providers like his company to survive in the information age, they have to target consumers directly rather than relying so heavily on business clients as the intermediaries.

Nowhere is this dynamic more obvious than in the fast-growing wireless market. AccuWeather's biggest growth area is a downloadable program for cell phones that for $2.95 per month provides long-range forecasts and sophisticated radar maps that illustrate, for example, rain clouds approaching or drifting away--helpful to any golfer trying to decide whether to play the back nine. The company has also launched a text-messaging forecast service and a special version of its website for handhelds, and can send video clips of meteorologists like Kosek to the hundreds of thousands of Sprint TV and Verizon V Cast subscribers.

The Weather Channel is doing all these things too, of course, and hopes to exploit its popular brand as successfully in wireless as it did on the Internet. Which leaves Myers clinging to the same hope he started his company with--that whoever has the better product will eventually win. Studies conducted by AccuWeather from 2000 to 2004 claim to show that its two-day temperature forecasts are 30 to 41 percent more reliable than the Weather Channel's and that AccuWeather is 35 percent better at predicting other conditions, such as cloudiness or sunshine.

"I could say we've done studies and we're the best, but what would that do?" responds Ray Ban, the Weather Channel's executive vice president for meteorology science and strategy. "There is no industry standard on how you're going to measure quality."

Fighting back against his larger rival, Myers also developed the RealFeel temperature, which he claims is better than the government's widely used heat index because it takes into account wind, cloud cover, elevation, precipitation, and sunshine intensity to explain why a 90-degree day feels more like 101. And rather than sitting idly by when Weather.com extended its forecasts from seven to 10 days a couple of years ago, AccuWeather now offers predictions up to 15 days in advance.

"I'm not jealous," Myers says about the Weather Channel's emergence as the dominant player in his industry. Anything that increases interest in weather reporting, he says, is good for everybody. "The bigger they get, the better for us."

And with that, he returns to his favorite subject: how unfair it is that he should have to compete with an enormous government agency funded by the American taxpayer. "The National Weather Service spends half of its $800 million budget on routine forecasting," Myers says, citing an estimate prepared by his own staff that the agency will neither confirm nor deny. "How am I supposed to compete with that?"

Myers still doesn't get it. The man who invented name-brand weather forecasts is being beaten at his own game by his real competitor, the Weather Channel, which has been proving for two decades that weather is a media business, where distribution and marketing matter far more than being right.

BLEAK FORECAST

AccuWeather prides itself on accuracy, but that hasn't translated into business success against its chief rival, the Weather Channel.

Note: TV and newspaper figures are daily; Web figures are monthly. Sources: AccuWeather; Kagan Research; Thomson Gale; the Weather Channel