INTERACTIVE NETWORK GOES BLANK

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The last chapter of David Lockton's book may soon be written.

The president-CEO of the pioneering Interactive Network last week virtually shut down his company, ceasing programming in all markets and laying off 160 of 190 staffers. The moves are a last-ditch attempt to keep the interactive TV company alive; without additional funding it will stay open only until August.

IN, which lost $122 million since its inception in 1987, took the drastic steps after expected funding failed to materialize in late May. An entertainment industry company, which IN officials declined to name, is said to be conducting due diligence on IN's assets, but a deal has yet to be made.

The stock of San Jose, Calif.-based IN slid on the news, trading as low as 25 cents per share, down from a high of $8.

One thing is certain: Even if it achieves additional funding, IN as it exists today is dead.

"No investor will invest in this company without a change in the business plan," said Tarun Chandra, technology analyst at Laidlaw Equities, New York.

Indeed, some say an investor will likely scoop up the majority of IN, pick off the meat-its software and patents-and leave the interactive pioneer's bones behind.

None of IN's current investors-Tele-Communications Inc., the largest outside shareholder with 17.8% of the company; Gannett Co.; NBC; Motorola; and Sprint-will pony up any more cash to bail out IN. Even a $42 million investment just last fall failed to stave off the latest cutbacks.

Now Mr. Lockton is hoping for a single investor to save the company, and he's resigned to giving up IN's independence.

IN's future "is certainly going to be dictated by a single entity, whether it's owned by that [entity] or it's just the big dog," Mr. Lockton said. "Investors aren't willing to put in deep, deep money unless they have control or the ability to get control."

IN has accumulated just 5,000 subscribers in four markets: San Francisco; Sacramento, Calif; Chicago/South Bend, Ind.; and Indianapolis. It has stopped billing subscribers but is letting them keep units in case programming is resumed.

Also left hanging in the balance are IN's charter advertisers: American Airlines, Chrysler Corp., Sprint and the Ad Council. All advertising programs have been suspended until the company's fate is known, and even then, the prospects for using IN's technology to test interactive TV advertising are dim.

"The investors that are doing their due diligence certainly believe advertising is an important part of the mix," said Stu Segal, VP-interactive marketing. The future of IN's advertising program "really depends on what the strategic thrust of the [investor] is."

Interactive Network demonstrated one of the first examples of marketing via interactive TV. Though unsophisticated (IN required consumers to respond to questions on a handheld unit and then send in the information by telephone), the tests showed that consumers are willing to respond to questionnaires during a TV commercial.

Also abandoned is IN's relationship with Kobs & Draft, Chicago, its direct marketing agency. IN last week sent a letter to Kobs terminating the contract. Kobs said IN has paid its bills and the agency wouldn't cut staff due to the account loss.

Mr. Lockton remains a believer in IN's technology, though he admits there may not be a place for him at the company if and when a new investor takes over.

And about that book? "It's not only a book that would be of interest to any entrepreneur," Mr. Lockton said. "It also will be of great interest to all the people that follow the information highway, because it's a microcosm of what happens when you take an idea and try to turn it into an industry."

That, as they say, may be all he wrote.

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