INVASION OF THE SAUCER PEOPLE

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With the sudden emergence of direct broacast satellite television as a potentially serious cable competitor, interactive TV and its myriad advertising possibilities may rapidly become a very dishy reality

IMAGINE THE SURPRISE WHEN interactive TV proponent Mark Kvamme, president at the hot West Coast multimedia agency CKS Partners, recently identified himself as an owner of a digital satellite dish-at a new-media conference. Why, in the impending age of cable-based interactive TV, the audience had asked, were people buying a seemingly retro, one-way broadcast system: small-dish digital broadcast satellite (DBS) TV.

"The answer," said Kvamme, "is that it gives you control over 150 channels with high-quality sound and reception."

True enough, but what Kvamme also mentioned-and what DBS companies have so far been leery of hyping-is that digital broadcast satellite systems already have considerable interactive features. But as Tom Bracken, VP-communications at DirecTv, the main programming provider for RCA's Digital Satellite System (DSS) explains, "We didn't think it would help sell the systems now."

But that is changing. Vendors in a medium claiming almost half a million households-a figure that is expected to explode this year-are becoming increasingly interested in talking about interactive now because they are moving well past their initial audience of rural cable-bereft purchasers. Now their suburban and urban subscribers are growing dramatically-either abandoning cable or running both systems, since DBS, for all its remarkable options, lacks local programming. Bracken estimates that half the DSS audience is drawn from cable households, and the subscriber base is split fairly evenly between urban and rural markets; clearly, despite the absence of local channels, the dishes have captured America's do-it-yourself fancy.

These 18-inch babies, and their somewhat larger leased, not owned, cousins from the competing PrimeStar system, "have energized the marketplace," says General Instruments' Jeff Wolking, director of product line management for consumer satellite receivers. Combine high-quality reception and great sound for a market gobbling up high-end TVs and home theater systems, with a TV alternative for a public fed up with overpriced, second-rate cable service and you have the hit technology of the year.

This means that by the time any sizable cable-based interactive TV medium hits the marketplace-perhaps in regional clusters of about 250,000 viewers-there might already be as many as three to five million households nationally with satellite systems-a prospect that could bury cable-based interactivity and deliver to DBS one of technology's great marketing end runs.

From an advertiser's point of view, digital broadcast seems to offer an antidote to Madison Avenue's greatest nightmare: that the mass market will fragment into countless niches that can never be profitably targeted. Because DBS is a national broadcast system from a single source, says John Cusick, president at PrimeStar, it can "aggregate markets," or create "mini-mass" markets out of niches. You could reach America's opera lovers or tractor-pull fanatics cost-effectively-something that network and cable TV can only do regionally, if at all.

When applied to the interactivity that is already in the box, it is easy to see why the future may already be sitting in people's living rooms. DBS, which requires a phone line connection, ostensibly for billing purposes, as part of its installation, "can handle 90 to 95 percent of the interactive features being talked about now," says Bracken. By that he means these systems can do interactive shopping-everything from ordering pizza, cubic zirconium or theater tickets-and even pull information off online services.

Viewers could also ask for more information on ads, even calling up an infomercial or simply requesting that the TV find an ad they had overlooked. The one thing it cannot do is handle full video on demand. That is the Holy Grail of interactive TV, which, through expensive cabling and a powerful computer server at the cable head end, gives the viewer the ability to control a movie or a TV program as if it were sitting in a VCR.

If video on demand is regarded as the killer app of interactivity-the thing that will make every customer want interactive-it is also regarded by critics as the application that can kill the industry. It is expensive to install, at about $700 to $1,000 per household, and expensive to maintain. Worst of all, survey after survey has shown that for all their apparent enthusiasm, users are willing to pay no more than about $2 extra a month for the service.

DBS requires a small dish and a set-top box that costs between $650 and $1,000, but the delivery costs are dramatically lower, since full-service, cable-based interactive systems require something like a separate, computer-controlled channel per user. DBS is a broadcast system that is able to simulate most of what viewers need from interactivity, and the secret of its set-top magic is storage: Satellites "overbroadcast" information that a set-top box is able to trap in memory, and the box has enough smarts to let you access it as you need it. It can take an entire section of heavily compressed video in one chunk and then dole it out in the original sequence, grabbing it whole just so you can deal with the parts you want on your own time and doing it so fast that you always seem to be "online."

Technically, DBS is delivering compressed data at

speeds comparable to the internal data transfer rates of the average computer, only it is relentless, while computers rarely need to send around that much data continuously and they don't usually use compression.

However, plucking information at will from these vast amounts of circulating data mimics only one part of real-time interactivity. Answering back is the other. Since DBS set-top boxes are already connected to phone lines, the answer-back channel is already in place. These were originally designed for occasional use, so the satellite providers could call into your box to get billing information and send out e-mail to customers for administrative reasons.

But like any other phone line, it could permit other kinds of uses. With the addition of more hardware and in some cases without, viewers can play games downloaded from the satellite along with other players using that phone line. They could also send messages: "The only thing they can't do is videoconference to Grandma," says PrimeStar's Cusick. Research companies could also get real-time information on consumer response and TV viewing, and perhaps even generate tie-ins between ads and local shopping habits. Viewers could offer feedback on ads, ask for more information, register opinions, play along with "Jeopardy" and call football plays for prizes.

The same applies to online shopping. Viewers can request more information as well as place instant orders, which are then delivered automatically by phone line to the broadcast station. DBS also offers a very refined and inexpensive form of mass messaging. If the station or an advertiser wanted to send a personalized message to every consumer, it could be done without the expense of a phone call. Since each set-top box has a "mailbox" number, all the messages with their individual addresses are crammed together in one transmission and broadcast-and each one hits its individual mark. The user sees a blinking light on the box and simply turns on the TV to "read" the mail. Presto-digital junk mail! While the DBS players are not quite ready to court Madison Avenue, they do want advertisers to keep in mind that it is a digital environment and, by understanding the underlying issues, innovators will be able to tap major new markets. For one thing, the technology-savvy agencies could aim ads at specific users, since broadcast companies have profiles of all set-top owners, and the set-top boxes have the ability to swap ads in and out of programs. This could change the way Madison Avenue will buy media, no longer buying a program, only the viewer.

While many interactive wannabes will hold out for fiber optic cable or even a phone-based interactive system, DBS may just win out because it is attracting a coalition of old-fashioned TV nuts and technology heat seekers.

Despite all the interactive hype, "You don't need as much interactivity from your TV as you do from, say, a computer," says General Instruments' Wolking, and DBS offers the prospect of delivering now what people have only been fantasizing

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