Interactive TV shows signs of life

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Given News Corp.'s purchase of DirecTV and Comcast Corp.'s play for Walt Disney Co., it appears interactive TV is finally poised to take off. Or is it?

DBS competitor EchoStar Communications Corp. is building up its portfolio of iTV services-15 at last count. The latest is a Bloomberg Television financial news/data retrieval channel that premiered more than a month ago. Moreover, there are three major cable operators currently with interactive TV ventures: Charter Communications' Digeo, which entered last month with more than one million subscribers; Cablevision Systems Corp.'s Interactive Optimum, with more than 689,000 subscribers, and Insight Communications Co.'s Insight Digital, accessed by more than 400,000 subscribers in the Midwest. But interactive deployments are still rare.

"It's been a generator of soft revenue value," said Randy Carlson, Digeo's general manager, so cable operators instead "have been focused on opportunities like video-on-demand, high-definition TV and high-speed access connectivity." Moreover, iTV has generated several high-profile ventures that had their plug pulled for troublesome economic or technological reasons-including Time Warner's QUBE and Full Service Network-leaving other operators jittery about following those footsteps.

But as Digeo and other projects show how iTV can deliver, and in turn, help generate more subscriptions in VOD, HDTV and Internet access, operators "are beginning to see the benefits of having interactivity," Mr. Carlson said.

figuring it out

"Cable has the capability of doing all sorts of interesting things," said Lynne Elander, Microsoft TV's general marketing manager, but operators "have to figure out what's the economic and technology model" for various applications. "The road's littered with iTV companies that failed because there was neither enough scale of deployment or the economic model wasn't clear enough."

So while cable operators are closely watching Rupert Murdoch's plan to deliver interactive TV nationally this summer or fall via DirecTV, most are taking a wait-and-see attitude. "Anytime you have a catalyst, you have a quickening of the pace," said Jeff Shell, CEO of Gemstar-TV Guide International, but he warned, "operators won't just roll out services for the sake of rolling them out. They'll focus on what works."

And it takes experimentation to find out what works. "This industry has a number of levers to pull, whether it's VOD, a better HDTV offering or bundling video with voice and data," said Dallas Clement, Cox Communications' senior VP-strategy and development. "People are looking at iTV, and we'll all approach it differently. You'll see some trials this year and further deployment next year."

Bloomberg TV advanced product overseer Cara Familet sees cable going head-to-head with DirecTV through a mix of iTV, on-demand and PVR features-"a hybrid product, where the interactivity leads you to a VOD option." Bloomberg's approach permits users to call up video clips on demand and customize the data crawls or graphics surrounding either those clips, or a live video feed.

When Comcast made its $66 billion hostile bid for Disney, Comcast Cable President Steve Burke hinted in passing that Disney's content and technology resources could make some formidable advanced service collaborations possible. The former Disney executive didn't specify interactive TV at the time, and Comcast declined further comment.

Comcast, the cable industry's largest operator with more than 22 million customers, is beginning with games. It recently started Buzztime, a full-time iTV games service, in its Howard County, Md. system. A few months earlier, Buzztime, organized by California-based NTN Communications, premiered in Portland, Maine through Time Warner Cable, cable's second-largest multiple system operator. The service also runs in two Pennsylvania markets served by Susquehanna Communications.

Buzztime will get wider circulation as the service proves itself with viewers, said Mark Hess, VP-digital TV at Comcast, interviewed before the Disney bid. He said cable operators are treading carefully in responding to News Corp. "It depends on what [Mr. Murdoch] does," with iTV, he said."We have to gauge the market and see what he introduces. What he's done elsewhere doesn't automatically suggest what he will do here."

Cox's approach is to focus on "ways to make consumers' lives easier," said Mr. Clement, with its iTV push toward communication applications, such as on-screen caller ID, e-mail, instant messaging and customer care. Games, advertising, e-commerce, ticketing and such are not off the table down the line, he said.

Charter expects to expand Digeo's reach to another seven to ten markets from the current 20 by June 30, and diversify its iTV offerings further before DirecTV gets going, according to Digeo general manager Randy Carlson. News, games, sports and financial information are already available; more games, local and niche content are in development. About 67% of Charter subscribers in Digeo-available markets use the service regularly, and 20% use it at least 13 times per week, Mr. Carlson said.

more discussion

"There's no question that iTV is moving up the [operator] priority scale," he said. "There's far more discussion than a year ago, and some of that is interest in us from other operators."

Digeo's sponsor list includes national automobile marketers, bankcard/financial services and computer software providers. Banner ads and feature sponsorships are among the tactics deployed, along with "loops on demand" where viewers can click a section of the screen with the advertiser's name to get a live-action message with more product information.

Cablevision Systems, which already offers ticketing, camera angle selection for sports events and customized traffic updates among iO's features, will add shopping, multi-player games and more to its roster this year. Patricia Falese, Cablevision senior VP-consumer product management and marketing, said the new attractions will "get the best mix of information and entertainment options onto the home TV screen."

So far, Cablevision has not sold advertising for its interactive iO features, and has no plans to do so for the near future, a representative said.

Dennis Patton, a former executive with Cablevision subsidiary Rainbow Media Holdings, believes iO will carry out its intentions in lockstep with Murdoch and DirecTV. "Keep your eye on them. That company has always been an innovator, and you should never sell short anything they can do," he said.

Mr. Patton, now consulting at, a new digital cable network targeted to the Gen X and Y demographic, also expects other cable operators to take DirecTV's push at face value, no matter what their public stance is. "They will have to look at this. It's prudent for everyone to take inventory of where their competitors are."

Neither DirecTV nor EchoStar returned calls for comment by press time.

However, key executives from two News Corp.-controlled ventures are looking forward to a role in DirecTV's iTV plans, and both believe the cable industry will, when those plans are realized, ramp interactivity up fast.

Gemstar, whose live horse-racing oriented TV Games Network is carried by EchoStar, is talking with both direct broadcast satellite companies about an iTV version where viewers use their remote controls to trigger betting on any race. Interactive betting (via telephone or Web sites) is permitted in 13 states.

Another DirecTV iTV natural is an application for TV Guide Channel, which launched a format upgrade late last month. Mr. Shell foresees a TV Guide-supplied application where subscribers click into a five-minute recap covering previous episodes of a TV series, or a movie preview complete with TV Guide editor critiques.

Dov Rubin, VP-general manager of interactive applications provider NDS's Americas unit, believes Mr. Murdoch will adapt many of the BskyB iTV applications for DirecTV, including games, shopping, polling and multi-angle sports programs. NDS, which developed a number of BskyB iTV elements, promises to market them before operators as they're showcased on DirecTV. Mr. Rubin thinks cable programmers may play a huge role in how soon operators run iTV.

"Let's say MTV or Discovery Channel launches a DirecTV application, because of its critical mass and nationwide reach," he said. "I have to believe cable operators or viewers would say, `Why not us?' You might get some me-too reaction there. They may need to be kicked in the pants from someone like DirecTV to showcase those features."

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