News

TVGateway Option Fading

10/26/2003 7:00 PM Eastern

TVGateway LLC is halting development on its interactive program guide, forcing some affiliates to scramble for a new guide and giving Gemstar-TV Guide International Inc., which recently signed long-term IPG deals with Time Warner Cable and Insight communications Co. Inc., an even stronger lock on the IPG market.

"I have spoken to all of the affiliates about the fact that we'll not be developing the IPG going forward and we'll support the current deployments but it would probably be in their interest to do a graceful transition [to another IPG]," TVGateway CEO Bill McCall said last week.

OPS: Guide Folding

Executives at two TVGateway affiliates disputed McCall's statement regarding whether TVGateway would continue to supply its customers with the guide.

Chris Lovell, general manager of Coaxial Cable TV in Edinboro, Pa., and Cindy Wikstrom, marketing director at Click! Network in Tacoma, Wash., both said last week McCall called them on Oct. 9 to inform them that TVGateway was folding its IPG service.

"They basically told us they were changing their business plan and they were looking at no longer supporting the interactive guide," said Cindy Wikstrom, marketing and business operations director at Click!. "We were shocked because we had just launched a new version of the guide, and we hadn't made any plans to change our guide."

Coaxial had recently deployed an upgraded version of the guide that was more customizable and included more parental controls, and the cable system had sent subscribers notices about the new IPG, Lovell said.

"I never would have upgraded in the first place — I would have just switched guide services. It blew me completely out of the water," Lovell said of the call he received from McCall.

McCall was named CEO of TVGateway in March, when Comcast Cable Communications Inc., Cox Communications, Charter Communications and Adelphia Cable Communications restructured TVGateway as an independent company. Previously, TVGateway was managed by WorldGate Communications Corp., which also owned a stake in TVGateway.

Last month, WorldGate closed a $3-million deal to sell its interactive TV assets to TVGateway.

Charter Uses It

Charter is TVGateway's biggest distributor, running the IPG on systems in Michigan, Colorado, California, Texas, Alabama, Mississippi, Louisiana, Georgia and Kentucky. Asked if Charter would replace TVGateway with another IPG, spokesman Dave Andersen said, "We'll take the steps necessary to ensure that there's no effect on our customer relations in terms of an IPG."

Comcast, which has deployed TVGateway on systems in Mobile, Ala., and Savannah, Ga., doesn't plan to drop the IPG, said Comcast vice president of digital television Mark Hess, who sits on the TVGateway board.

While McCall maintained that TVGateway will continue to support its current IPG deployments, he said he would expect TVGateway affiliates to switch to another IPG if competing vendors such as Gemstar-TV Guide offer them better products.

McCall said TVGateway's focus is to move away from the IPG and focus on developing new products for its MSO owners and possibly acquire other technology companies. "When it's in the interests of our members to share vision or share costs, TVGateway is a vehicle for them to make use of," McCall said.

Comcast, Charter, Cox, Comcast and WorldGate formed TVGateway as a consortium in 2000, with the goal of bringing competition to a market dominated by Gemstar. Each of the MSOs initially invested $1 million in TVGateway.

At the time, TVGateway's MSO parents complained that Gemstar, then run by CEO Henry Yuen and co-president Peter Boylan, had a lock on the IPG market and little incentive to budge on pricing its IPG.

But within a year after TVGateway's formation, Gemstar had signed a 20-year IPG deal with Comcast and 10-year agreements with Adelphia and Charter.

Gemstar has signed more cable distribution deals since former Fox Cable Group chief Jeff Shell took over as CEO in April 2002.

Cable executives say Gemstar has become more flexible in its negotiations and is easier to work with under the new management.

Insight Deal

"Since Jeff has gotten there, they've been a pleasure to work with," Insight Communications CEO Michael Willner said.

Last week, Insight signed an agreement with Gemstar to use its IPG to run digital video recorder set-tops from Motorola Corp.

Insight still uses its own Source Guide IPG for digital subscribers, and hasn't agreed to replace Source Guide with Gemstar's TV Guide Interactive.

But Willner said Insight plans to eventually replace the Source Guide IPG now in the field with a new IPG it will develop — or with a guide from Gemstar or another vendor.

"We are in the process, incidental to the timing of this decision, of evaluating the whole user-interface experience that our digital customers have at their fingertips right now, and sometime next year we will probably have a long-term strategy in place," Willner said. "We're looking at either developing our own next-generation guide or outsourcing it to a third party — we just don't know yet."

If Insight decides to use Gemstar's IPG on all digital set-tops, Local Source interactive content — which offers information ranging from news and entertainment to local restaurant reviews — would be integrated within the new IPG, Willner said.

Ian Aaron, president of Gemstar's TV Guide Television Group, said it would take a year to integrate Local Source with TV Guide Interactive.

Gemstar also signed a long-term deal earlier this month with Time Warner Cable, which agreed to license Gemstar's intellectual property, allowing the MSO to either deploy TV Guide Interactive or integrate Gemstar's technology into a new guide that the MSO would develop.

For operators not locked into long-term deals with Gemstar, there are only a few IPGs on the market to choose from.

Few IPG Alternatives

Microsoft Corp. is pitching cable operators an IPG that relies on technology that it has patented from Gemstar. And Tribune Media Services, which supplies listings data for IPGs to Gemstar, Time Warner Cable and Cablevision Systems Corp., is also pitching cable operators a new IPG.

Scientific-Atlanta Inc. and Pioneer Corp. have IPGs operators that buy their set-tops can use.

Tribune bought an IPG patent portfolio from iSurfTV in July, which it is using to develop the IPG. iSurfTV has been certified to run on Motorola set-tops, and Tribune could integrate with Scientific-Atlanta's platform if it cut an IPG deal with an MSO that uses S-A set-tops, said John Kelleher, general manager of Tribune's electronic program guide group.

No new IPG entrant has signed major deals with the major MSOs; some smaller operators are looking at the products.

Lovell, the general manger of Coaxial, said he is considering replacing the TVGateway IPG with Microsoft's IPG or an IPG from Pioneer.

Click! Network's Wikstrom said the company hopes to replace TVGateway within six months, with an IPG from Microsoft, Pioneer or Gemstar.

September