Satellite

The ITV Super Drive

5/22/2005 8:00 PM Eastern

The waiting is over. After months of industry expectation, focus groups and beta tests, DirecTV Inc. earlier this month launched the first of its new interactive services. Within a month, any direct-broadcast satellite receiver capable of activating the DirecTV Active services should receive the software downloads via satellite.

Initial applications include a variety of options, including instant access to local weather, horoscopes, lottery updates, mosaic screens called Mix Channels with interactive links to several networks within a given programming genre, and an enhanced programming guide with video previews and suggestions for TV viewing, DirecTV senior vice president of advanced services and content Eric Shanks says.

Despite the huge selection, some analysts question whether there will be a strong consumer demand for ITV. Forrester Research Inc. has done surveys for years on what consumers want from their television. Instead of clamoring for interactivity, consumers want to skip commercials, record all their favorite shows, and have better picture and sound, says Forrester vice president Josh Bernoff.

“The only interactive TV feature that’s always been in the top 10 is a one-button weather feature,” Bernoff adds. “Weather and games tend to be popular in the U.S.”

TVPredictions.com president Phil Swann has been closely watching DirecTV’s interactive television launch. “Consumers don’t know it’s coming,” Swann says. “There’s no pent-up demand.”

Shanks says the DBS provider would promote DirecTV Active more heavily in the fall, after there’s a more sizable base of customers with interactive-capable receivers. All DirecTV boxes sold since last May are capable of receiving the DirecTV Active software downloads, he says.

Later this year, DirecTV will add a games service and movie trailers, says Shanks, who adds the company is also trying to work out a way to offer local traffic reports.

“We work on probably 10 killer applications, and if one of them sticks, that will be great,” Shanks says. He predicts the interactive component to the National Football League’s NFL Sunday Ticket, due later this year, will be an “unbelievable killer app.” Subscribers who have ITV capabilities, along with a newer digital video recorder with NDS technology that ships in July, will have access to game highlights, statistics and condensed games through the DVR.

NFL Sunday Ticket customers with interactive receivers will also have access to Mix Channels created specifically for the NFL games. DirecTV Active launched with three Mix Channel genres: news, sports and children’s. The Mix Channels were available earlier in the year without the interactive links to the individual genre channels.

“In focus groups, Mix Channels test off the charts,” Shanks says. “I was surprised that there was such a consistent positive response from different demographics — not just younger viewers or sports fans or news junkies.”

Leichtman Research Group president Bruce Leichtman calls the mosaic channels “pretty compelling.” Though not necessarily a strong draw for new subscribers, the Mix Channels might get people to stay with DirecTV, he says. It’s also a strong demonstration tool for interactive services at retail.

DirecTV’s challenge in rolling out new services, Leichtman warns, is that not all subscribers can get them. DBS companies are often “much kinder to new subscribers,” Leichtman says. “A box switch costs money.”

Shanks says existing subscribers can upgrade to new DirecTV Active capable boxes for as little as $49.

In addition to providing killer apps for consumers, DirecTV hopes to find new revenues through its interactive services. “Probably the only one with a proven business model is games,” Shanks says. He adds that there are multiple ways to charge for games, by the day, by the month, or in some cases, on a pay-per-play basis.

DirecTV also plans to take a cut of the interactive advertising and shopping revenues likely to grow as traditional television ads face new challenges. Earlier this year, the DBS provider signed automaker DaimlerChrysler Corp.’s Chrysler Group as its first interactive advertising partner.

At this point, Shanks says, the overarching goal is research. The partners are trying to determine which interactive advertising tactics generate the most viewer response and the most time spent with the brand.

With DirecTV Active, viewers who respond to a 30-second spot can click out to a longer form ad, request to have information sent to them via e-mail, or play a Jeep driving game, Shanks says. As a client, Chrysler will also be able to examine DirecTV’s upcoming HD and DVR technologies for potential advertising opportunities there.

“Over the long term, the most interesting interactive advertising opportunities will likely be the ones we haven’t even thought of yet,” Shanks says.

DirecTV still hasn’t worked out all the specific revenue-sharing models that will allow viewers to shop over their television sets. It’s still unclear, for example, whether a programmer will get a cut of the television commerce revenue if a viewer clicks through an ad on its networks to buy a product. Shanks says DirecTV would probably work out the kinks by initially offering television commerce only on DirecTV Active or home-shopping channels.

Eventually, DirecTV plans to negotiate with programmers to add interactive elements to certain shows, perhaps consumer polls or voting on reality shows, although nothing is immediately in the works.

Tellus Venture Associates president Steve Blum says he expects the cable industry to respond with its own interactive services, which will have the advantage of more individual, two-way, point-to-point connections.

Shanks says the fight is less about two-way capability and more about programming connections, creativity and the overall consumer experience: “This is not a technology war.”