Ever since Warner Communications Inc. turned QUBE into an industry buzzword nearly 30 years ago, cable has been trying to capitalize on a formidable competitive weapon unique to this industry: our two-way, real-time return path.
From simple polls to complex, multilevel video scenarios, we've attempted to use television-based interactivity as a subscriber acquisition and retention tool. Yet today, the industry is losing video market share, relative to direct-broadcast satellite, partly because we have not yet figured out how to exploit this key strategic advantage in a large-scale, economically viable way.
Over the past decade, in particular, a new generation of ITV vendors has proposed increasingly sophisticated, complex and expensive approaches. We've seen the rise and fall of the Full Service Network, the emergence of "thick" cable boxes and the creation of a host of middleware providers, all claiming to create harmony among a gaggle of set-top-resident "breakthrough" applications. Each innovation promises to change the way consumers watch television — yet the most interactive element today is still that old standby, the remote control.
In the present capital environment, the cable industry can ill afford such "progress." At a time when operators are being urged to generate more earnings with less capital spending, ITV has loomed as an economically interesting but poorly defined proposition that requires high levels of capital investment, envisions applications that are too futuristic and offers revenue streams that are too speculative.
Take new tacks
At this critical moment in the market, it would be beneficial for cable to consider alternative approaches to interactive television. Rather than trying to hit a technological home run that requires immediate and dramatic changes in consumer behavior, the industry should be looking for ways to deploy ITV in a logical, incremental and inexpensive manner. Such a "common-sense" approach should accomplish the following:
- Minimize the financial impact of ITV on operators;
- Provide cost savings, as well as revenue gains;
- Create implementation flexibility that enables experimentation with a variety of applications and business models;
- And gradually transition habitually one-way viewers into the interactive world.
Let's face it: Despite all the effort, investment and enthusiasm, we're still waiting for the revolution. What went wrong, and how can we get back on a more feasible and profitable course? Here's my take on the three biggest problems and how we can solve them right now.
First, ITV is too expensive. Most interactive services require extensive integration, specialized content development and, in many cases, expensive set-top boxes. As a result, the up-front per-consumer investment is usually too high to justify incremental returns.
To capitalize on its unique two-way, real-time interactivity capabilities, however, the cable industry need not invest in expensive, futuristic approaches. Nor must cable customers settle for flat, Teletext-like interfaces or simple stop-and-start video-on-demand interactivity.
Rather, operators can deliver a no-compromise ITV experience without moving away from the current pattern of investing in inexpensive, highly durable thin set-tops. Taking advantage of the 30 million 1000-,1200- and 2000-series boxes already in the field, they can provide digital subscribers with full streaming video, synchronized audio and two-way, real-time interactivity.
How? By putting the computing power in the headend, rather than in the home.
Keep it simple
This approach, in my view, illustrates a truism in business — the simplest way of accomplishing an objective is usually the most profitable way. And the best ITV solutions will be simple, not only in regard to customer-premises equipment, but the cable plant as well. They should require very little real estate at the headend, make efficient use of bandwidth to and from the consumer, and involve a minimal amount of capital and plant disruption.
The second problem is that there's not enough content. With ITV available in such a small number of households, it's been difficult to get content providers to deliver the cutting-edge applications that would drive demand. Market fragmentation exacerbates the situation: each runtime platform has only a fraction of the ITV subscriber universe, further reducing the potential audience.
To solve this problem, we need ITV platforms that can deliver interactive content to all digital boxes — thick or thin, newly installed or several years old. A critical mass of subscribers can thus be achieved, hastening the day when operators will be able to shop at a "supermarket" of interactive programming for the content they need.
In the meantime, there is questionable value in spending millions of dollars on integration fees for proprietary platforms that have little hope of ever attaining such market reach.
The third problem is that we don't know what consumers want. The industry does not yet have a clear picture of the kinds of services that will attract eyeballs and meaningfully affect subscriber retention. Indeed, most consumers — accustomed to one-way viewing — have difficulty imagining how they would use interactive TV. Until we get some real experience that enables us to sharpen our focus, the broad rollout of ITV services will remain largely a vision.
We need an inexpensive, fast way of deploying interactive programming. Instead of making a huge, risky decision —going six months down the road and spending millions in integration fees before we can determine if we're on the right track — let's get something out in front of viewers quickly. While cost-effectively exploring various types of content, marketing plans and business models, we'll also be gradually transitioning consumers from viewers to users.
The truth is, useful and entertaining interactive programming is available "for the picking," right now, from dozens of content developers. With the right delivery platform, operators can adapt existing interactive content to TV in a matter of hours. New content can be developed in a matter of days.
In fact, developing interactive programming for TV takes no longer than building a Web site, because today it can be done using exactly the same widely adopted tools and technologies (Windows, Java, Real Player, Windows Media Player, Flash, Shockwave, etc.). Operators should also be able to use the same backend servers (for provisioning, billing and other services) they're currently using to support their Web sites.
What to deploy?
Here are just a few examples of the kinds of interactive applications cable operators could deploy to all their digital subscribers within weeks:
- Customer-Relationship Management
— Operators are spending too much on customer care, via one-on-one methods like truck rolls and telephone support centers. Web-based sites do help, but many customers lack Internet capabilities at home, have low bandwidth connections or find moving back and forth between the PC and TV to be awkward and fatiguing.
As demonstrated by TV Guide Interactive, cable operators can improve customer service while reducing costs by implementing interactive support directly on the big screen. Two-way tutorials, multimedia demos, searchable knowledge bases, self-provisioning, bill payment and purchasing can all be accessed by consumers using standard TV remotes.
- Family Commercial Applications
— A pilot program from Sabre Labs demonstrates that television remains the ideal medium for family viewing. The application combines multimedia tours of cruise ship and hotel accommodations with online booking.
According to a Sabre Labs spokesperson: "We think television is the right vehicle for presenting this information to consumers. We consistently hear that people are tired of PCs by the end of the day … they want to relax in a more social environment where the entire family can be involved in making travel decisions."
- Internet Services
— While not unique to cable, television-based Internet-including e-mail and instant messaging-has demonstrated value in attracting users, particularly those who opt not to invest in a PC.
Can less really be more? One indicator will be the results generated by offerings like Cox Communications Inc.'s FreeZone on-demand service in San Diego. While FreeZone's menu of short independent films, sports vignettes and local celebrity interviews is limited to video-on-demand, its choice of content, its simplicity of use and its reliance on existing set-top and remote control equipment are exactly the tactics the cable industry needs to jumpstart richer ITV offerings.
My hope is that cable operators will soon abandon costly and complicated schemes in favor of a common-sense approach. By taking advantage of the set-tops and digital infrastructure already in place and by embracing industry-standard computing components and development environments, cable operators will finally be able to make interactivity the competitive powerhouse it has long promised to be.
Such a course will enable the industry — rather quickly, in my view — to drive market penetration, accelerate subscriber acceptance and justify the creation of the more-sophisticated applications that will ultimately be the greatest revenue generators.