ITV Providers: Murdoch Aids Us With Ops

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Cable's interactive television players, who've struggled for survival over the past few years, think they're starting to see a little sunlight at the end of a long, dark tunnel — courtesy of Rupert Murdoch.

The impending purchase of DirecTV Inc. by chairman Murdoch's News Corp., and the prospect of British Sky Broadcasting plc-type ITV applications on that platform, seems to have heightened some MSOs' awareness of interactive features.

"In my opinion, it shouldn't have taken that to be the wake-up call. But whatever it takes," said Gary Lauder, vice chairman and primary investor in ICTV Inc., which offers server-based two-way ITV applications designed to run on DCT-2000-class set-tops.

ICTV, around since the early 1990s, is one of the longest-surviving ITV providers despite limited cable-trial experience, including a run on some Cox Communications Inc. systems and on St. Joseph Cablevision in Missouri.

ITV first was guilty of being overhyped, and then "anti-hyped" to the point of being virtually ignored.

"But what has been shown in other countries, particularly in England, is that it is of value," Lauder said. "So it is a much riskier strategy to simply hand-wave it away as being irrelevant."

ITV isn't a super-hot MSO priority, Lauder said, "but it has finally gotten back onto the list."

If interest has picked up among MSOs, then the vendors likely to benefit are those still around, in good financial shape and with applications targeted to the large, installed base of "thin-client" digital set-tops. Such former contenders as WorldGate Communications Inc. and ACTV Inc. have sold out of the business.

The category in general has had some good news in the form of trials and deployments for the likes of Buzztime and Paul Allen's Digeo Inc.

But there have also been recent setbacks. DirecTV Inc. and OpenTV Inc.'s Wink unit recently said they'd sever ties, which cost the Wink interactive-advertising platform a base of 10.4 million DTV boxes.

Mystro Move

It's also unclear what Time Warner Inc.'s recent decision to have Time Warner Cable absorb the MystroTV networked digital video-recorder project will mean for that experiment in creating a personalized TV environment. (MystroTV might not fit some definitions of ITV, but Lauder noted that popular interactive applications, such as video-on-demand ordering menus, always tend to get their own labels, while unsuccesful applications get the ITV tag.)

Digeo vice president and general manager Randy Carlson said he's definitely heard Murdoch mentioned in talks with Charter Communications Inc., which has launched Digeo's ITV suite in some systems, and with other MSOs.

"They all have been stating the fear of Rupert and what's that going to mean to them and their business. There is a very renewed interest in ITV."

Said Buzztime president and chief operating officer Tyrone Lam, "The level of awareness of what DirecTV may be turning into has sped everything up."

The ITV games provider has obtained carriage on several cable systems, including Time Warner Cable in Portland, Maine, and a recent test launch with Comcast Corp.'s Baltimore system.

"Games has been on the short list of applications," Lam said.

Added senior vice president of distribution Dan Sweeney: "Two-way has been the real differentiator. Cable wants to go on the offensive with those guys."

The direct-broadcast satellite return path is slower — and only about one-third of customers are patched into it.

Murdoch peppers his ITV experience with betting, shopping, choosing from various camera angles for sporting events or among different news feeds, polling and gaming.

Because of U.S. laws, the wagering service won't likely take off, except perhaps for some horse-racing applications. And Murdoch has scaled back his shopping applications. But parlor games, extra camera angles and polling could all be on the horizon.

"The ability for satellite to do different camera angles is going to be a struggle for the cable side," Carlson said. But cable can do games.

"We've proven out parlor-style games will do very well. People will spend a lot of time playing the most simple of games."

Enhanced television — adding interactive features to linear programming — could well be a major factor in cable's ITV efforts next year.

"There is no question 2004 will be the biggest year in ITV in the history of the U.S." That's the opinion of Scott Newnam, CEO of GoldPocket Interactive, which specializes in creating two-screen experiences for programmers. "Every single operator has moved from: 'We're interested' to 'How fast can we do it?' "

GoldPocket's enhanced-TV technology is present in 200 TV shows this season, Newnam said, and it's being backed by 80 advertisers, including American Express Corp., AT&T Corp. and the large automobile dealers. "That dwarfs any number in prior years," he said.

Programmers are interested in enhanced TV as a way to keep viewers on their channel and as a hedge against DVR ad-avoidance features, he said. That plays right into operators' interest in providing interactivity as a competitive hedge against DirecTV.

"Our projection is that 10 million to 15 million set-top boxes at the end of next year will be running enhanced TV," Newnam said.

Most of cable's lower-end set-tops could handle many of these applications today, said Scientific-Atlanta Inc. director of strategic markets for subscriber networks Dave Davies, noting the interactive applications available on Cablevision Systems Corp.'s iO: Interactive Optimum platform today.

Time Warner Cable is also looking at potential IP-based news, weather and sports on-demand applications, Davies said. And S-A is shipping a set-top to United Kingdom MSO Telewest Communications plc, which is running four video movie trailers at the same time.

"The real question is whether the U.K. model is going to translate to the U.S.," Davies said. "It will be interesting to see what applications take off with subscribers."

Cable Television Laboratories Inc. is holding an OpenCable Applications Platform tutorial at this week's Western Cable Show, which could be used as a basis for future ITV applications. The OpenCable initiative is designed to help programmers write to a common ITV standard and open up the playing field to more receiver devices, CableLabs said.

At present, an MSO must integrate an electronic program guide to each model of a set-top it may have in the field — which could be four or more, given the HD and DVR set-tops in the marketplace. OpenCable would help standardize software so it could run on a variety of devices.

OpenCable standards could be built directly into TV sets.

Time Warner has announced it's developing applications based on OCAP and may deploy services in late 2004.

MSOs are also taking their lead from their subscribers.

"Our customers have told us the two most compelling interactive products are high-speed Internet and VOD, and that's why we've prioritized those services," said Comcast Cable executive vice president of sales, marketing and customer service David Watson. "The addition of DVRs will add to this combination."

"We're continuing to look at opportunities for adding interactive applications where it makes sense and where it adds value for our customers," Watson said.

What Model?

That caution stems from one of ITV's age-old problems: It's a technology or service in search of a business model. Which applications would consumers pay extra for, and which applications could help lower churn? Both are unanswered questions.

Games seem to be the most developed application. "Murdoch has been pretty successful in distributing games in the U.K.," Lam said, and Buzztime's launches in the past two years has helped the company gain credibility.

Lauder said ITV trial data has demonstrated that e-mail and Web-browsing on the TV is popular with customers and could make money. But operators aren't interested. "We don't even mention Web and e-mail because cable operators don't want to hear it," he said.

What's popular with operators depends not only on the operator but on who one talks to at an operator, Lauder said. Some like games; others prefer advanced VOD menuing and still others appreciate such interactive customer-service applications as bill presentment.

Thus, ICTV presents itself as "one platform that can handle all of these really, really well."

Kent Gibbons contributed to this report.

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