ITV Should Mint Cash, How Much is Unclear

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New York-Market researchers predict interactive television will soon generate billions of dollars each year, but some pay TV providers don't have a clear idea of how to make good on some of those forecasts.

That was one key theme at an industry conference here last week, where top cable and satellite interactive-TV executives offered some new details on their ITV rollouts.

"Quite honestly, we don't know," AT&T Broadband vice president of digital products Keith Bechard said at the Paul Kagan Associates conference. He was asked how much revenue the MSO expects to generate from interactive- television services.

Moderator Paul Kagan said his firm, recently sold to Primedia Inc., predicts the industry will generate $728 million in ITV revenue this year. Revenues from ITV will jump to $16.4 billion in 2005 and hit $33.9 billion by 2010, Kagan estimated.

Donaldson, Lufkin & Jenrette Inc. analyst Karim Zia predicted valuations for ITV vendors could hit $2,000 per subscriber in the next five years.

Zia reckoned that interactive services like video-on-demand, Internet to the TV, advertising via interactive programming guides and television commerce would generate additional revenues of about $20 per month per household in the next five years.

Given the number of interactive-capable homes over that time frame-Zia predicted 10 million by year-end and 60 million within five years-that could mean $15 billion in annual revenue by 2005.

AT&T plans to launch ITV services on Motorola Broadband Communications Sector DCT-2000 digital set-tops during the fourth quarter, Bechard said. The MSO will launch a fourth-quarter trial with DCT-5000 set-tops in an undisclosed market, he added.

Comcast Corp. plans to begin deployment of ITV services in 2001, but the MSO doesn't expect to launch the service in mass until 2002, said senior director of new business development Steve Heeb.

Heeb didn't offer many details about the types of services Comcast will offer. But he stressed that Comcast is seeking something more substantial than graphic overlays on current video programming-today's typical ITV model.

Heeb didn't cite any specific companies. But vendors who are presently selling overlay-based ITV products to operators include WorldGate Communications Corp., Wink Communications Inc. and RespondTV Inc.

"People will get bored with that," said Heeb of the overlays. "We will cut relationships with people that want to make TV-centric, dynamic content."

Figuring out how much cable operators should charge for some ITV services, such as electronic mail, was also a topic of debate.

"You almost have to give this stuff away," Heeb said. Subscribers may reject the idea of paying for e-mail, he noted, since there are many free Internet services on the market, such as Microsoft Corp.'s Hotmail.

In the short term, Comcast is skeptical about deploying Internet services to the television, Heeb said. Web pages displayed on interlaced television sets look inferior to those shown on personal-computer monitors, he noted.

Insight Communications Co. senior vice president of operations Gregg Graff was the only panelist who could discuss ITV products already in the field, as Insight was one of the first operators to commercially launch interactive services.

The company has seen "high usage" from ITV subscribers who use the service to view horoscopes, play games or access information on soap operas.

Insight is also offering subscribers 400 video-on-demand titles, Graff said. The MSO will soon deploy Commerce TV's e-commerce product, he added.

DirecTV Inc. senior vice president of global digital media Brad Beale took a subtle shot at his cable competitors' ITV deployment schedule in discussing the DBS provider's launch of Wink's ITV service last week.

"We don't do trials. We only do launches," Beale boasted.

This week, DirecTV plans to announce additional content it will offer through Wink's service. The company will offer news, sports and e-commerce through "virtual channels," Beale said.

Noting that "digital cable has leveled the playing field," Beale said DirecTV hopes to differentiate itself from its cable competitors through interactive-television offerings. ITV is "where that differentiation battle will take place," he said.

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