Liberty Wants OpenTV To Spark Interactive TV

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Liberty Digital is leading a drive to back OpenTV Inc.'ssoftware platform as a vehicle for busting what it sees as a development logjam in digitalinteractive television.

Liberty Digital -- part of John Malone's Liberty MediaGroup portfolio -- unveiled a powerful alliance of infrastructure and programminginterests last week that is pumping more than $31 million into OpenTV.

Group members will also work with the Mountain View,Calif.-based company to develop applications focused on generating revenue frominteractive electronic commerce over TV -- what's being called "T-commerce."

OpenTV's majority shareholder, holding company MIH HoldingsLtd., also announced plans for a $50 million initial public offering of a minority stakein OpenTV.

Along with the other investments, proceeds will fundOpenTV's development of applications for enhanced television programming, interactiveadvertising and other advanced broadband services, plus marketing its core set-top-boxoperating software that competes with the likes of products by Microsoft Corp. andLiberate Technologies for cable-TV business.

More significant than the money is the reach and influenceof the group joining Liberty to invest in and foster the spread of enhanced TVapplications developed with OpenTV: Time Warner Inc., America Online Inc., News Corp.,General Instrument Corp. and Sun Microsystems Inc., an OpenTV cofounder that boosted itsexisting investment.

Such investment and development deals are a dime a dozenthese days. AOL and Sun are also investment partners with Liberate, for example, as areseveral major MSOs that have licensed its set-top software for offering plannedinteractive services.

But the Liberty Digital initiative, spearheaded by CEO LeeMasters, is a uniquely unified effort that backs a specific software solution to prime thepump for creating and selling interactive TV services to digital broadcasters and theirviewers.

Liberty wants to support not only the opening of moreset-top models to the OpenTV software that it likes as a vehicle for interactiveprogramming, but also the development of actual content that cable, satellite andterrestrial broadcasters will want to run through those boxes.

"Anything that improves functionality in the boxpotentially is an opportunity for Liberty to expand and increase the functionality oftheir brands and to expand those brands into these new mediums," said Ted Henderson,cable analyst for Denver-based Janco Partners.

Like a number of other software developers trying to breakthe grip that GI and Scientific-Atlanta Inc. have with proprietary platforms, OpenTV hasfailed to dent the U.S. cable market, despite getting software into 4.3 milliondigital-cable and satellite set-tops worldwide.

Its major U.S. win has been EchoStar Communications Corp.,which has deployed two direct-broadcast satellite receiver models with OpenTV software forDish Network interactive services to be launched early in 2000.

Now, being ported to GI means OpenTV might supportinteractive services over the advanced "DCT-5000" set-top, as well as themillions of "DCT-2000" boxes that cable operators have already deployed, whichare likely to remain in the field for years.

"Lee Masters has a vision. He understands thattelevision is the most powerful medium in the world," OpenTV senior vice president ofmarketing and operations Mitchell Berman said. "His focus is T-commerce. They want todevelop interactive content across all platforms, and they see OpenTV as the first placeto begin this initiative."

Liberty will use the development effort as a cornerstone ofits own plan to create a suite of interactive commerce channels -- offering entertainment,shopping and interactive games -- that will have preferred standing as content providerson systems using the OpenTV platform.

The company also might leverage the 6 megahertz ofbandwidth it controls on all AT&T Broadband & Internet Services systems, althoughit did not indicate its plans in that area.

Liberty declined to comment officially beyond Masters'statement in a news release that its OpenTV-related plans were "important milestonesin our strategy to be a leader and innovator in interactive television programming."

But one executive familiar with Liberty's strategy said thecompany believed that it needed to support the development of more easily deployed,beefier interactive TV systems in order to realize its vision of profiting frominteractive TV commerce.

He contrasted the "light" interactivity supportedby other systems, such as Wink Communications Inc.'s, which primarily gather productorders and relay them to product suppliers, with the yet-to-come, two-way functionalityLiberty believes is necessary for T-commerce to be widespread and profitable.

Available set-tops such as the DCT-2000 and DCT-5000support that kind of interactivity, but they are being deployed either with a proprietarysoftware platform or alternatives not yet proven in a large commercial setting --Microsoft's "Windows CE," in the case of the DCT-5000.

"OpenTV has far and away a larger installed base thanany other alternative," the executive said. "We believe in the product, and thefact that they're already so far out of the gate internationally was a very positivefactor."

Liberty is not wedded solely to OpenTV's platform, however,and it expects to work with others as they "become viable alternatives in the UnitedStates," he added.

Another plus for OpenTV, he said, was its pledge to conformto any middleware specification that emerges from the U.S. industry's ongoing OpenCablestandards-development initiative.

OpenTV also announced deals last week to develop AOLapplications, such as instant messaging, for TV; to develop interactive set-top softwarefor News Corp. digital-satellite systems that have not already deployed OpenTV; and todevelop enhanced TV applications with Time Warner's Warner Bros. and Turner BroadcastingSystem Inc. units.

OpenTV's deals are only the latest sign that cableoperators are breaking from traditional platforms in choosing critical components forinteractive digital systems.

Cablevision Systems Corp. last month tabbed News Corp.subsidiary NDS Ltd. to provide conditional-access software and DiviCom Inc. to providedigital headends for its new system being developed by Sony Corp., to be deployedinitially next summer in New York.

Cablevision announced in September that it had picked Sonyto create the system and that it had agreed to pay $1 billion for up to 3 million Sonydigital set-top boxes.

Those boxes will run Sony's "Aperios" operatingsystem, and they will be built to "open" equipment standards intended to makecable networks, subscriber equipment and software applications easily integrate withstandards-based components from all other manufacturers.

The deal is the first U.S. digital-cable win for NDS,which, like OpenTV, has a long résumé of international cable clients, but none in theUnited States.

Cablevision followed MediaOne Group Inc., which announcedin February that it would use open software standards and the Digital Video Broadcasting(DVB) platform that is predominant in Europe in several of its markets that are beingrebuilt for two-way services.

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