Multicasting Mixed with Set-Top VOD

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XTV: It sounds like very soft-core video porn,
differentiated from XXX-TV.

But the only dirty little secret about XTV -- or
"Extended Television" -- is that it may offer a peek into Fox's digital-TV
agenda, with massive implications for the rearrangement of viewing and advertising
patterns.

At last week's National Association of
Broadcasters' Convention, News Data Systems (that's "News," as in
Murdoch's News Corp.) unveiled its XTV concept, which looks a lot like the TiVo and
Replay Networks technologies.

XTV envisions a digital set-top box with a huge hard drive
to store video programs. The unit will be "tightly integrated" with NDS'
conditional-access and copy-protection technologies.

NDS -- best-known as a fast-growing global supplier of
digital-broadcasting and compression technologies -- makes it clear that it won't
build the set-top boxes. Rather, it will seek consumer-electronics alliances, with an eye
toward market introduction next spring. Pricing and distribution plans are just beginning.

XTV is being positioned as broadcaster-friendly -- giving
stations a tool to send targeted advertising to viewers by downloading customized
commercials into the set-top box.

Not surprisingly, XTV was demonstrated in a showcase at the
NDS booth, adjacent to new interactive services such as Value@TV, a customized
direct-marketing feature available through datacast transmissions. NDS envisions Value@TV
being used to deliver on-demand coupons, order-entry functions and interactive program
features.

The XTV concept includes technology that will allow the
set-top box to identify viewing patterns, thereby creating a roster of favorite programs
that the customer can modify (add or delete shows).

Not surprisingly, at the NAB display, NDS showed a
"favorites" list including Sunday National Football League games, The
Simpsons
, TheX-Files and Ally McBeal (all Fox shows).

And therein lies the master plan: Fox Broadcasting has
consistently enunciated a digital-TV agenda that is based on multicasting through its
digital-TV bandwidth. The Fox networks -- sports, family, news, movies -- could show up on
over-the-air channels in each market, cable retransmission notwithstanding.

Adding the XTV box -- which effectively puts
video-on-demand on a set-top server -- gives Fox, or any other broadcaster, the ability to
deliver a customized package of programs to every household.

Multiple Fox broadcasts could be beamed into and stored on
each box, enabling the household to create its own lineup for daily viewing. Of course,
the box could also pick up shows from many other sources.

XTV's security and conditional-access capabilities
(the NDS "VideoGuard" system) enable pay-per-view and other fee-generating
opportunities. Video-watermark and fingerprinting techniques can also be added for extra
security, which will presumably make the system more attractive to Hollywood (including
Fox and other studios) and to all program suppliers.

Blending targeted advertising and special features such as
"content tagging" makes the experience even richer. Indeed, NDS'
descriptions of how to implement XTV at the headend (cable, satellite or broadcast
location) stress the ability to incorporate features such as for news,
for a music channel or for a shopping channel.

It's interactive TV at the set-top: Viewers can jump
to whatever they want to see.

The digital storage -- presumably 15 hours or more, based
on current technology -- would put dozens of ready-to-view shows on the set-top, with more
constantly flowing in.

The random accessibility means that family members could
store and view different shows, and the conditional-access feature provides security
(including the ability to prevent kids from seeing adult shows).

Although NDS executives are deliberately vague about the
XTV rollout plan (including manufacturing licenses), and Fox officials haven't
commented about their XTV agenda, the high visibility of XTV underscores the changing
nature of TV's and NDS' efforts to get into the set-top space that TiVo, Replay
and their allies are rushing to fill.

At the NAB Convention, WebTV Networks and EchoStar
reaffirmed their vows (unveiled in January) for an integrated set-top box service,
offering similar download-and-store capability.

When asked how they will deal with the fast-growing number
of competitors, EchoStar's Charles Ergen declared, "Anything they can do,
we'll do better."

Meanwhile, the pioneers in this set-top VOD business are
adding to their arsenals.

For example, Replay has an Internet-access feature built
into its device -- not a Web browser, but an invisible capacity that enables the unit to
dial out and fetch specific video material from a remote server.

Replay can thus bring in a specific commercial, based on
the viewer profile, and store it on the hard drive. When a customer watches a show, the
specially selected commercial (for example, a sport-utility-vehicle or luxury-auto spot)
is displayed, based on the demographic information for that box.

Of course, that process assumes that the customer watches
any commercials. And that remains the next big challenge for set-top VOD, as ad-oriented
XTV must recognize.

I-Way Patrol columnist Gary Arlen Xpects Xtra Xperiences --
especially from FoX.

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