Personalized TV Devices Eye 1Q Launch

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Advances in digital hard-drive technology have paved the
way for a new category of video-recording devices that will allow TV viewers to store up
to 20 hours of their favorite shows and to use VCR-like features, even while watching live
events.

The two most prominent proponents of the technology, which
they call "personalized television," are TiVo Inc. and Replay Networks Inc.

Each plans to exhibit its wares at the Consumer Electronics
Show this week in Las Vegas. Each plans a consumer launch later this quarter, following
consumer beta-testing that began last month. And each is fighting to convince consumers,
manufacturers, cable operators and satellite-television providers that its company has the
better mousetrap.

TiVo is conducting extended field trials with DirecTV Inc.
and local cable operator SunTel Communications LLC in the heart of Silicon Valley, where
TiVo is headquartered.

Ed MacBeth, vice president of marketing and business
development at TiVo, said the company wants to make sure that everything is "as
rock-solid as possible" before going ahead with a full-fledged consumer launch.

Brad Beale, vice president of advanced products at DirecTV,
said he's hoping to learn whether digital-video-recording technology will impact the way
that subscribers watch the direct-broadcast satellite service.

Because they'll have more control over pause and rewind
features, subscribers may be more willing to buy pay-per-view movies, and they may even be
interested in subscribing to more premium-movie channels, these advocates said.

MacBeth is already convinced that the TiVo system will help
cable operators and satellite providers to increase premium and PPV buy-rates,
"because people will have control over not missing the action if the kids come in, or
the phone rings, or they have to make a sandwich."

DirecTV is looking at both TiVo and Replay, Beale said,
although it is not directly involved in the Replay beta-tests.

Jim Plant, director of marketing for Replay, said there's
no specific geographic area for the test, and the company is not working with specific
cable operators or satellite providers. Rather, Replay chose consumers with different
types of system configurations, including cable, off-air antennae, satellite and
combinations.

Replay creates an integrated channel guide, pulling
together all of the video sources that a television has. Viewers can select programs to
record for later viewing from the on-screen menu, or set up search agents by category,
such as title, actor or director. The system will record any shows with descriptions on
the programming guide that match the criteria.

TiVo takes the feature one step further with an intelligent
agent that learns and remembers the types of shows that a household watches. Viewers can
hit "thumbs up" and "thumbs down" buttons on the remote to teach the
system what to record in the future.

DirecTV has not yet chosen whether it will partner with
TiVo or Replay beyond the initial tests and data-port-connection issues. Beale said he
hasn't ruled out working with Replay, and DirecTV may ultimately deal with both companies.

Initially, Replay's hardware will cost about twice as much
as TiVo's set-top box, which is set to launch at $500. TiVo will also charge consumers a
monthly $10 service fee.

Both companies aim to have their technology built into
other video devices -- such as cable set-top boxes, satellite receivers and televisions --
since consumers generally balk at attaching more devices to their TV sets.

Beale admitted that digital-video-recording devices could
be DirecTV's answer to video-on-demand. He also sees the technology as a consumer
enhancement to today's DirecTV service.

But MacBeth was quick to point out that TiVo is not VOD
because it doesn't require the investment in infrastructure that VOD does. He added that
he believes that TiVo and VOD can coexist.

"VOD is still a viable way of delivering a limited
amount of content," MacBeth said, "say, movies."

In the past, VOD companies have had a tough time
negotiating for the rights to air popular network-television programming.

Alan Bushell, president of VOD supplier Diva Systems Corp.,
called systems such as Replay's and TiVo's the "next-generation VCR," adding,
"There's a lot more interesting technology down the road."

The advantages of true VOD include the ability to watch a
show before its official airing, Bushell said. A movie scheduled for a 10 p.m. screening
might be available on VOD anytime that day.

"If you take content off the air, you can only take
what they give you and when it's sent out," Bushell said.

Bushell also expressed doubts that consumers would want to
invest in video-storage devices when the capacity of the hard drives could quickly become
obsolete. Even if a cable operator or satellite provider were to pick up the tab for the
technology, he added, "it's very expensive to have to go to the consumers'
homes" to switch out the boxes.

Both Replay and TiVo plan to sell advertising -- Replay on
its guide, and TiVo through customized use of local cable avails. Each also plans to
announce partnerships with content providers as early as this week.

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