When Looking Beyond Video, MSOs Squint

Author:
Updated:
Original:

Media Station Inc. and Into Networks Inc. won't be at the National Show in New Orleans this week — as if anyone would notice, amid all the other absent tech hopefuls.

The two streaming software companies really aren't much of anywhere these days. Media Station has closed completely, and Into Networks now has a skeleton crew struggling to find an enterprise proposition for its technology, which won a patent at about the same time as its latest cutbacks.

As cable operators alternately gloat about their broadband progress and lament the lack of compelling content that would attract customers to their high-speed pipeline, Media Station and Into Networks are poster kids for what could have been.

Not that either company perfected its own formula, which relied on software publishers to supply video games, edutainment and other titles that could be "rented" to cable-modem users.

Predictably, the software vendors were leery (i.e. greedy) about sending their best material through that pipeline. And the financial deals — typically structured as an equal three-way split between cable operator, software publisher and streaming software company — were not terribly attractive to the first two groups.

But despite paying lip service to value-added alternatives that can enhance the cable-modem package, cable operators largely ignored the streaming-media offer.

Sure, a few MSOs made small investments in one or both of the streaming software intermediaries. But that wasn't accompanied by much carriage — at its peak, Media Station passed 3 million homes.

More significantly, cable allies sicced Excite@Home Corp, their designated middleman ("highwayman," in the 18th-century sense of the word, would be more appropriate) upon Media Station and Into Networks. The struggling companies had to cough up $4.5 million to get onto the @Home front page, further crippling the delicate economics of the nascent business.

VIDEO-CENTRIC REALITY

It largely comes down to this: Cable remains a video-centric business. During most of their four years of life, both Media Station and Into Networks had to pitch their offerings through the MSOs's broadband divisions. Managers usually recognized that these were "sticky" services that could hold youngsters after school, as well as draw older males for nighttime strategy and escapist games, as well as software.

But top MSO executives — who clearly weren't game devotees — didn't accept that proposition, and kept focused on set-top box applications. Some of the losing parties contend that cable operators simply don't know how to manage digital services delivered to the PC.

Modem-delivered services simply cannot be judged by video-channel benchmarks.

Along the way, structural hurdles were placed in front of the streaming software hopefuls. For instance, they weren't allowed to run proxy hosting at the headend — instead, they had to operate remote hosting facilities. And MSOs were not willing to invest in local servers or, for that matter, in content to boost the appeal of the streaming software services.

Of course, similar barriers were erected by video-game publishers and others on the content side, who were reluctant to let their treasured properties drift too close to the "edge" without adequate safeguards. And those same publishers were also spending more time on the emerging and lucrative rug-top box sector — through systems like Sony Corp.'s PlayStation 2, Microsoft Corp.'s XBox and Nintendo of America's GameCube — which were in development as Media Station and Into Networks struggled for viability.

READY FOR PRIME TIME

There's bountiful evidence that online interactive games are ready for primetime (which is often the 4 p.m. to 8 p.m. after-school period). The Station — Sony Online Entertainment's video-game business — has more than 10 million registered users, who sign up for free — for now. Of that audience, 375,000 have registered for EverQuest, and pay $9.89 per month to play it.

Remember: High-speed connections give these games special appeal.

Right now, cable operators get nothing from such sticky services except extensive network traffic, which is not necessarily advantageous during peak hours.

Admittedly, Web-based games are not identical to the streaming software once offered by Media Station or Into Networks. And the dismal fate of those companies has also been suffered by less cable-centric providers, such as Softricity Inc., SoftwareWow and Yummy.com. Exent Technologies Ltd. is the category's only surviving provider.

The entire experience makes you wonder about video-on-demand's present status as the validation for broadband expansion. Cable is once again myopically focused on its video roots, despite high-minded references to the value of desktop-oriented services.

Hence, Rainbow Media Group's MagRack suite of on-demand niche video services — with its limited reach — is about as far as MSOs will plunge into enhanced services for now, and until well into 2003, according to key decision-makers.

Into Networks and Media Station were certainly victims of showing up too early. They might not have had the correct structure or business model, but they were certainly pioneers.

And they mistakenly expected the cable industry to look beyond the video screens and set-top boxes that have brought cable to where it is today.

Related