TV goes interactive, at last

Reshma Kapadia

NEW YORK: After decades of hype, the US interactive television market is

beginning to take shape, but the jury is still out on to what extent viewers

will embrace an industry based on toying with their much-loved TVs.

Media, telecom and publishing companies sunk billions of dollars into

projects in the 1990s, but companies have failed to find the right recipe for

interactive TV (iTV), which lets viewers pause live TV, surf the Web or respond

to programs.

Among the catalogue of stalled and failed projects in the past, Time Warner

Inc. pulled the plug on its high-profile trials in Orlando, Florida, in the

early 1990s when viewers showed little interest in interacting with their TVs.

Similarly, many analysts have said Microsoft Corp.'s WebTV, which transferred

the Web experience to the TV, has also failed to jump start the industry. Its

subscriber growth has plateaued and many analysts believe that TV viewers do not

want their passive TV experience altered dramatically.

However, industry pundits see evidence that the market has begun to turn the

corner.

"Infrastructure is in place and personal video is starting to take off

more. People have made substantial investments in these companies. We have

reached the crest of a hill and there's no turning back," said Mark

Snowden, analyst at Gartner Group.

Confusion over iTV



One of the main reasons interactive TV has not gained momentum in the US is
because of confusion about what it means, James Ackerman, president of software

maker OpenTV Corp., said in a recent interview. He said the other reason is the

debate about which technology will prevail.

Less than one per cent of North American households are interactive TV

subscribers, according to technology research company Forrester. But Gartner

sees iTV in 17 million US homes by 2004 and about 2.5 million homes in the next

12 to 18 months.

The confusion about where interactive TV will go has also resulted in

wide-ranging forecasts for its potential.

Gartner sees the industry generating about $11 billion in annual revenues in

five years. Meanwhile, Forrester expects program guides, enhanced broadcasts and

TV-based browsing to generate $11 billion of annual revenue in ads and $7

billion in commerce over the same period.

An onslaught of new products, some of which have hit the market for the

holiday season, are expected to help clear up consumer confusion about

interactive TV in the US.

"We have been very clear that we think that this is an experimental

market for the next year or two. It is going to take some time, but we're very

confident that the TV of your future is going to be a connected device,"

said Barry Schuler, president of AOL's interactive services.

Many of the new products, from the likes of America Online Inc. and

Microsoft, are the result of pacts with satellite providers Hughes Electronics

Corp.'s DIRECTV and EchoStar Communications Corp., digital video recorder maker

TiVo Inc. or software providers OpenTV or Liberate Technologies Inc.

What's available



There are three major "flavors" of interactive TV in the US, with
personal TV likely to be the biggest story this holiday season, EchoStar

director of iTV Scott Landers said.

Analysts and executives see the growing popularity of personal TV - which

lets viewers watch two shows at once or pause live shows - as a way to lure

consumers.

Companies are also beginning to provide Web features over TV so viewers can

access email, get information or respond to polls via their TVs rather than

rushing to personal computers.

Continued...

The first incarnation of AOLTV, which marries the Internet with TV via a

set-top box, has been quietly introduced as AOL awaits US regulatory approval

for its Time Warner merger.

AOL stands to gain Time Warner's huge library of content following its

proposed $95 billion union with the media giant.

The companies' executives have said their proposed union will spur

development in the interactive TV market, but regulators have been taking a

close look at what their role would be in the market and are keen on protecting

competition.

Meanwhile, Microsoft's Ultimate TV service, which will be available on

satellite operator DIRECTV later this year, offers live TV controls, Web access

and 500 hours of interactive programming that lets viewers play along with game

shows.

Analysts see it as an attempt to revive Microsoft's iTV efforts after WebTV

failed to capture users on a large scale.

Companies such as EchoStar and OpenTV are also working together to produce

enhanced TV, which lets viewers customize the information they want to get such

as the exact football scores or news story they want right away.

Cable and satellite offerings



Cable operators are finishing upgrading networks, engaging in high-speed data
service trials and preparing for commercial deployments next year to deliver

interactive TV.

ExciteAtHome Corp. is focusing on "broadband TV" to deliver

entertainment, music and games through its high-speed data pipe and pacts with

cable operators.

"We are in the process of finishing the first set of products that we

have developed in this space and expect beta tests in the first quarter of next

year with launch in late first or second quarter," said Kent Libbey, senior

director of broadband TV at ExciteAtHome.

Satellite providers are ahead of their cable brethren, with most unveiling

products this year, industry analysts said.

DIRECTV recently launched a receiver with TiVo that uses satellite technology

to produce a better picture and TiVo technology to let users control their

viewing. It is still developing platforms with AOLTV and UltimateTV, both of

which are "pretty close to the finish line," said Bradley Beale,

senior vice president of advanced products and new media.

Satellite players are also in talks with digital subscriber line providers to

offer two-way, real-time interactivity.

(C) Reuters Limited 2000.