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Interactive TV

Trade Reports by Judah Ken Freed

Interactive television is a reality. Here's the story.

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MEDIA
VISIONS

Journal

Is Interactive TV
a Business at Last?

by Ken Freed.
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With a boost from cable, the pieces finally are falling into place.
 

We've waited.

We've waited and watched.

We've waited long years for interactive television to become a real business in the United States.

We've witnessed interactive TV pass through successive boom and bust cycles. As each bubble burst and capital withdrew from "iTV" ventures, we've seen the critics close in like vultures. Interactive TV has been dead and buried more times than Boris Karloff. Yet the spirit keeps arising anew

"If we look at the growth curve for interactive TV from Winky Dink in the 1950s to Gold Pocket today," says cable industry researcher Gary Arlen, the president of Arlen Communications, "we see each wave ends higher on the shore."

The technology keeps improving as it becomes more affordable, so iTV no longer costs more than it earns.

U.S. cable operators are now taking iTV more seriously than ever because of its success in Europe, especially in the U.K. and France.

The skeptics fairly argue, of course, that Europe isn't the U.S.

Granted, people in Europe have a long tradition of going to the TV screen for Teletext information, while people in the U.S. have now adjusted to visiting a PC screen for information.

Granted, Europe's best iTV offerings have been deployed on more capable boxes than those in the U.S.

Granted, Europeans adopted the open Multimedia Home Platform (MHP) standard for interactive content on any set-top box in a DVB network, regardless of manufacturer, and this happened while iTV development in the U.S. was delayed by open competition among incompatible proprietary solutions for the set-top middleware.

Granted, Europe allows iTV gaming, while any TV-related gambling has been deemed unacceptable in the U.S.

But even with these differences and more &endash; even with NTL's failure in the U.K. -- the overall uptake in Europe undeniably proves the market for iTV. Now, it's facing another resurrection in the U.S.

Small wonder: The pieces finally are falling into place.

After a $75-billion investment, the U.S. cable plant has been largely rebuilt over the last few years. With digital services available to more than 80% of the nation's TV households, cable has attracted 20 million digital subscribers.

The digital boxes now deployed aren't as advanced as some may wish, but the installed base is large enough to build a business on. By adopting more open standards such as OCAP and XML, producers can at last create iTV content once and then see it played anywhere.

Given these developments, the financial balancing act between development and deployment at last looks favorable for iTV. Consequently, we haven't seen such hope for the concept in this country since Barry Diller married the television, telephone and computer into the magic money-making machine of home shopping.

Will the 21st Century's first decade begin the iTV era in the U.S.? Will cable operators soon be rolling out advanced services that go beyond electronic program guides and video-on-demand? Will cable make its move before satellite operators flip a switch for full-bore nationwide iTV services?

"It's inevitable that interactive TV is going to be big," says analyst Paul Kagan of Kagan Capital Management, "but it's coming together later than we thought. It's happening in bits and pieces, creeping into our lives."

Kagan expects three to five years to pass before iTV services in the U.S. reach the levels of interactivity already available in Europe. "We're now waiting for the last contractual pieces to fall into place, the carriage deals between the networks and content providers, but it's coming," he predicts.

For the U.S to match iTV's European success, "we'd first have to see the prices become more affordable," says Sean Badding, the president and senior analyst at The Carmel Group. "Then, we'd have to see more applications targeting specific interest groups. And these applications would have to be more intuitive, providing a more customized or personalized feel for each consumer."

The delusion still plaguing cable, Arlen warns, is a belief there will be one "killer application" that puts iTV over the top. In reality, success will hinge on a wide range of offerings that appeal to different markets. "We tend to think in terms of what's already been done, but these services may be things we can't even imagine yet," he notes.

"I'm optimistic that interactive cable TV will happen in the U.S.," says Gary Lauder, managing partner of Lauder Partners, which invests in new media ventures and funds. "What oscillates back and forth is public opinion and the pundits' views about the options for interactive TV, and for TV in general. What doesn't change is a tendency to offer interactive services."

So, is interactive TV in the U.S. a business, at last?

We're still waiting. end.

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TRANSMIT
First published December 2003 in premier of Transmit
(
c) 2003 by Ken Freed
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