|
Alan Breznick
Staking its claim in the Internet TV gold rush, Excite beat America Online Inc. to the punch last week by unveiling a technology distribution deal with AT&T Corp., its lead financial backer.
The agreement, the first cable carriage contract for Excite's long awaited Web-over-TV service, calls for AT&T Broadband & Internet Services to incorporate the broadband provider's Internet TV and interactive TV software in the MSO's next generation of advanced digital cable set-top boxes. Excite aims to launch its new TV service early next year, about the same time that AOL intends to introduce its proposed AOL TV offering with DirecTV Inc.
Details about the launch and the new Excite service, dubbed , were sketchy last week. But Tom Jermoluk, chairman/CEO of Excite, said market trials with AT&T and other unnamed MSOs, will begin later this year and commercial rollouts will start next year.
"TV is the Holy Grail for me," Jermoluk said, noting there are an estimated 282 million television sets in U.S. homes as opposed to 40 million to 45 million personal computers. "I am a believer in TV."
Excite, the leading broadband provider with 620,000 cable modem subscribers, and AT&T announced the Internet TV deal despite renewed speculation that the MSO and AOL are close to resolving their bitter fight over access to high-speed cable lines. They also unveiled the agreement after weeks of industry buzz that AT&T favors splitting Excite into separate content and access companies.
Earlier this month Excite stock plunged in the wake of a New York Times story speculating on a potential AT&T/AOL deal and AT&T rushed to assure Wall Street that there was "no specific proposal currently under discussion between AT&T and AOL." AT&T, it should be noted, owns 26% of Excite, along with a 58% voting stake.
Speaking at a digital TV conference sponsored by Paul Kagan Associates Inc. in New York, Jermoluk said the new Internet TV service will feature an electronic program guide, Web surfing, TV e-mail, ticker overlays, channel hyperlinks, personalized information, virtual channels and home shopping. He said he expects the ad-supported service to be largely no extra charge for digital cable subscribers, unlike the proposed AOL TV service and the existing WebTV service backed by Microsoft Corp.
"A lot will be free," he said, ticking off such elements as the electronic program guide and TV e-mail. But other planned features, such as full Web surfing, will likely cost more.
The announcement comes as both Microsoft and AOL rev up their efforts to bring their rival Internet TV services to the masses. At the same time, U S West Inc. is rolling out a similar offering in selected Western markets and WorldGate Communications Inc. is expanding its Web-over-TV service to more cable systems.
"The battleground for the Internet has now shifted to the TV," pronounced Hal Krisbergh, chairman/CEO of WorldGate, which has about 7,500 customers on a dozen cable systems. He noted that 11 million Internet-ready set-top boxes will be in cable homes by the end of the year, with the number climbing to more than 30 million by the close of 2002.
Microsoft, which has now sold more than 850,000 standalone WebTV set-top boxes, has penned deals to place WebTV software in up to 10 million AT&T digital boxes, as well as up to 1 million Rogers Cablesystems digital boxes. It's also selling a combined new DBS-WebTV box with EchoStar Communications Corp. and recently signed a contract with Thomson Consumer Electronics to produce a new WebTV box.
"We're talking to everybody," said James Spare, group manager of business development for Microsoft's North American cable division. "We're focusing on the top-tier guys."
AOL, for its part, has notched a major agreement with DirecTV to distribute and market its forthcoming AOL TV service. The dominant online service provider, which cracked the 18-million member mark last week, also signed recent deals with Hughes Network Systems and Philips Electronics to produce joint satellite TV-Internet TV set-tops with DirecTV.
Jermoluk did not disclose which AT&T digital markets will see the service first. But he acknowledged, and Spare confirmed, that some systems will offer a choice of and WebTV services.
Separately, Excite, which is undergoing growing pains associated with its acquisition of Excite Inc. and the potential acquisition of iMall Inc., are saying that operating costs are expected to rise "substantially" in the third quarter.
According to the filing, in the first six months of this year, operating costs increased by 155% to $47.7 million - or 50% of revenues - compared to $18.7 million in the same period of 1998. The company says that these increases were the result of the Excite acquisition May 28, 1999.
And as landscape becomes even more cluttered with DSL and satellite providers, some analysts say that marketing costs could become a substantial expense for providers.
But Glenn T. Powers, an analyst at Cruttenden Roth, believes that a company like Excite will grow its revenues faster than expenses will increase. "The constraint on the side particularly has been that there aren't enough two-way cable homes," Powers said. "But they have two factors of growth working at same time: The penetration of two-way homes is growing and percentage of upgraded homes is growing."
Powers also said that the company's actual network costs will start to decline relative to revenue as they implement AT&T Corp.'s backbone.
Back to this issue
|
