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TIM CLARK
The fledgling interactive TV landscape prompts a variety of success strategies for ITV service and content providers.
The interactive television space is a crowded one.
Today's conventions are bursting at the seams with panelists hawking killer apps that will deliver us to the Promised Land of couch potato commerce.
Consolidation is sure to come, and the key question is: Which companies will remain standing and which services will become both indespensible for consumers and important revenue generators for operators?
James Ackerman, CEO of Open TV, says consolidation will undoubtedly clear the ITV space.
He says most ITV players have created "terrific" services and "wonderful" pieces of technology but don't always have the stamina to survive.
"Their burn rate is leading them to a point of running out of cash within the next 12-18 months," he says. "If things remain the same in terms of available funds, one has to query whether or not some of these companies are going to go to the wall."
ACTV says it has already faced shakeouts in the ITV world.
"You have to understand the type of company we are," says Kevin Liga, CTO, ACTV. "We've weathered this storm before."
In some ways, the frenzy in the ITV arena mirrors the way companies have mushroomed, then shriveled, in the dot-com world.
Liga says the main difference between the dot-com craze and the excitement over ITV is that ITV stocks aren't valued anywhere near what Internet stocks are worth.
"Liberate took quite a ride without any deployments," he says.
Art Cohen, SVP-advertising, ACTV, says ITV is a very "curious" situation. "There are a lot of players, and it confus-es the marketplace," he says.
Cohen sees the Internet as a training ground for the new ITV services.
"The next step is translating all of those functionalities to television," he says.
Getting applications onto enough systems and into enough homes might be too big a job for some of the companies now peppering the industry.
Ackerman envisions an ITV space where a number of companies will get picked up by larger companies, but only if the smaller company adds value to that larger company's overall offering.
"I think it's very important in any acquisition to identify what additional value the new company can add to the acquiring company," he says. "The types of companies we would look to acquire are going to be different than what other companies look to acquire."
Ackerman says he would steer clear of an acquisition that is "pure gravy" and would only move forward with an acquisition that adds value to Open TV's overall offering, which is a "proven technology to run ITV services throughout the world."
Open TV is the world's largest provider of digital ITV systems for digital set-top boxes. Ackerman says Open TV has deployed 10 million set-top boxes, and that number is growing rapidly.
"We are a company that has a very firmly established presence in the global digital TV arena," he says.
The first taste of ITV success for Open TV occurred in the United Kingdom with Domino's Pizza.
Like the United States, Domino's is a national brand in the United Kingdom and delivers to 60% of all U.K. households. Open TV created a service for the pizza chain that enabled a postal code check between the set-top box and the database. If postal codes didn't match, no purchases would be permitted, and if you lived in an area where Domino's didn't deliver, a message would appear informing the customer.
"What we had to do was build a service that operated just as if you were to order on the telephone, which is once you order a pizza, you need it delivered in 30 minutes," says Ackerman. "We built a system that made sure the order was placed from the TV set to the closest store within 90 seconds."
An e-mail or fax would appear at the local store; the pizza would get made and delivered within the next 30 minutes.
Ackerman says the operation ended up representing 2% of Domino's pizza turnover in the entire United Kingdom.
"We went to great pains to make our ITV service in the U.K. very easy to use and easily accessible," he says.
To generate interest in the Domino's project, Open TV made all of its ITV services free to anyone who had the Sky digital service, an Open TV partner. According to Ackerman, this eliminated a big barrier to entry. Consumers felt very comfortable playing games, ordering CDs, pizzas and setting up e-mail accounts because there was no subscription service to pay.
"The traffic flow got people increasingly more comfortable with e-commerce related service," says Ackerman.
Easy interface is also a huge factor that will shape the future of ITV. The numerous passcodes and screens to struggle through on the PC will be far removed from ITV.
"Creatively, it has to look like TV and not Web pages," says Ackerman.
Liga says Open TV's accomplishments in the United Kingdom have also ignited the desire to deploy further and faster in the United States.
"It's almost an across-the-pond slap in the face to say, `Hey, we're already over here in a nice TV commerce world, and you guys haven't started anything yet over there,'" says Liga.
Liga says charging customers for ITV services should be handled with kid gloves.
"If you were to drive incremental revenue to subscribers without potentially tapping the subscribers directly to be buying up, you potentially hit a brick wall with certain subscription services," says Liga.
New ITV opportunities are in commerce and advertising with VOD being a highlight.
"It's a great feature; we've been waiting quite some time for this," says Liga. "I think the model has proven itself for years with Blockbuster and video stores."
Liga says the numerous advances in processed power have brought ACTV to a point to deploy interactive services on the television that have never been done before. Like most ITV proponents, Liga believes you can't take the high-end experiences of traditional, linear television and dumb them down with poor graphics to create the ITV experience.
"There are some technologies now that are quite old and antiquated that should've been launched eight years ago," he says.
ACTV has a product that has similar capabilities as their competitors but exudes more relevancy.
"Bring relevancy, and then you'll bring the click-throughs," says Liga. "This has to be done in a real, TV-based domain and not just slapping the Internet on the TV screen."
PBS views the crowded ITV space from a different perspective. As content providers, they look first at the cable and satellite companies to provide content. If they team up with a proprietary technology service provider that isn't compatible with the platform operator, the content won't get through.
"That tends to narrow the playing field considerably," says Deron Triff, director-business development, enhanced TV, PBS Interactive. "We're certainly selective, but we select upon companies that have established relationships with the platform operators."
Triff says PBS also narrows the ITV playing field by grouping different technology interactive service providers into different categories, such as middleware, backend technology and design companies.
"If you break it down into those categories, even though some of them overlap, it is not nearly as complicated as the Internet," says Triff. "The Internet is an open market, and, unfortunately, this is playing out as a closed market."
Triff says PBS is a big proponent of standards and believes a significant amount of content won't make it into the pipeline if there's not a proper amount of standardization.
"It's been pretty simple for us to select who the right partners are once you have your strategy in place," he says.
PBS understands that cable operators recognize content.
In turn, cable operators understand PBS's commitment to content enhancements as opposed to other types of secondary interactivity.
"What we've done is develop the first baby steps, which are the walled garden sites," says Triff. "They're not Web-like, but they are standalone content offerings that reside in a closed portal within a cable operator's platform."
Triff says PBS has taken five properties that represent a cross section of content genres and demographic groups to help cable operators test the walled garden approach on a variety of users.
Cable operators have found great value in this approach because it creates a steady content pipeline, all branded from PBS.
"Because we have a trusted, safe brand, it helps viewers adopt interactivity when they recognize our brand that's been broadcasting for many years," says Triff. "We wouldn't want to hide that."
PBS has developed six walled garden sites based upon Nova, Zoom, Mr. Rogers and other popular PBS shows to test different audiences and different content. "Shop PBS" was also initiated because the network felt strongly about offering educational products.
"Most importantly, we've blended our local and national strategy where we've given all the local stations in the trial markets the opportunity to create local walled gardens," says Triff.
PBS took "painstaking effort" to blend the local and national strategy across different cable operator platforms to ensure that they didn't have a "customer service nightmare."
The biggest ITV challenge for PBS has been determining how much content to build within the uncertain number of receivers in the market today and tomorrow. Ironing out a content plan to make it compelling enough to cable operators is also a challenge.
"We've been fairly aggressive but not silly about it," says Triff. "We don't take a hard line on commerce, because we're not commercial TV."
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