"No digital system is launching today without interactive TV. iTV is the future
of TV," so says Regis Saint Girons, Managing Director OpenTV in an interview
with ATV (advanced-television.com -SEE FULL INTERVIEW
7th April). Given the BBC's recent comments that all new programming needs
to have an interactive angle, that doesn't seem such an unreasonable comment,
but what is less clear cut is whose version of iTV?
A battle is already underway to establish what constitutes 'real' interactive
TV. Does Web TV count, are linear programmes dead, or is enhanced TV what we
really want? And this is the contest that must be won before the fight to establish
uniform standards can really be resolved. Although the players are often American,
much of the skirmishing is taking place in Europe, where digital deployment
has been faster.
What is generally agreed already is that an interoperable standard - especially
for set top box middleware - is required by programmers, developers and advertisers
to ensure maximum utilisation of their output across multiple platforms. It
also appears increasingly likely that the Internet on TV is not enough to satisfy
the market, yet its standards and protocols will play a key part in ensuring
cross-platform use of digital content.
There is also money to be made in the interim - today - with proprietary systems
establishing a market presence, gaining market share and earning revenues -
while working toward an open future. Indicators of the potential income to be
gained from interactive TV can be gleaned from the latest financial results
from BSkyB - whose digital package attributes £37 million to recently introduced
interactivity - though a substantial £35 million of this is from gambling. Of
course introduction of such a sure-fire revenue stream will depend upon the
regulatory restrictions of each country, with the UK one of the few allowing
TV gambling today.
It is normally assumed that interactivity entails use of a return path - hence
it is only the arrival of digital which has heralded the interactive age. In
fact the humble TV phone-in long ago demonstrated the public's wish to be more
involved - but was necessarily limited to the lucky few. Then there were a variety
of analogue offerings, including the early Two Way TV games, or the VideoWay
service of Videotron. This latter system was really just multiple broadcast
channels for the same programme, so when a user chose an on-screen option to
alter outcomes, they were, in effect, switching channels to an alternative scenario
of the same story or advert. But for viewers it worked.
This is an important consideration, for it is the viewer experience, rather
than the purity of the technology which is important. Although more viable in
the digital era of a tenfold increase in channels, BSkyB's alternative camera
angles for sports events is simply an extension of the Videoway concept. And
much of future satellite interactivity will not require a full broadband return
path to the operator, but just as far as the set top box hard drive, where additional
functionality and programming will be stored.
Of course the cable industry talks about its superior bandwidth and the much
richer range of user experiences it will be able to offer. This is the same
talk it has been offering for the last decade. Technologically, it is absolutely
correct, but commercially satellite, and now xDSL and even Digital Terrestrial
TV, appear to be offering or planning to offer many of the key services promised
- or good simulations. These include Video On Demand, impulse pay per view,
on-screen shopping, email, gambling and gaming - as well as all the PVR functionality
which the latest iterations of set top boxes and home gateways will contain.
Who is doing what right now, and how do they plan to transition their service
to a standards-based world in the future?
Middleware
One of the more contentious areas that may be worth starting with is the middleware
vendors. The players include Liberate Technologies from the US - a heavywieght
in the industry, though just last month UK cableco NTL scrapped its spring roll
out of enhanced TV, reportedly because the Liberate 1.2 software didn't automatically
work on the network. However, April 2 Dutch based cableco United Pan Europe
Communications (UPC) confirmed it is to roll out digital set top boxes containing
middleware from Liberate Technologies in all 17 countries in which it operates
- alongside Microsoft Corp's rival software.
Microsoft was UPC's sole supplier until it missed delivery of its new Microsoft
TV software by the planned launch deadline last October, Portugal Telecom's
TV Cabo, in which it has a 2.5 per cent share, following the UK cableco NTL
- in which Microsoft also holds shares - switching to Liberate last October.
Microsoft is an unknown quantity in the TV market where the company is seen
as too PC-centric. But there are fears in the market that Microsoft could use
its financial muscle to buy market share through stakes in UPC, NTL and the
UK's number two cableco Telewest - but all now appear to be going over to Liberate.
Of some 15 million commitments worldwide, Microsoft includes 7.5 million boxes
from A&T, a company in which it has a $5 billion stake, but which has 16 million
customers - some of whom it is trialling with Liberate software.
The problem is that Microsoft's software requires a higher specification set
top box, and in the current economic climate, cablecos are opting for more economic
introductions to interactivity - but Microsoft has the resources to hold on
for the long term.
Then comes MediaHighway, whose parent France's Vivendi Universal owned Canal-Plus
Technologies ensures it has a guaranteed subscriber base, estimated at some
six million boxes. In Germany the D-Box - seen as not really interactive by
some, still benefits from Deutsche Telekom's remaining ownership of cable franchises.
Yet another offering with a built-in customer base is BSkyB's NDS - which can
run on other middleware, and has built a following outside its parent.
Again from the US comes probably the lead player, Open TV, which has won significant
ground in Europe and internationally, among both operators and developers. Certainly
Saint Girons sees it that way, telling ATV that he believes his company does
indeed have the lead, after delivering some 14 million set tops to 40 operators
internationally - on satellite, cable, and digital terrestrial. The prominant
role of Liberate Technologies Inc and OpenTV Corp was highlighted by the March
23 announcement that Morgan Stanley Dean Witter has begun coverage of two interactive
TV software makers, initially giving them both neutral ratings.
A report from industry consultant Jupiter forecasts that, early entrant middleware
platform developers are likely to share leadership in the iTV market, with no
clear leader expected to emerge within the next 24 months. Which should be good
news for OpenTV and NDS, but sounds like a warning to Microsoft to get its skates
on.
Typical of the developers producing content for the new medium is Simon Cornwall
of Two Way TV, seeking to cover all options, telling ATV, "We are running on
the Liberate platform for NTL and Telewest and we are running on Open TV in
Australia. We signed a letter of intent to form a strategic alliance with Microsoft
to run our services on the MicrosoftTV platform which we are sure will become
a major player in the market. In addition we run on the Canal Plus Media Highway
platform, which we are using for the OnDigital roll out."
"We are also looking at others such as Future TV, and the stand-alone VOD players.
There are no technical hurdles to prevent us running on ADSL - or indeed any
broadband network."
In fact ADSL is a target market in its own right, especially for telcos wanting
to get into TV, with companies such as Blue Zone in Canada developing content
creation software specifically for this market - while also catering for the
more general broadband and web TV markets. Catherine Warren, COO of Blue Zone
told ATV, "We have created an end to end 'publishing' solution for content acquisition,
enrichment, and cross platform delivery in which video becomes the centrepiece
of the content and is as easy to use as email. At the push of a button, it delivers
to all the relevant platforms."
Keeping iTV viewers
Saint Girons also dismissed the Internet approach to creating interactive TV
telling ATV, "Web on TV has been tried and it failed because Web content is
created for the PC and not the TV. We offer services that can exist on the Internet
and other platforms, but is put together in a package in a TV-centric way."
Another supporter of enhanced TV - adding to the conventional TV experience
rather than replacing it, is Richard Cross, VP interactive Television, at NDS,
who told ATV (advanced-television.com - SEE FULL INTERVIEW
7th April). "We are great believers in interactivity to enhance the TV experience,
enriching the content to make it more interesting and entertaining." Girons
also adds, "For us, like Sky, we see most opportunities through adding interactivity
to existing TV, rather than pure iTV content." And the general thrust of this
year's Financial Times media conference in London in Spring also delivered the
same consensus.
The reason for the TV industry's support of enhanced rather than a new medium
or the web is both practical and commercial. If interactivity launches viewers
into a new experience, and especially if it takes them away to the Internet,
the TV channel, the programme being viewed, or the advertising that accompanies
it, loose that viewer until they choose to return - if they do. In contrast,
additional information and functions on screen related to the screen content
enhance the value of that content, increase the viewer experience and strengthen
the involvement of the viewer with that programme, channel or advertiser. Its
also likely to be less bandwidth intensive and require less production and acquisition
costs, as well as running over existing infrastructures with minimal additional
software or hardware modification.
That said, the idea of 'create once, use many times' content has definite attractions
for TV companies and rights owners who are striving to leverage their rights
by developing for other platforms. If this it can be done simultaneously, at
minimal additional cost, during the creation of content for TV, so much the
better. It's here where Internet protocols are welcomed once more.
The industry has moved beyond simple HTML and now Cross of NDS comments, "XML
seems to be emerging as a standard from a technical point of view. There are
subsets, but in general, there is a move to XML. MHP standards do not have widespread
support, but when that materialises, we will support it."
EXtensible Mark-up Language is intended to enable content to be used on a variety
of platforms with minimal modification, and Cross is far from its only supporter.
Girons adds, "Essentially we are using XML for content creation, and the display
format of the TV."
Making it pay
So how will interactivity pay - excluding the aforementioned gambling?
Cross at NDS comments, "We did think advertising would be the driver, but that
hasn't happened - but it will come. Interactive TV requires more standardisation
- which will allow targeting for specific groups. It will beam direct marketing,
and will organise advertisement placing within TV schedules for advertising
agencies to ensure they reach specific demographic groups."
The future, as outlined by companies such as Future TV, is one in which the
interactive operator is able to glean more and more detailed data on their viewers,
creating demographic and pyschometric profiles of subscribers based on viewing
habits. Uses again include more personalised targetting, so that only people
with cats see cat food advertisements, only people with children get nappy adverts
and so on. Viewers will be targeted with advertisements and suggestions for
programmes tailored to their profile to reduce wastage - and annoyance.
Some companies such as Respond TV are developing systems to handle the vast
amounts of data that successful interaction creates. Kevin Morrison Managing
Director International, RespondTV, a US company which has recently established
itself in Europe, told ATV, "We can handle the very high spike in responses
that results when 50 per cent of your viewers click in the same second thanks
to special algorithms that roll down the peak." The company provides the software
that handles transactions on TV. "We did a rock concert in the US with the ability
to buy a CD and there was a 22 per cent response rate which we handled." Respond
also collates the data from interactive advertising to manage targeted advertising.
Of course this raises a number of security, privacy and ethical issues. The
industry contends that viewers will prefer to only get relevant advertising,
and will willingly decide not to opt out of the benefits of profiling. Some
civil libertarians believe viewers should have to opt in - and not be discriminated
against in terms of what they are offered if they choose not to. Various bodies
are establishing their own industry sponsored codes of conduct, the key points
of which are to ensure consumers are aware when data is being gathered, what
it will be used for, and that they have an opportunity to decline. It is felt
that this will obviate more severe restrictions being imposed on the industry
by statutory regulatory bodies.
However, such bodies are already drawing up legislation. In a move expected
to be replicated wherever interactive TV is deployed, in February this year
The UK commercial TV broadcasters watchdog, the Independent Television Commission,
set out guidance on interactive TV services for the first time.
It was specifically considering the issue of embedding interactive advertising
within programming, and dealing with PVR systems such as Replay and TiVO personal
video recorders, which allows viewers to cut out traditional advertising.
The TV is "an environment in which the viewer has considerable trust" said a
statement from the ITC, adding that blurring of editorial and commercial boundaries
in iTV could therefore leave consumers especially vulnerable. For example, a
viewer clicking on their TV screen and being taken to a company site leaves
behind regulated content intended to be impartial to be given further information
by the manufacturer of a particular product.
None the less the ITC agreed that, "There is no dispute that some degree of
commercial exploitation will be needed if the costs of providing interactive
enhancements are to be met."
Consequently it proposes guidelines which ban the use of interactivity to lend
"undue prominence" to products, adding that interactive icons should not be
used in a way that emphasises particular items in a linear programme, and must
not themselves be branded.
Ironically the move comes at a time when some large advertisers are considering
cutting back on their TV ad campaigns in the UK because viewers of digital channels
are using their sets for interactive services rather than watching the commercial
breaks.
The de-mutualised Abbey National bank, said during February that it was going
to reduce television advertising as a result of the increase in viewers choosing
pay-TV digital services over free terrestrial channels. The crunch came after
managers viewed film of an experiment by the Henley Centre in which viewers
repeatedly ignored screen adverts and instead used their televisions to shop,
bank or send emails. In a further sample of 1,000 Internet and interactive TV
(iTV) users, 30 per cent also said they watched fewer advertisements on digital
iTV than on conventional analogue television. Such findings confirmed Abbey
National's own experience where it found peak demand for its interactive television
site coinciding with breaks in popular programmes.
This kind of report sends a mixed message to interactive TV operators and would-be
advertisers. On the downside, if the first advertiser in an advert break steals
away a sizeable portion of the viewers, what price the remaining slots? Far
better if they can simply click something on screen to be sent further information
runs the line from the proponents of enhanced TV. However, viewers do use the
service and find it compelling - which must be a plus.
Cross at NDS notes that advertising isn't the only way to make money out of
interactive TV. "At QVC where there is a cost to take orders by phone. They
wanted to minimise the use of operators - and thereby cut costs, which interactive
ordering delivered for them. Others want to charge a fee for services and make
money that way. I expect to see some interactive channels re-negotiating their
carriage fee. Yet others will simply be increasing viewing by adding interactivity
- Music Choice is using interactivity to relaunch brand. (Games and betting
also bring in revenue) We don't develop the games ourselves - but we do have
relationships with game-play, Two way TV and other interactive games developers,
and we deploy and make them work."
BSkyB has a clear model to make money from ecommerce operations on its channels.
It charges a percentage of anything sold on the channel, with a fee for security
and a fee for each transaction.
Some of the interactive programmers are also clear about their revenue streams,
with Cornwall of Two Way TV telling ATV, "Our projections are that two thirds
of our revenues will come direct from the consumer, with the remainder a mix
of other sources, particularly sponsorship and advertising. We are running a
cross promotion with Domino Pizza in which we get a percentage of each Pizza
sold, but this is more of a testing service than a revenue earner."
BSkyB also plans to launch several new interactive services of its own, for
Sky Movies, Sky One, Sky Sports and Sky News, with the first, Sky Movies Active,
launching at the end of the month, using the same technology as Sky News Active
and Sky Sports Active.
Eight video streams of short movie previews will be delivered along with reviews,
profiles of actors and an interactive ticket-buying service through the Sky-owned
Open shopping service. The closed 'walled-garden' interactive service Open is
seen within the industry as just an introduction to interactivity, as its proprietary
nature will restrict the services which are offered. Nonetheless it is a service
which is winning customers now.
The market for interactive TV
There are many opinions about the speed of interactive TV uptake, as the following
consultants' examples demonstrate, but they are all in agreement on one thing,
there is a strong upward trend over the long term.
Strategy Analytics' latest research says that 625 million people will have access
to online services on their TV sets by 2005, including online shopping, banking,
games, information and interactive entertainment services. By the end of 2001
some 38 million homes will have access to interactive digital television services,
up from 20 million today. Western Europe accounts for 62 per cent of the audience
this year, North America 18 per cent, Asia-Pacific 10 per cent and Latin America
1 per cent. Some 74 per cent of digital viewers use a satellite-based service,
21 per cent cable and 5 per cent terrestrial.
The UK remains the lead market where 40 per cent of homes will have interactive
digital television by the end of 2001. All the UK's major digital platforms,
satellite, cable and terrestrial, offer a wide range of interactive services
such as interactive sports coverage, t-commerce, games, e-mail and walled garden
internet.
Other leading European markets include Denmark (household penetration end 2001
25 per cent), Spain (23 per cent) and Sweden (22 per cent). iTV application
and software developers are creating a fast-growing new industry exploiting
the new platforms.
Somewhat optimistically, David Mercer, VP, Consumer Practice at Strategy Analytics
says, "Programmers and operators can now plan with confidence for an interactive
future."
In a report from CE Unterberg, Towbin entitled 'Hotbird,' analysts predict significant
growth prospects for interactive television including in the US market. The
report notes that last June, Thomson Multimedia, DirecTv Inc., and Microsoft
Corp announced an expanded and enhanced version of DirecTv's DBS service, which
will integrate DirectTv programming, digital video recording, Internet access
and interactive television in one comprehensive package.
CE gives a figure for Western Europe of roughly 12 million households currently
using interactive televison, to play games, download movies and surf the Web
via TV.
And back in the US, Jupiter analysts suggests interactive television there will
grow 83 per cent per year to reach close to 46 million homes in 2005. Jupiter
predicts that in the US cable will surpass satellite in terms of iTV household
penetration. Around 26 million cable and 15 million satellite households are
expected to have interactive programming by 2005 (up from four million and two
million, on average, in 2001).
Jupiter's report says that despite accelerated growth, iTV infrastructure will
not reach every market, leading to a regional rather than national penetration
of new technology.
"Even though iTV will be a viable platform for developers, content programmers
and advertisers alike, the market needs to understand that this audience will
be fragmented - by geography and by technology," said Lydia Loizides, Jupiter
analyst. "Programmers and advertisers looking to target the iTV audience must
understand what can be delivered by cable or satellite and plan their initiatives
accordingly."
Most panelists at the National Academy of Television Arts & Sciences' Television
Internet Conference in New York this year estimated ITV at four to six years
away for the US.
