NBC Takes Stake in Personalized TV
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By MICHAEL WHITE
.c The Associated Press
LOS ANGELES (June 9) - NBC is partnering with a fledgling technology company to sell digital video recorders that automatically find shows to fit the viewer's personal tastes and allow commercials to be skipped.
While the new recorders, created by TiVo Inc., could mean people will watch fewer ads, NBC is banking on the technology because the machines can choose ads targeted specifically to the interests of each viewer.
NBC expects consumers will buy millions of the new digital recorders in the same way they turned to VCRs during the 1980s.
''Digital recording is going to happen. It's going to be a fact of life,'' said Tom Rogers, president of NBC Cable, which will make a multi-million dollar investment in TiVo and work with the company in refining the recorders.
''It's going to be an integral part of television's future. By doing this investment, we are hooking up with the company we believe has the most momentum to grabbing that future.''
TV networks are facing declining viewership due to heavy competition from cable TV and the Internet. Although advertising revenues are still on the rise, networks are now looking for new ways to generate revenue.
Other companies are also betting on making money from TiVo's technology.
Investors in TiVo, a small, privately held company based in Sunnyvale, Calif., include the consumer electronics maker Philips Electronics, the satellite TV company DirecTV, Showtime Networks, and Vulcan Ventures, the investment company run by Microsoft co-founder Paul Allen.
TiVo's main rival, Replay Networks Inc., of Mountain View, signed a deal Tuesday to have the electronics maker Panasonic manufacture its devices.
Similar to Replay Networks, TiVo's device stores TV shows on a high-capacity computer disk for viewers to watch when they're ready. The boxes can record 14 hours to 30 hours, depending on the size of the hard disk.
The device, which will sit atop the TV set like a cable TV box, also gives viewers controls to pause, rewind and ''instant replay'' television without using a videotape.
TiVo sells its recorders directly over the Internet and expects to have them in retail stores by July or August. The 14-hour version sells for $499 and the 30-hour box costs $999. Customers also pay a $9.95 monthly service fee.
Replay boxes are expected be in stores in time for the holiday shopping season. Replay's device costs from $699 to $1,499 depending on storage capacity. There is no monthly service fee.
With the alliance, NBC will gain a prominent position on TiVo's electronic programming screen, which gives viewers a menu for programs they want to record. As they select programs, the box builds a profile of the viewer's preferences and will automatically record similar shows.
Both the TiVo and Replay boxes allow viewers to quickly bypass commercials in a few seconds.
The critical issue for NBC was the concept of targeted advertising.
NBC and TiVo plan to modify the system to allow the network to download large batches of ads onto the hard disk. The device would then pick ads that fit the viewer's personal profile and insert them into programming.
Officials hope that by tailoring the ad package, viewers will be less likely to skip them. The digital recorders also create other opportunities, such as selling ads that would appear on the TiVo program schedule, said Josh Bernoff, an analyst with Forrester Research in Boston.
''These are all opportunities NBC would like to investigate as a potential bulwark against the loss of advertising,'' he said.
Also important for NBC: Unlike Replay, TiVo won't tout its commercial-killing capability, Rogers said.
''TiVo preserves our advertising model,'' he said during a conference call with reporters. ''Digital programming where ads would be automatically zapped would be anathema to what broadcasting is all about.''
Practically speaking, the new technology means viewers will be watching fewer ads, said Bernoff. A Forrester study predicts that commercial viewing will decline by 8 percent during the next five years and 50 percent over 10 years as a result of digital recorders.
AP-NY-06-09-99 1759EDT
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