What's the point of interactive TV in China?
By Charles Dubow
EW YORK. 12:40 PM EDT—OpenTV, a privately held interactive television software company based in Mountain View, Calif. has announced that it struck a deal with the China Broadcasting Film & Television Satellite Company (CBSat) to become the first provider of interactive TV on mainland China. But, while China may have a population of more than 1.2 billion, what kind of market will it be for interactive TV?
At first glance, OpenTV's agreement to deploy 2.5 million set-top boxes by 2006 seems quixotic: the high tech equivalent of selling snowshoes in Africa. Interactive set-top boxes aren't exactly Marlboro cigarettes or Coke, after all. Just because a market is big and untapped, does not necessarily mean that the local population has the means or the need for the product in question.
Due to its size, the Chinese market is in many ways one of the most attractive in the world. However, because of the nature of its economy, an amalgam of communism and capitalism, and its infrastructure--getting better in major urban centers like Beijing and Shanghai but relatively poor in the rest of the country--it is unclear how successful OpenTV will be. Interactive television requires two fundamental ingredients: an infrastructure that can provide enough bandwidth to allow interactivity to a subscriber's television; and credit cards, which would allow subscribers to purchase products via interactive TV.
Interactive TV is, in essence, a commercial proposition. While it may also be used by subscribers to send E-mail or even surf the Internet, it's raison d'être is to sell. And that assumes that the viewer has a credit card to purchase the products they are seeing on their television.
No one is questioning OpenTV's technology. The company has already successfully deployed more than 3 million digital receivers with Open TV OS software around the world, most notably in Spain, Canada, Australia and the U.K. The company's other markets include much of Western Europe, Africa, the Middle East and the Pacific Rim.
Moreover, OpenTV's software is currently being deployed by 12 television networks worldwide, including Rupert Murdoch's BSkyB (nyse: BSY) in the U.K. and TPS in France. Later this year, it is scheduled for deployment across EchoStar's (nasdaq: DISH) DISH Network.
On second glance, however, maybe OpenTV isn't tilting at windmills as much as it would appear. According to VISA International, since it started issuing cards in China in 1994, the company expects to reach 100 million cards in China by the end of 2000. (Of that number, approximately 50 million will be debit cards.) The credit card company believes that there is potential to tap an even greater percentage of the Chinese market.
That does not even include American Express, MasterCard, JCB or other locally issued credit cards.
Seen in that light, OpenTV's deal with CBSat-partially owned by CCTV, China's state-run television agency--seems to make a lot of sense. Due to the absence of a fiber optic cable network or nationwide telephone service, satellite is the only way to reach the majority of Chinese viewers. While OpenTV has yet to really crack the U.S. market, it's possible that the key to success may lie first in establishing its international presence.
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