BIG front page article from Biz Page of LATIMES...competition is heating up gang....
Ready for Prime Time? Interactive TV Start-Up Boldly Set the Scene. But Are the Viewers and Infrastructure on the Same Channel?
By JENNIFER OLDHAM, Times Staff Writer
Jonathan Taplin and Richard Baskin persuaded well-heeled
companies to invest in their idea. Built their server. Signed
content partners and conducted trials. But their toughest challenge yet lies ahead: convincing consumers and distributors to buy their interactive TV service.
The duo founded Intertainer three years ago to programming for the
high-speed broadband networks that cable and phone companies are developing to cash in on increasing demand for sophisticated Internet
services. Taplin and Baskin
plan to offer about 700 hours
of movies, music, games and
other content to viewers,
which can be accessed for a fee from a PC or a TV set that's hooked
into a high-speed network.
"Our partners said only lunatics could have done what we did--which
was basically cash in all our chips and invest everything we had in an
idea that had not only no distribution, but no customers," Baskin aid.
So far the Culver City-based company's staff has grown to more
than 100 and it's garnered $37 million in financing from industry
heavyweights such as Comcast, Sony, Intel, NBC and US West,
each of which owns a small equity stake. The Disney Channel, PBS,
ESPN, Warner Bros. and Sony, among others, have agreed to
provide content to Intertainer.
To date, Intertainer has had only a few small trials of its service,
including several conducted by US West with digital subscriber line
(DSL) subscribers in Boulder, Colo., and current trials operated by
RCN in New York City and Comcast in Willow Grove.
This fall Intertainer plans to deploy its service in a handful of markets,including Denver, New York City and St. Cloud, Minn. And it hopes to have about 100,000 households signed up for its service by the end of next year. Still, its founders don't expect their company to break even until at least 2002, when they hope to sign up "millions" of customers.
But analysts wonder whether cable and phone companies will deploy
new high-speed networks fast enough to fulfill Intertainer's ambitious
goals. At present only one in five cable subscribers has access to these high-speed networks and only one in 25 phone customers does.
Network growth is expected to be slow because expensive equipment
upgrades force companies to charge consumers higher monthly service
fees.
"What it all comes down to is making the service available to
consumers," said Kevin Hause, an analyst with International Data, a
Framingham, Mass.-based market research firm. "[Intertainer] can have
all the content partners they want, but if the service providers don't sign on then it's not going to be available to consumers to see."
Taplin, 52, and Baskin, 50, who are entertainment industry veterans,
say millions of Americans are ready to buy handbags, play video games
or demo new CDs on their TV sets. Taplin is a former tour manager for
Bob Dylan, and Baskin directed music videos for Barbra Streisand and
Elton John.
But the fast-growing start-up is at a crossroads in its quest to
become the interactive TV service of choice for consumers with
high-speed connections through cable modems or DSL technology
being offered by phone companies.
The company must now set itself apart from myriad competitors,
such as video on demand provider Diva and enhanced TV start-ups
Wink, WebTV, WorldGate and others. All of these firms are jostling
to tap into the still untested market for interactive TV services such as video on demand, surfing the Internet on a TV set, electronic
programming guides and interactive advertising.
Interactive TV start-ups face an uphill battle with cable operators,
who in some cases are planning to offer their own enhanced
programming through ventures such as Excite@Home. Cable
companies also act as gatekeepers by deciding which of these services
they will offer consumers on their digital set-top boxes.
"A lot of cable providers are hesitating to order any of these
services--that's why we see a lot of announcements about trial
deployments," Hause said. "It's a 'we'll dabble here and there and wait and see what works' attitude."
Intertainer currently has deals with set-top box makers Scientific
Atlanta and General Instrument to offer its service to cable
companies on their new digital set-top boxes.
Once enhanced TV is available, consumers must be persuaded to
install digital set-top boxes. About half of the nation's 66 million cable subscribers don't even use simple decoder boxes that are required to receive extra movie channels such as HBO. If these consumers don't already subscribe to premium movie channels, analysts say, they may hesitate to pay for movies via Intertainer. First-run movies on Intertainer will cost $3.95, with library films from $1.95 to $2.95 and TV shows for about $1.
Several things set Intertainer apart from its competitors. Investments
from industry heavyweights lend credibility to their service. And Taplin and Baskin, along with a third founder, Jeremiah Chechik, have received praise for Intertainer's easy-to-use home page, which features a wheel of content choices like movies, music and TV. The company has also designed its server to work on a number of platforms, unlike several of its competitors.
But distributors are concerned about how well this server would
handle an avalanche of requests from users, analysts say.
"Intertainer requires a fairly robust infrastructure relative to some of the other offerings," Hause said. "This investment has to be considered by the service provider."
Intertainer hopes to profit through video on demand, e-commerce
offerings, subscriber fees from distributors and advertising. One hallmark of Intertainer's service is video on demand, which allows customers with digital set-top boxes to pay a fee for 24 hours of access to movies and shows they can pause and rewind at will.
To beef up its e-commerce offerings and to build customer loyalty,
Intertainer uses a "personal assistant" that allows users to create
individual profiles that can be saved and accessed later with a password. The "assistant" uses this information to present a user with movies and TV shows, music, books and games geared to his or her interests.
"It's about weaving e-commerce through movies, TV, music and
games in a way that's targeted and focused and makes a real
connection," said Bob Kaminsky, Intertainer's senior vice president of
programming. "If you're watching the 'City of Angels' you might also like to buy the album. If you're watching 'A Room With a View,' you might want to click over to a Tuscan cooking show and click on a link and buy a cookbook."
As technology improves, the company plans to expand the number
of hours of programming offered on its server.
E-commerce opportunities will also be embedded in ads which will
pop up on Intertainer every eight minutes if the consumer hasn't
purchased anything. (Ads won't appear during movies or other shows
ordered and paid for by the consumer.) "Hypervideo" technology from
San Francisco-based Veon allows Intertainer consumers to click on
products displayed in the ad and order them.
Intertainer's high-profile backers are using the service as a laboratory to test how interactive TV services of the future might look and act.
Sony will use the service to test "different types of movies and TV
shows and to target different audiences," said Cheryl Koll, vice
president of sales and marketing for pay television and airlines for Sony Pictures Entertainment.
"We're really looking for information about who is using it, how they
use it, and why they are using it, so we can better position our product in video on demand," Koll added.
During US West's test run that ended in April, the Baby Bell found
that consumers--who used Intertainer on their PCs--bought two to five
movies per month on the service.
US West households in the trial reported that oredom with
broadcast and cable offerings motivated them to use the service. These
households also watched less TV and rented movies half as often when
they were using Intertainer, said Audrey Thompson, director of
innovations for Internet protocol services for US West.
But during this transition period for Intertainer, analysts say, it's also likely that Taplin and Baskin will field offers to sell the company to a hungry cable or telecom company looking to beef up its high-speed programming slates, analysts say.
If that's true, the founders aren't talking.
latimes.com
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