Geocast gets backing for
digital-TV feed to PCs
By Jane Weaver
MSNBC
Oct 6 ? Hearst-Argyle Television, owner and operator of 26 stations across the U.S., is taking an equity stake in Geocast Network Systems, a Silicon Valley startup that will be using digital TV signals to beam video content to personal computers. For TV stations, the new service could present a way to actually make money off digital television. For users who want to watch video while they surf, it could mean an end to bandwidth choke.
?Geocast gives us an opportunity to get a return on our [digital] investment and to set the stage for revenue streams we might not otherwise have access to.?
? BOB MARBUT
Hearst-Argyle Television HEARST-ARGYLE is committing up to $10 million, along with digital airspace and on-air promotion, to the fledgling, privately held programming service for the PC, says Bob Marbut, chairman and co-chief executive of the TV station group.
?We have invested a lot of money in building the infrastructure in this new digital spectrum,? says Marbut. ?Geocast gives us an opportunity to get a return on our investment and to set the stage for revenue streams, advertisers and partners we might not otherwise have access to.?
Digital TV is in its infancy. About 70 TV stations are currently broadcasting on their digital channels and a few TV shows, such as NBC?s ?Tonight Show with Jay Leno? and professional sporting events, are airing digital versions. (NBC is a partner in MSNBC.)
Beyond that, it costs each TV station anywhere from $5 million to $10 million for the equipment upgrades needed to send out digital signals. So while the Government has ordered all TV broadcasters to go fully digital over the next six years, there?s no guarantee the broadcast stations will make their money back any time soon ? if at all.
?Nobody knows if there?s a business model,? says Bruce Leichtman, analyst with The Yankee Group. ?How do the broadcasters make money off digital TV??
THE BEST OF TV AND THE WEB
Enter Geocast.
Backed by three of Silicon Valley?s most respected venture capitalists ? Kleiner Perkins Caufield & Byers (backer of Amazon.com, America Online, @Home), the Mayfield Fund (3Com, Silicon Graphics, Broadvision) and Institutional Venture Partners (Ask Jeeves, Excite, Bay Networks) ? the Geocast system is seeking to combine the strengths of the Internet and broadcast television on the PC.
As Geocast executives see it, the Internet with its limited bandwidth is ill-suited to video news and entertainment. ?The world has spoken that it wants more broadcast-like information on the Internet,? says chief executive Joe Horowitz. ?But the more people turn video on, the more it slows down.?
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?The Victoria?s Secret Webcast brought the Internet to its knees,? says Kevin Fong of the Mayfield Fund, referring to the phenomenally popular fashion show that crashed the lingerie company?s Web site when a million viewers tried to log on simultaneously last winter.
On the other hand, ?TV doesn?t have interactivity or user-controlled video. That?s what Geocast hopes to bring,? says Fong.
HOW IT WORKS
Geocast is a special plug-in receiver software technology that will use a digital broadcast to deliver customized entertainment and information video to the desktop via a receiver.
When users plug a Geocast receiver into the PC, they?ll be asked to list content preferences such as local football highlights, particular stock quotes or favorite music genres. The Geocast browser ?which ?piggybacks? on top of any Internet browser ? will then allow people to watch digital video and audio content from the PC, while conducting transactions or other interactive activities via the Internet. Content could either be downloaded live or cached for playback later.
H. Joseph Horowitz, CEO and Chairman of Geocast Network Systems, Inc.
?We?re not trying to replace the Internet,? says Horowitz. ?People will watch video over digital TV and use the Internet to fulfill orders.?
Fong, who serves on the Geocast board of directors, says the video format will be best suited for short slices of content, that is, headline news as opposed to longer forms.
The Geocast service will be free, supported by advertising and commerce revenues; sponsor messages will appear in a commercial-like, rich-media format on the Geocast browser. In that way, Geocast most resembles the ads on cable modem services like Excite@Home, commercials that command a premium price from advertisers.
Its in the advertising and commerce model that digital broadcasters like Hearst-Argyle stand to gain from Geocast.
?TV stations don?t reach the desktop user,? says Fong. ?TV stations look at the Internet and [see] being able to reach a new audience.?
The receiver, which will most likely cost less than $300, is slated to arrive in consumer electronics stores at the end of next year.
THE NEXT POINTCAST?
In the meantime, Geocast has challenges ahead. The company needs to sign a national lineup of affiliate stations like Hearst-Argyle, as well as TV satellite networks and cable operators, in order to be able to reach every U.S. household with a PC who wants to tap into the digital datacast.
To that end, the Menlo Park, Calif. firm is in ?advanced levels of discussions? with other TV broadcasters and expects other announcements in the next few weeks, says chief executive Horowitz. Geocast is also negotiating with a consumer electronics partner to help create the receiver that will connect to a user?s PC.
?Something like this could open the marketplace? for the digital TV industry groups, says analyst Leichtman.
Some Internet experts are cautious.
?They want to control the user?s Internet experience and interface and pick up the commerce and ad streams,? says Ross Rubin, a Jupiter Communications analyst who has seen a demonstration of the Geocast prototype. ?That?s a high value position to be in, but it?s also a hard place to defend.?
Rubin noted Geocast resembled ?a souped up Pointcast,? referring to the once-hot ?push? media service that delivered personalized, dynamic Web content to desktops.
It?s too early to say whether the similarly named Geocast ends up like Pointcast (which bled subscribers until being acquired by Idealab in May, to be merged with Launchpad Technologies) or becomes a richer Internet experience for consumers and achieves mass market success.
?It?s difficult to compete against the Web for attention,? Rubin says. ?That?s where the development is.?
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