From the 3rd qtr. 10Q that was released today.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since our inception, the primary focus of our operating activities has
been to develop patented, proprietary technologies that enable programmers and
advertisers to create individualized programming and programming enhancements --
first for television and later also for the emerging area of television/Internet
convergence. We call our technologies for the television and television/Internet
convergence markets Individualized Television and HyperTV(TM), respectively.
We derived all of our revenues for 1998 and for the nine months
ended September 30, 1999 from although substantially all of our HyperTV
revenues to date have come from the education market we anticipate, that the
most significant portion of future HyperTV revenues will come from the
entertainment market, for which we introduced a HyperTV application earlier
this year. We subsequently entered into HyperTV programming alliances for
this market with The Box Music Network, Showtime, and New Line Television. We
expect the sources of revenue from the entertainment market to be software
licensing and program hosting fees, Internet advertising and commerce,
content creation fees, and data management services.
With respect to Individualized Television, our business plan is to
generate future revenues from subscription fees, advertising and fees related
to advertising services. For national distribution of Individualized
Television, we have formed a joint venture, LMC IATV Events, LLC, with
Liberty Digital, a subsidiary of Liberty Media Corporation. LMC expects to
license the rights to produce individualized telecasts of marquee sports and
other events. LMC IATV Events entered into an agreement in November 1999 with
Viewer's Choice, LLC to distribute individualized event programming on a
pay-per-view basis to a national audience. Viewers Choice is the premier
distributor of pay-per-view programming in the United States.
8
For regional applications of Individualized Television, we intend to
launch a series of sports television networks in different regions of the
United States. Programming for our networks will be provided by FOX Sports
Net, which reaches 72 million homes through 19 regional networks across the
country. FOX Sports Net will supply us with its professional and college
sports programming, to which we will add Individualized Television
enhancements produced by us. Our license agreement with FOX Sports Net
provides that we pay FOX a portion of the net subscriber revenue we receive
from cable operators. In addition, we must bear the production costs of
additional elements to produce an individualized telecast.
Having performed tests of Individualized Television during 1998 and
1999 through the Dallas cable system of AT&T Broadband & Internet Services
(formerly TCI Cable), we intend to launch our first network in the region served
by FOX Sports Net Southwest. FOX Sports Net Southwest programming reaches over 6
million subscriber homes in Texas, Arkansas, Louisiana, Oklahoma and parts of
New Mexico. We have an agreement with AT&T Broadband to distribute our southwest
regional network and to share subscription fee revenues with us. Since
individualized programming relies on software incorporated into digital cable
set-top terminals, AT&T Broadband will offer our network to those subscribers
who receive its digital cable service. We intend to enter into similar
distribution agreements with other cable operators who are deploying digital
service in their systems.
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