Cable TV Players See New Dawn for Two-Way TV
Updated 4:26 PM ET December 19, 1999
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By Bob Tourtellotte
LOS ANGELES (Reuters) - It's been slow coming but cable TV hardware and software makers are all promising that the digital age of two-way communication over television sets, or two-way TV, will truly dawn in 2000 -- they swear.
In recent years at the Western Show, cable TV's largest gathering that takes place in southern California each year about this time, makers of digital cable modems and specialized digital content have touted the roll-out of ever faster products that will allow e-mail and e-commerce over TV sets.
But due to the cost and size of modem-equipped set top boxes for cable TV, the large investment by cable operators to buy large computer servers, and the lack of adequate content -- among many reasons over the past four to five years -- consumers saw the digital TV evolution only in test markets.
For the most part, those issues have been overcome and at this year's Western Show in Los Angeles that ended on Friday, industry players said consumers should see an explosive growth in digital services in 2000 and 2001 starting with a first generation of so-called interactive program guides, or IPGs.
"Digital has developed much slower than anybody expected, but the fact is, this time, it is real," Pete Boylan, president of TV Guide Inc. (TVGIA.O), told Reuters in an interview.
The emergence of two-way TV -- using a remote control or cordless keyboard to scroll TV listings and choose programs from an interactive program guide, or in more advanced forms to play game shows, shop, send and receive e-mail, or choose different camera angles for programs -- is driving TV Guide's planned $9.2 billion merger with Gemstar International Group Ltd. (GMST.O).
REVENUE POTENTIAL LIFTS STOCKS
Boylan said its current digital interactive program guide, which has space on TV screens for advertising revenue, reaches some 2.7 million viewers after its initial rollout this year.
Using research from investment brokerage Goldman Sachs, Boylan said TV Guide/Gemstar's forecast of $1.5 billion in annual revenues could grow over 50 percent in one year on new ad revenue from only its current IPG subscribers.
Those types of forecasts are driving stocks for companies like Liberate Technologies Inc. (LBRT.O) and OpenTV Corp. (OPTV.O) to lofty heights as investors look for a tidal wave of growth interactive program guides and two-way TV systems.
Liberate, for instance, priced its initial public offering of stock back in July at $16 a share and Friday was trading up around $190 a share on the Nasdaq market. OpenTV shares debuted on the Nasdaq at $20 in November and climbed as high as $94 before falling back to trade around $80 Friday.
Even software giant Microsoft Corp. (MSFT.O) is touting an interactive program guide of its own that, like others, will offer a seamless Internet connection that couch potatoes won't even know exists, but which will bring them pizza delivered to their doorstep.
Boylan's glimpse into possible future revenues, however, does not include millions of cable TV homes that are expected to sign up for new cable modems and set-top boxes this year.
While the TV Guide IPG reaches only 2.7 million cable TV homes now, it can potentially reach up to 40 million homes as soon as digital set top boxes with cable modems are available.
GROWING SET TOP BOX SALES
Cable modem maker General Instrument Corp. (GIC.N) sold 3.3 million set-top boxes in 1999, but expects to sell another 4 to 4.5 million this year, according to a company spokeswoman.
More telling, perhaps, is its completed installation of computer servers for cable operators that could allow for the deployment of set top boxes in roughly 41 million homes.
A spokeswoman for Scientific-Atlanta Inc. (SFA.N), another cable modem maker, said this past year they've put 650,000 digital set top boxes in cable TV homes, but its largest customer, Time Warner Inc. (TWX.N), just placed an order for another 500,000 to be delivered in six months.
Scientific-Atlanta is playing both sides of the game -- hardware and software -- with its own IPG nicknamed SARA and a 51-percent stake in fledgling PowerTV, maker of an operating system for two-way TV used by some companies like Liberate.
All the talk about the new digital roll-out, however, begs the question of whether consumers really want to interact with their TV sets, scroll through IPGs, play along with game shows like "Jeopardy" and watch sports from different camera angles.
Four years ago, a digital, cable modem set-top box cost operators as much as $7,000, but the cost is now down to $300 to $350 for mass purchases, manufacturers said.
The size of the box, which was in some cases as big as a PC, is now slightly smaller than a standard VCR or DVD player.
Industry players said operators, in general, were charging about $10 extra on an average cable bill of around $35 for the added services of two-way TV.
Finally, NDS Group Plc (NNDS.O) launched a service called Value+TV on British satellite service BSkyB in October that gives viewers the ability to choose different camera angles to watch sports programs.
Dov Rubin, NDS general manager for the Americas, told Reuters the service is now seeing some 10,000 camera changes a day, on average, from viewers who signed up, and enrollment has doubled in just three months.
"What it says is, people really want more from their TV," Rubin told Reuters.
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