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Sunday February 20 08:33 PM EST
Interactive TV: The $20 billion revolution
By Jennifer Mack, ZDNet News
Totally interactive TV -- from chatting to Web surfing to killer e-commerce -- is coming sooner than you think, creating a $20 billion windfall for the broadcast industry.
Talk about must-see TV. Soon, perhaps as early as this summer, you could be using that box in the living room to call your mother, check your stocks, order a pizza and maybe even chat live while watching "Dawson's Creek."
In order words, you may never have to leave your couch again.
? Startups target couch e-commerce
Long-awaited -- and, in broadcast circles, long considered a dirty term -- interactive television, or ITV, isn't just on the comeback trail, it's threatening to engineer a $20 billion revolution for the broadcast industry.
And how is this interactive revolution being televised? If it were showing on the boob tube it would be a three-part miniseries.
Part One: EPG. If you're a digital-cable subscriber or satellite user you can take advantage of electronic programming guides (EPGs), the first phase of ITV. EPGs let you sort through upcoming shows, set alarms for your favorite programs or automatically program your VCR.
Part Two: Enhanced TV. "Enhanced TV" basically makes television programming "clickable," allowing TV viewers to pull up additional information or place orders using their remote control.
Part Three: Total ITV. Not only do you have clickable programming, now you can use your set to browse the Web and take advantage of tools like chat and e-mail.
America Online Inc. (NYSE: AOL - news) will likely fast-forward the move toward total ITV when it rolls out AOLTV this summer -- giving its 20 million-plus users the opportunity to decide whether they need to chat live while watching that "Dawson's Creek" episode. In fact, Henry Blodget, senior Internet analyst for Merrill Lynch, believes AOL "is in a good position to become the dominant consumer interface to interactivity across all devices" -- comparing its potential position in the industry to Microsoft Corp.'s (Nasdaq: MSFT - news) domination of the OS market.
But AOL isn't alone.
Despite a relatively slow adoption rate, Microsoft's WebTV has made its way into 1 million homes. And with the creation of ATVEF, an emerging broadcast industry standard for adding data to video signals, other cable companies and telcos will soon be rolling out their own set-top boxes offering enhanced content. Research firm Jupiter Communications predicts that 30 million U.S. households will have ITV capabilities by 2004.
Europe leads the way
Charlie Tritschler, vice president of marketing for Liberate Technologies, a company that, along with competitors Microsoft TV and OpenTV provides the back-end technology for ITV, has already seen some of the ways companies are using the new technology.
"The folks in Europe are already tuned in to using TV for more than just TV," Tritschler said. "Forty percent of the airline tickets purchased in Europe were bought over the television using a program called Teletext."
Tritschler also points to products being developed by U S West (NYSE: USW - news) that turn your set-top box into a speakerphone that answers calls and can put caller-ID information on your TV screen. In Britain, pay-for-play gaming has gained increasing popularity.
ITV: A $20 billion industry?
By 2004, interactive TV will be worth $20 billion in advertising, commerce and subscription revenue, according to Forrester Research.
Two companies eager to get a piece of that are Wink Communications (Nasdaq: WINK - news) of Alameda, Calif., and RespondTV of San Francisco. Both have designed technology that lets you use your remote control to pull up additional information about what's appearing on television. More importantly, the companies' technologies let viewers make purchases via their television. In RespondTV's case, those transactions can take place in real time, meaning you could click your TV to order a pizza and have it show up at your door 30 minutes later. Both companies expect to be in up to 3 million homes by the end of this year. (See: Startups target couch potatoes.)
For advertisers, "It's like they died and went to heaven," said Wink CEO Maggie Wilderotter. "It's finally an opportunity for them to measure the effectiveness and pay for performance and have direct connectivity to customers."
For companies, the potential is enormous. Not only does ITV-powered e-commerce enable impulse buying, it lets interactive advertisers instantly track the effectiveness of their commercials and engage in pinpoint direct marketing. Also, by combining Net use with the average seven hours per day people spend watching TV, advertisers should be able capture more eyeballs longer.
Telewebbers on the rise
Consumers are already creating their own do-it-yourself ITV by combining their use of the Internet with their TV habits.
A study just released by Dataquest, a division of GartnerGroup, shows the number of people watching TV while simultaneously surfing the Web has risen from 8 million adults in 1998 to 27 million in 1999. According to analyst Sujata Ramnarayan, who authored the report, the majority of these "telewebbers" (82 percent) have the TV on as background noise while they surf. Other telewebbers say they use the Net to look up more information about a news story or to chat with other viewers and vote in online polls while they're watching a show.
The possibility that television use could shift to the PC has some broadcasters running scared. iCraveTV, a Canadian company that streamed TV programs and sports events until it was blocked by a preliminary injunction, was sued by everyone from Time Warner (NYSE: TWX - news) to the National Football League for violating U.S. copyright and trademark laws. The iCraveTV lawsuit inspired the U.S. House of Representatives' Commerce subcommittee on communications to hold a hearing Wednesday on television programming and licensing issues over the Internet.
At issue is whether Internet companies should be given a compulsory license to retransmit broadcast TV channels like the license given to cable and satellite operators. Broadcasters are worried the Internet makes it too easy to violate copyright protections -- cheating them out of lucrative royalty payments. Henry Petri, an intellectual-property lawyer for Washington, D.C.-based firm Howrey, Simon, Arnold & White, said the broadcasters are probably fighting a losing battle.
"This wave of support for the Internet and e-commerce is so strong right now Congress is not going to stand in the way of that," Petri said. "They will reach some type of solution where this type of broadcasting is permitted."
Ramnarayan agreed and compared the current hesitation to the concerns radio broadcasters faced with the mass arrival of television back in the 1950s.
"I really think the two are complementary," she said. "Right now they feel threatened, but there's no reason for that. They should take advantage of it. It's a matter of finding technology solutions.
One company already "taking advantage" is Zatso, a San Francisco-based company that, with permission, repurposes and enhances television news content. While watching a TV news broadcast, viewers are directed to a Web site featuring streamed video of the story along with content created by Zatso.
Zatso CEO Roger Keating said the company won't limit itself to PC-only content, however. It's already looking into bringing their services to ITV. He calls it "the next logical step."
Despite plans to make your television a phone system, home entertainment provider, shopping guide and communication tool, most experts agree neither the PC nor the TV are likely to replace each other; you just might not be able to tell them apart. Wink's Wilderotter compared the situation to the various kinds of ovens that can be found in a kitchen. Toasters, convection ovens and microwaves all perform basically the same function, but each has its own specialty.
"It's all about simplicity," she said.
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