Because it didn't cost anything (apart from perhaps engineering costs) for either GIC or SFA to include the StarSight EPG in their set-top boxes, they gave the EPG away for free as part of their overall strategy to sell more set-top boxes.
Henry's perspective:
twst.com
Mr. Yuen: If you'll allow me to give you a two-minute story, it's actually quite interesting. About five or six years ago, there was a company called StarSight. It was eventually acquired by Gemstar. But at that time, StarSight was a competitor of Gemstar's and was for cused in the cable sector. In fact, it was formed by some major cable companies such as Viacom, Times Mirror, Providence Journal, and Cox. Based on the strength of their relationship with cable operators, StarSight entered into two agreements, one with General Instruments ("GI") and one with Scientific Atlanta. The agreements were virtually identical. Both GI and SA ("SA") were to exclusively deploy StarSight's EPG. They did not have to pay StarSight a fee, but StarSight would get to charge the cable operators if they wanted that EPG feature. Now StarSight at that time was at its very height since GI and SA added together control about 90% plus of the cable box market. However, a couple of years later StarSight discovered that both companies breached their agreement blatantly. In fact, both of them took StarSight's technology, put it in their own boxes, and gave it away for free in order to sell more boxes. So ironically, StarSight changed from securing a 90% plus channel of distribution to having 90% of the distribution channel competing with them, and worse still, the competitors were not selling products, they were giving away the very same product they appropriated from StarSight for free. Their giving it away for free had the further effect of poisoning the well. As you know, even if there's a valuable proposition, if you are accustomed to receiving it for free, or at least apparently free, it becomes affronting if somebody comes in and says "pay me" for this same thing. Take as an example, if from the very start, we had to pay $1 a month for the free TV, I bet you everybody would be willing to do so. However, if today ABC or NBC comes in and says "give me a buck for my programming," you would think they're crazy. The problem of the past five years of this "give away" is that the cable industry adopted a point of view that any payment or concession would be unreasonable, and therefore the only way for us to be able to do this is to convince them that there is not right, that they had no right to the free EPG, and that this is really something that they would need from us. That is why there is the litigation. |
