OT - Ackerman on Making Money from ITV
Taken from broadband-daily.com
[Bold is mine, used for emphasis.]
James Ackerman was appointed CEO of interactive set-top software company OpenTV, on April 10, 2001, following his role as Pres./COO at the company. Prior to joining OpenTV, Mr. Ackerman was CEO of BiB, parent company to Open (no connection to OpenTV), where he was responsible for the launch of the interactive platform Open. Prior to BiB, Mr. Ackerman was the Managing Director of Sky Ventures Ltd, a wholly owned subsidiary of BSkyB, where he was responsible for BSkyB's joint venture channels, including Nickelodeon, Paramount, The History Channel, National Geographic Channel, Granada Sky Broadcasting Channels, QVC, Sky News Australia and Playboy.
On 7/23, OpenTV is publicly kicking off its U.S. ITV showcase in Half Moon Bay, CA with cable operator USA Media, demonstrating a host of ITV applications on Motorola's current generation existing DCT 2000 set-top box.
In this interview with Broadband Daily’s principal analyst Cynthia Brumfield, Mr. Ackerman talks about why ITV has taken off in Europe, but not the U.S., what he hopes to show U.S. cable operators about ITV in Half Moon Bay, and why CableLabs’ OpenCable specs don’t work for OpenTV.
CB: What has your European experience taught you about customer acceptance of interactive TV applications and what has emerged as the most attractive interactive TV offerings overseas?
JA: There are a lot of things that we found consumers like about interactive TV. Most of them revolve around the reason why we come to the TV in the first place, which is to be entertained. Interactive TV games and entertainment services are very popular. Interactive TV betting, where it's allowed, around sports channels and things of that kind, is popular, and impulse purchasing as well.
What we found is that simple, impulse-based purchases are really attractive to consumers - CDs, DVDs, pizzas, computer and video games, chocolates, flowers, gifts. Anything that is impulse purchased. What hasn't been proven yet is whether or not consumers will provision by the TV, do their grocery shopping by the TV or buy their clothes. A couple of other things that have proven popular is any on-demand information, whether it's accessing my bank account, finding out about the weather, checking the sports scores of my favorite team and things of that kind. On demand and I-need-to-know-it-now, as long as it's made available in accessible and simple way, has proven to be very popular.
The last thing that's been popular is email, which is a real surprise to all of us. When we launched email on Sky, we thought we would have a niche group of people who would take up email services. Today something like 1.3 mil. people use interactive TV email via Sky Digital platform in the UK, which makes SkyDigital as a TV service one of the top five email providers in Britain.
CB: Everything you just described sounds to me like the Internet.
JA: Yes, but it's different. I think we have to separate the Internet into two levels. An interactive TV service should be accessing and communicating and facilitating the things that it does through the Internet. That's what a good interactive TV service does. The Internet in terms of accessing the whole world of web sites out there is a completely different experience on the PC than interactive TV services on the television. And some of it comes down to just the device itself. The PC is kind of set up as a tool -- we use the PC to go search information and research things. If I want to find a web site on a subject, say, as far reaching as Asperger's syndrome, I'm going to find a whole myriad of web sites on the subject. Whereas on interactive TV, consumers are much more interested in edited choice, having a selection of services that are pushed to them instead of services they have to go searching for. The important thing is to have a wide enough breadth of content for consumers, with enough depth per category to make it interesting.
CB: OpenTV is well-known in Europe, having made great strides in getting your platform integrated with satellite and cable providers there, but in the U.S., you've had a hard time cracking into the top ten cable operators. How important is the U.S. to OpenTV's growth plans and why are U.S. operators such tough nuts to crack?
JA: The U.S. cable industry is a mature industry and it's wrestling with the issues of any mature business. In Europe, chances are the European cable operator has 20 to 30 percent penetration of their franchise area, and that European cable operator can launch a whole digital offering to the consumers, with new digital channels, interactive TV, information services, games, shops, email. That more attractive proposition will help them drive subscriber growth. In other words, they'll increase penetration of the franchise area. We've seen that happen again and again. BSkyB is the perfect example. In BSkyB's analog days, they had reached 3.7 to 3.8 mil. DTH subscribers. Today they have something like 5.3 mil. The attractiveness of the digital offering helped them grow their overall subscriber base.
The U.S. cable operator doesn't have that opportunity. It doesn't have the room to grow the subscriber base by 20, 30 or 50 percent. They're fully maxed out, fully penetrated. The issue that the U.S. cable operator is wrestling with is, number one, how do I drive more revenue per subscriber and how do I increase customer loyalty and thus reduce churn. The decision in that is what investments do I make and what return am I going to get for making those investments.
That's where I think the U.S. industry has struggled. They've been skeptical about the business model behind ITV. Are ITV services something I bundle and sell subscriptions to? Does ITV in America mean full Internet access for a monthly fee? Does ITV mean a walled-garden collection of services that I give free to my customer and then charge content providers a fee to have access to my customer? How do we make it work?
That's where I think the U.S. industry has struggled. They've been skeptical about the business model behind ITV. Are ITV services something I bundle and sell subscriptions to? Does ITV in America mean full Internet access for a monthly fee? Does ITV mean a walled-garden collection of services that I give free to my customer and then charge content providers a fee to have access to my customer? How do we make it work?
In almost any scenario I'm going to have to make new investments before I discover whether I am able to get those new returns. I think that's where the cable industry has struggled. As a result, we haven't seen interactive TV take off in America. We have plenty of digital boxes in America -- Motorola has something like fourteen million DCT-2000's in the marketplace today. Those boxes for the most part are offering consumers an electronic program guide, of one sort or another, and they're offering digital channels. We see it as part of our job to help the cable industry understand the model behind ITV, help them capture vision for what interactive ITV can look like to hopefully get the industry rocking and rolling.
CB: What about OpenCable? It seems to me to be increasingly irrelevant as interactive TV plans gets scaled back or scrapped and as cable companies go back to the drawing board and start focusing on the current generation boxes. Is OpenCable driving at all what you are doing and do you think it's useful?
JA: Can I answer a different question first? We decided late last year to basically launch our own ITV initiative with the U.S. cable industry. The premise of it was, when I arrived at OpenTV and got an understanding of how the U.S. cable industry was structured, I asked the technology guys, "what is the architecture of a DCT-2000?" and they said, quite simply, it's basically a Sky digibox for cable. It has no more or less processing power than the set-top boxes BSkyB is using to offer some 100-plus interactive TV services today.
What we sought to do is find a cable operator in the U.S. market that would let us use their platform. A real cable system to offer and run interactive TV services to their consumers. The one we identified was a company called U.S. Media in Half Moon Bay, CA. Today in Half Moon Bay, we have an interactive TV portal that has enhanced TV from Discovery and the Game Show Network. It has commerce, we sell pizzas and CDs and things like that. It has full web-enabled email and instant messaging. It has a number of interactive games. It has tons of local content, including a cinema listing service that allows people to watch a movie trailer and find out where films are showing. Useful interactive TV services such as an enhanced version of Bloomberg that allows you to set up your own personalized stock portfolio, for example.
We're running something like 30 separate applications on that system and they're all running on this very basic Motorola DCT 2000 set-top box. So one of the things that we're hoping to do is use our experience in understanding the business model behind ITV, and use our experience with the technology behind ITV and demonstrate for the industry real interactive services running on a live network, so they can hold the remote control themselves, play the games, to help the industry, both at a middle level and a senior level, capture a vision for what is possible on these set-top boxes.
In regard to OpenCable, we are totally supportive of the various standards developing around the world. We sit on the DVB-MHP [Digital Video Broadcasting, Multimedia Home Platform, a de factor European platform based on Sun's Java] board in Europe. Our CTO is the representative there. The MHP standard is one that is important to Europe and parts of Asia, South Korea, Australia and other markets. And we have an MHP solution, in beta version, that we're delivering early. The target was the end of the year and we think we're going to have it ready more towards early on, which is good news to us and good news to our clients.
We're also supportive of OCAP [OpenCable application platform], which we have communicated to Time Warner, Comcast and others. But there is a difference between what OCAP is asking for and what DVB-MHP requires.
To be a member of the DVB-MHP board, you have to agree that any IP you have that makes up the final specification you will license to DVB-MHP and to the group companies on a fair, reasonable and non-discriminatory basis. And a fair, reasonable and non-discriminatory basis is actually a fairly common legal and regulatory term.
What OCAP has asked for is an absolute and complete free license in perpetuity to all you have that is related to the standard. And from a business standpoint, that is ridiculous. I don't understand the justification behind that. So we've written to OCAP, actually several weeks ago, outlining our concerns and as I communicated to one of the two companies I just mentioned, we're still awaiting a response to our concerns.
--------------------------------------------------------------------------------
What OCAP has asked for is an absolute and complete free license in perpetuity to all you have that is related to the standard. And from a business standpoint, that is ridiculous. I don't understand the justification behind that. So we've written to OCAP, actually several weeks ago, outlining our concerns and as I communicated to one of the two companies I just mentioned, we're still awaiting a response to our concerns.
--------------------------------------------------------------------------------
CB: I can't figure out where OpenCable is. If everyone is backing away from the advanced boxes, does OpenCable make any sense?
JA: That's a good question. One of the cable operators I just mentioned said the other day exactly the same thing. Does OpenCable even make sense any more because the original premise was to have an advanced set-top box that could be sold at retail level that had a base standard that was available across the industry.
If everyone is going to walk away from the advanced set-top box, then where does that leave OCAP as a specification and how does that affect the industry as a whole?
I certainly understand the desire to have a single standard. We sit on the board of Arib in Japan, which is the standards body for Japan. It is a completely unique standard that only applies to Japan and is unlikely to be deployed anywhere else in the world. But it is what Japan wants.
The premise of the standards body is something with which we are familiar, that we have supported in the past, but nonetheless, the cable industry has business issues that have to be addressed and there are two primary business issues. One is, how do I increase revenue per household that isn't necessarily tied to more subscription services. In other words, at the end of the day there are only so many movies per month that I can sell to a household, or basic tier packages. How do I move beyond just subscription services to other revenue streams that increase my revenue per sub.?
That comes through interactive services, commerce, customer service and other entertainment means such as gaming where the operator can gain $2, $3, $4 per sub. extra they hadn't seen before.
The other thing is customer loyalty. If all of sudden I can access my email accounts through TV, play some interactive games, visit some shops and get on-demand information, and enhance my TV viewing experience by looking at an auto race from a multi-camera viewing angle, and I know that it's my cable operator that has brought me all these benefits, that obviously has some revenue impact.
CB: What about content? You've recently made an acquisition in the interactive games space, which seems to indicate that technology alone won't get OpenTV into viewers' homes? Are you looking to make more acquisitions in the content arena?
JA: Yea we are. It's not that technology isn't enough to get us into consumers' homes, it's that I want OpenTV to move up the value chain of interactive television by providing to our customers not just technology, but production services and content that they can offer to their customers. One of the areas of content in the interactive TV space that has absolutely stood out is the area of interactive TV games. And the leader in that space is a company called Static, which operates a channel called PlayJam. PlayJam earns its revenues streams via two sources.
The first is advertising, and it's able to measure the repeat activity of games played, so it can sell to advertisers the specific demographics, so it can charge more for certain games than others. Static targets the 16-to-34 demographic, so the games do have more of an edge to them. Their second source of revenue is premium-rate phone calls where consumers are given the opportunity to store their points on line for the opportunity to win prizes. The prizes can be as simple as a mouse map or as attractive as a weekend for two at a beach resort. But some of them are just fun prizes such as a Ferrari for the weekend or a balloon trip in the countryside. They have these prizes and they generate healthy revenues by consumers storing their points online. Packaging together our technology solution with also our ability to provide content is something that just adds value to what OpenTV can bring to any offering.
In the content space it's important to develop content for all the available platforms in the market. Today PlayJam operates on OpenTV, Liberate for NTL and Telewest, and Canal Satellite, which is Media Highway in France. Having that multi-platform capability is also attractive. |
