Hi Chris,
This article is from last year, but it might shed some light on how ACTV is involved in the interactive arena.
dfcint.com
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DB&P EXECUTIVE INTERVIEW SERIES:
DIGITAL DISTRIBUTION AND PROGRAMMING IN MULTIPLE VIEWING ANGLES
With more than 18 months worth of market trials completed, and commercial deployment now beginning in Texas on TCI systems, ACTV is ready to carve out a market in individualized programming for multiple viewers.
William Samuels, Chairman and CEO of ACTV agreed to discuss the developing market for individualized video programming with DB&P, and how the company is positioning its product as digital services roll out.
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DB&P: There aren't many companies left standing from the original ITV trials that took place back in the early 1990s, but ACTV is one of them. How have you done it, and what is ACTV today?
W.S.: We're here because ACTV's end product is standard television programming. The end product is a football game or a television show. It's live or pre-recorded, except it's totally individualized, seamlessly and with infinite memory.
With other DTV applications, either Barney is 'more purple,' or you can multiplex more Barney programming into a 6 MHz channel. You can offer more choice, which is healthy. But, ACTV is the third category, which we believe will have as much or more economic and social implications in DTV than either of the first two mentioned.
DB&P: How does it work?
W.S.: The remote control is able to move the viewing angle. In our case, Barney will talk to the child. In the case of pre-recorded programming, it's individualized. With live events, the viewer can follow a golfer as he moves between the various holes. They can stay with the winners.
You are viewing a channel, but there are four options of that same channel available. That's the advantage of compression. It's a four to one compression ratio. The bigger the pipe, the more you can do.
We are fundamentally improving programming. Washington [Congress] has assumed that digital is better color, or more content. We're saying there is another choice. Individualized programming totally changes advertising and learning.
DB&P: This sounds like a form of interactive VOD; is that what it is?
W.S.: We rejected the two-way interactive format. What we did was work off the movie breakthrough: What made the movie business work were frame rates giving the appearance of live action. That was the essence of our thinking.
With ACTV there is no replay or on-demand programming. This is not a search, or switched approach. We're not storing video. It's always there, but once it passes it's gone. It's produced and delivered simultaneously.
There are no on-screen overlays or data wrapped around the video. It's all video, even with a channel for statistics.
DB&P: Is this a "software" solution similar to other "middleware" applications that reside above the set top OS to enable various entertainment options?
W.S.: ACTV's software is downloaded to the set top box. There is a one time NRE (non-recurring expense) to configure the software to the box because OpenCable compliant is not yet here. There is still not a common architecture; there are many nuances. That can be a 60 day or six month iteration. It's all software, it's cheap, and it does work.
DB&P: Sports programming seems to be an obvious area of opportunity, but rights are always expensive. Does individualized programming have a separate rights window?
W.S.: Over time, given this is a core breakthrough, there will be some things we do on our own, and other things in a joint venture structure. In most cases we'll probably license because the broadcast rights to multi-view programming will be sold differently than standard "one view" feeds. It doesn't matter now, because the marketplace is very small. The only thing that counts is how compelling the programming is to viewers.
DB&P: What's the hook for the end user and the rights holder?
W.S.: With sports rights so expensive, and salaries so high, if we can involve the sports fan more in the game we believe they will be willing to pay for it. If the consumer perceives the programming is better, then the programmer can charge more for it.
DB&P: Who are your programming partners?
W.S.: Our deal with Fox Sports Net runs through 2003, and we've also signed with Rainbow Programming. So, between those two services, there are some 55-60 million sports homes in our market universe.
The first distribution deal is with TCI in Dallas. It will be branded as Fox Sports Net Plus. We have to wait and see what the sports fan has to say. But, you can't keep charging the consumer more and giving him the same programming. The consumer has to feel there is more value.
ACTV MULTI-VIEW SPORTS PROGRAMMING ROLL-OUT PRO-FORMA
Scenario: A
B
C
Number FOX/Rainbow Sports Cable TV Homes (mil.) 60.0
60.0
60.0
ACTV take-up (penetration) 1.0%
3.0%
5.0%
Total subscribers (mil) 0.6
1.8
3.0
Subscription price/month ($) 9.95
9.95
9.95
Revenue per month ($mil.) 6.0
17.9
29.9
Revenue per year ($mil.) 71.64
214.92
358.2
Cable MSO cut 50.0%
50.0%
50.0%
Cable MSO revenue ($mil.) 35.8
107.5
179.1
FOX/Rainbow/ACTV revenue cut ($mil.) 35.8
107.5
179.1
Source: Digital Broadcast & Programming.
DB&P: Can you work with broadcast and DBS networks?
W.S.: We can work broadcast and DBS because we don't need a return channel, but we don't have relationships in place. Cable is our focus.
We can't make a local deal with the Yankees and send it up on the bird. We would have to do national programming, and then you would only be on the air once per week. That's why regional deals and cable distribution make sense. We want to be on the air daily.
DB&P: What did your market trials reveal to convince you that a regional approach was the best way to launch ACTV?
W.S.: What we did was go into a test bed in Los Angeles beginning in 1995. We did research with Fox Sports West for18 months. We individualized every event broadcast by the channel. We also worked with CNN. We produced kids shows with Nickelodeon, and music shows with Much Music. This was a 1,000 home trial.
The upshot was sports, on regional basis, was the programming genre to start with. It's inexpensive to do that because the cameras are already there. There has always been a lot of information available that was never used. Plus, digital was occurring regionally, not nationally. TCI has 1.7 million of the 5 million sports subscribers in Texas. What we've done is choose a few things to do well.
And, with sports it can be either a pay, or PPV. We're not going to put on a kid's PAY-TV show or a news show.
DB&P: Have you signed other deals with Fox Sports Net?
W.S.: We'll also be launching on Fox Sport West and Fox Sports Bay Area.
DB&P: What sort of multi-view production requirements are there?
W.S.: Production costs are incremental. There are eight or more cameras at these events. We always add at least one camera, because there are special features like a "Star Cam" or an "in the paint" cam. It's typically under $10,000 in incremental costs to produce the event.
DB&P: What's the business model?
W.S.: In many cases the service will be a premium pay channel ($9.95/month) with a standard split with the operator. So, the MSO will get a cut, and the balance split between ACTV and Fox. If we were doing the World Cup, it would probably be PPV.
DB&P: What level of penetration will lead to profitability?
W.S.: If we get 4-5% penetration at $9.95/sub we'll be making a good living. That's within a region. This is a low-tech approach, but the core issue is to be profitable to the MSO. Even at 5% penetration, it's not going to make any MSOs' increased cash flow all that exciting. If you're a pay service, you have to get to breakeven but also positively impact the distributor. If you're basic, then you have to emphasize advertising.
DB&P: Do the professionals understand what you are trying to do?
W.S.: It's been a complicated field for cable TV engineers and operators to understand in recent years, because there are so many different ideas of what can be done with the pipe. The concept of individualization is not really understood yet. We're a small company, and there aren't many executives out there that understand who we are. |
