Re: Digital TV- IPG Fight Between Gemstar and TV Gateway
Thread- An interesting problem brewing for the MSOs. Seems Gemstar is pulling an Amazon and putting patents on just about everything connect to interactive TV(Amazon one-click patent<vbg>). IMHO, this only hurts consumers. Patenting a, "grid." That's ridiculous. But since I'm relatively new to the TV world, I don't know the full details. Having hundreds of patents on an IPG seems excessive to me and a sure way to throw up roadblocks to competitors who want to roll out services to their customers.
Notice how the MSO's might get around the problem of patents on the STB. They plan to run their guide from the headend. IMHO, this might be a better idea since they have more control of the software that way. In other words, like a central server type set-up vs. a desktop. Wonder if TV Gateway is patenting that idea?<vbg> -MikeM(From Florida)
PS Once again, digital TV discussions, and all it's ramifications, are a direct subset of the Last Mile. Mainly because there seems to be an obvious shift in thinking that data connections need to be made to the eyeballs and ears using the TV model. The TV has 100% penetration while the PC(with modem) is only 40% and stalled out forever it seems.
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WAITING AT THE GATE
Wanna-Be Guide Rivals Tout Economics
By MIKE FARRELL
July 24, 2000-- TV Gateway, a consortium of four cable operators and WorldGate Communications Inc., is pitching operators on the economics of its interactive program guide and gearing up for a fall launch, executives familiar with the plans said last week.
But while the group -- consisting of Comcast Corp., Adelphia Communications Corp., Charter Communications Inc. and Cox Communications Inc. -- is already talking with some cable operators about the server-based product, it faces the specter of litigation from the top player in the IPG space: Gemstar-TV Guide Inc.
Sources said last week that TV Gateway has proposed some aggressive pricing. Some cable operators were told that they could get the service for an upfront fee of $17,500 per headend plus a charge of between 35 cents and 65 cents per subscriber, per month, depending on the system size.
That fee would be considerably lower than the 38 cents to $1.10 per subscriber reportedly being offered by Gemstar-TV Guide and the $25,000 to $30,000 headend charge owed to guide provider Source Media Inc.
The creation of the rival IPG could be important to large and small cable operators alike, as a reasonably priced guide could be a big help in successfully marketing expanded digital offerings.
In addition to attractive pricing, TV Gateway is also selling MSOs on the ability to control their own destinies.
Gerard Klauer Mattison & Co. Inc. analyst Michael Cristinziano, who was briefed on the TV Gateway plans, said the rift between cable operators and Gemstar-TV Guide centers around control and advertising-revenue splits. He added that Gemstar-TV Guide was asking for as much as 80 percent of advertising revenue generated from the IPG, in addition to the per-subscriber fee.
"It's more than just an issue of egregious terms. There is also the control issue that has led some MSOs to pursue other alternatives," Cristinziano said.
Although not familiar with TV Gateway prices, Cristinziano said TV Gateway could pursue a model that would offer the IPG free-of-charge, or at least at very favorable terms, in return for the MSO agreeing to offer the WorldGate Internet and "Channel HyperLinking" services. Those services allow users to jump to Web sites connected with the programs they are watching with the touch of a button.
"WorldGate could give [the IPG] away and leverage that into the MSO," Cristinziano said. "Once it's there, doing the guide, the Internet TV and the Channel HyperLinking pieces are in place. That's WorldGate's business model."
The potential for advertising revenue from IPGs is great, amounting to about $13 per month, per subscriber, according to Cristinziano's calculations. Add to that $15 per month, per subscriber from WorldGate's Internet service, and operators could see $28 per month, per customer in additional revenue from a combined IPG-WorldGate offering.
"I think [WorldGate] will give very good terms to MSOs," Cristinziano said. "Call [the IPG] a Trojan horse."
But hovering over TV Gateway is the potential for infringing on Gemstar and TV Guide patents. Cristinziano said making TV Gateway a server-based guide, as opposed to a set-top-based guide, skirts some of those patents, but that alone would not insulate the newcomer.
"You need to do more than that. You also need to do things with the user interface," Cristinziano said. "There will be lawsuits. The courts will have to decide what is patented and patentable here."
According to one source who has seen a representation of the TV Gateway interface, the on-screen appearance consists mainly of two boxes. The left box contains the channel lineup, and the right box shows the corresponding programs.
The relative blandness of the IPG is mainly an attempt to avoid infringing on Gemstar-TV Guide patents. Among the more than 100 guide patents Gemstar-TV Guide owns is one for a grid system to display channel and programming information [They've got to be kidding].
Cristinziano said Scientific-Atlanta Inc. has taken a similar tack with its IPG product. When a user calls up the S-A guide, it doesn't come up on-time, on-channel -- it's either one hour ahead or behind.
"They needed to do that to not infringe [on Gemstar-TV Guide patents], and they still got sued," he added.
Gemstar-TV Guide -- which was created earlier this month after the $15 billion merger between Gemstar International Group Ltd. and TV Guide Inc. -- controls most of the patents for the electronic-program-guide and IPG space, and it has not been afraid to defend its intellectual property in the courts in the past.
Gemstar has lawsuits pending against S-A -- it won a judgement for $15 million against S-A in 1996 -- as well as Pioneer New Media Technologies Inc., TiVo Inc. and General Instrument Corp. (now Motorola Broadband Communications Sector).
Gemstar-TV Guide co-president and co-chief operating officer Peter C. Boylan III said July 14 that he was unfamiliar with the details of the TV Gateway product, but if it infringed on Gemstar-TV Guide's patents, the company would "have no alternative but to protect our intellectual property."
Boylan added that the combined Gemstar-TV Guide has more than 125 issued patents and another 150 pending for IPG technology -- a formidable obstacle to anyone that wants to develop a competing product.
"I think [TV Gateway is] pursuing a business with an incredible degree of risk," he said, adding that given analysts' estimates of future IPG revenue, treble damages for willful patent infringement could be as high as $3,000 per subscriber, per year.
But by presenting a combined front -- each of the partners has an equity stake in TV Gateway -- the MSOs may be able to weather a long court fight with Gemstar-TV Guide.
In the meantime, TV Gateway is taking the potential threat of litigation very seriously. "They've had their lawyers looking at it for a while to see engineeringwise what they can and can't do," said one analyst who asked not to be named.
In addition to avoiding infringing on Gemstar-TV Guide patents, TV Gateway will also have to look closely at server-based technology patents held by Source Media, which has rolled out its "SourceGuide" server-based IPG in several Insight Communications Co. Inc. systems.
"I don't know how the technology operates in the WorldGate guide," Source Media CEO Stephen Palley said. "My assumption is that there will be a potential claim there. We're not looking to be litigants -- that's not our business model. But we're also not willing to permit our IP patents to be disregarded."
Palley said the emergence of the WorldGate guide does not worry him. He declined to reveal Source Media's pricing structure, but he said it was competitive.
He added that the TV Gateway arrangement may not be the only one between MSOs and alternative guide companies. "I don't think this is the last teaming up, or the only equity stake," Palley said.
This also could include Source Media, which already has a substantial investment from Insight CEO Michael Willner.
"We're definitely interested in doing what makes sense to get carriage," Palley said. "That could be anything, certainly including an equity stake, a venture in which our guide was partnered with cable operators. Everyone is talking to everyone about everything, including that." |
