OpenTV readies itself for worldwide iTV market
AUDIO INTERVIEW: Joergen Bredesen, president and CEO, Tandberg Television
12/19/2000 OpenTV CEO discusses the world market for interactive TV and the hurdles still to overcome.
Jan Steenkamp is CEO of OpenTV Corp. (Mountain View, CA). He joined OpenTV in 1997, bringing to the company an extensive background in both electrical engineering and pay television operations. Since that time, he has been instrumental in helping OpenTV become the leading provider of cost-effective solutions for the delivery of digital interactive services to television viewers around the world. Prior to joining OpenTV, Mr. Steenkamp was the Commercial Director of Irdeto Consultants in the Netherlands, and held various management and new business initiative positions at both Irdeto and the Myriad International Holdings Group from 1985 to 1997. During that time, he initiated the introduction of pay television in Greece, managed a project team to establish pay television in Italy, and was active in the acquisition and development of the European Nethold operations in the Netherlands, Belgium, Finland, Sweden, Denmark and Norway.
In this latest interview with the Wall Street Transcripts, Steenkamp outlines the current status of interactive TV technology and OpenTV’s future market strategies.
TWST: Would you start us off with a short overview and profile of OpenTV?
Steenkamp: OpenTV is a company that is very active in the field of developing interactive television software. We focus predominantly on the ability to provide a rich media experience to television viewers. This is achieved by incorporating our software into the millions of set- top boxes being manufactured today to receive digital television. As a result of this new wave of introduction of technology, we can actually place software in set-top boxes that enable consumers watching television to conduct interactive experiences.
These interactive experiences could be playing along with game shows, purchasing through the television e-commerce merchandising, or even communications like an e-mail chat or instant messaging enabled through the services. The company has had an immense amount of success in the European market, where the introduction of digital television is leading the charge. Following from Europe, we are seeing the markets in Asia starting to move, as well as now, just about to unleash itself in the United States market. Where we see the company in its current positioning and moving forward is OpenTV announced earlier this month a milestone in surpassing 11 million set-top boxes deployed in the market already today. From this base, and the know-how that has been established in OpenTV, we see ourselves being extremely well positioned.
The business of interactive television is about a billion TV households in the world today. We see those migrating to digital over the coming years, and there is a really powerful proposition for e-commerce and services on these platforms coming of age with the proliferation of the platform.
TWST: What is that proliferation strategy specifically? How do you get OpenTV on to all of those boxes over the next three to five years?
Steenkamp: I think, first of all, the major catalyst that is driving this is the network operators that do, today, have established analog bases, are looking toward a digital base as a great new potential. The analog base, obviously, in a lot of instances, is reaching a saturation, and with the introduction of digital, not only can more channels be presented to viewers, but more services can be presented to viewers as well. So a lot of the businesses that have very good businesses in analog today, see digital as a great next step toward building their businesses. So that is a catalyst, and a lot of people want to move into that business as soon as possible to gain first mover advantage. So, that’s one push.
The second push is that in the analog spectrum being allocated for television today, as governments are able to actually migrate television spectrum to digital spectrum, it will free up frequencies that actually could be sold off for other wireless communications devices. As a result of that, we are starting to see in certain countries that the governments are starting to try and mandate the migration from analog to digital, providing yet another push for the introduction of digital television. The third catalyst that is driving the market is the consumer manufacturing industry. The reasoning for this, is the fact that manufacturing new digital devices, obviously, is a great new business. They are actually coming in behind digital to drive more set-top boxes and television sets so that they can actually nurture their own businesses and grow their own businesses in the manufacturing industry.
TWST: Is cash or capital a limitation as you look at these opportunities?
Steenkamp: I think there are a couple of opportunities, if I understand you correctly, I will assume you refer to the market and not OpenTV. First of all, the opportunity, I believe, in moving these set-top boxes into the market does require quite a lot of capital. The reason being is, in the phase that the technology is right now, the cost of the set-top boxes are still prohibitively high. Two things have been very evident to us as we deploy this around the world. The consumer has a certain barrier to entry on cost, and if you can actually reduce that barrier, bringing the cost of the set-top box as low as possible, you have a very rapid proliferation of the technology.
So network operators are, today, looking to the most economical set-top box to introduce into the market so that they can actually get penetration as quickly as possible. That has, also been, a great catalyst and reason why OpenTV has been so widely deployed because our software is built in a way that we actually provide network operators a piece of software that will provide a very economical start-up box to introduce into the market. We also allow, then, the operator to grow with the OpenTV system to more sophisticated set-top boxes, with the ability to introduce set-top boxes with greater functionality when they become economically viable alongside the existing installed boxes, and remain compatible on the applications that the subscribers are using today. Having the capability to provide this migration strategy is a strange benefit of the OpenTV system.
TWST: What time frames are you looking at as you describe this progressive process, particularly from the consumer viewpoint?
Steenkamp: The time frames, I believe, will vary from market to market, and I think the key that we see today is how an operator addresses the various markets. OpenTV has been very fortunate to be aligned with a company called BSkyB, which is part owned by News Corporation in the UK. BSkyB had a pretty robust and established analog pay television business that they have migrated across to digital. They went about the business in a very direct and aggressive form, and have now surpassed four million digital set-top boxes in their network. When we see an operator focus on the opportunity, two things happen. First of all, the base of set-top boxes is large enough to create a very compelling e-commerce and interactive services business on the base. I think they’ve approached it in the right manner to establish that base as fast as possible, and then be able to prosper from that base as soon as possible. So, we see it’s very much driven by the network operator taking a lead in driving the business, and we'll see more and more of these markets as network operators understand that its time-to-market is actually getting these set-top boxes out as quickly as possible.
Once you achieve a certain base of set-top boxes, there are sufficient people viewing television, transacting on the television, to make it a very viable business. Then, when you see the returns that you can actually generate through a subscriber, it becomes even more very attractive, and the two actually start fueling each other. So, you’ll see market by market, as this dynamic becomes evident, you’ll see it kick in and start growing rapidly. There are, obviously, also matters of standardization and various competitive forces in markets that do have an impact on the introduction of the technology.
TWST: At one point, there was movement toward a universal set-top box. Converging cable systems with, perhaps, satellite, with perhaps, other wireless or other types of transmission into the home. What's happened with that idea?
Steenkamp: I think a couple of things have become pretty much clearer in terms of what is possible in this regard. One thing is clear, a box supporting all the standards is prohibitively expensive because you have to include a box that can do just about everything. As I said to you earlier, when you actually increase the set-top box cost, it becomes a barrier to entry to proliferating the technology.
What we’ve done at OpenTV is we’ve created a piece of software that does provide a low-cost box, but we have not stopped at that. Within this framework, we include as many possible standards in the set-top box as the set-top box will be able to handle. With that, I mean, today already a set-top box that is sitting in a consumer's home viewing television adheres to a large amount of the standard Internet protocols that exist today. So that set-top box is actually being fed standard e-mail from the Internet. It also is using standard e-commerce transaction processing from the Internet today. When the cost of the set-top box allows us to include more standard features, we do this because it’s in our interest to embrace the Internet, it’s in our interest to embrace any standards, because when we do that we can actually utilize standardized equipment that has already been manufactured as well as standardized services that are already out there today.
TWST: What’s on the agenda for this company over the next 12 months? What specific accomplishments would make that time frame a success for OpenTV?
Steenkamp: Specifically, we believe that further proliferation into the various markets is very important. Asia is really starting to develop now and open up new opportunities for us. As I alluded to, Latin America is a new opportunity, as well as the cable industry in the United States. I think the significant change in the US is the fact that the DCT-2000 set-top box is the one all focus is on now and is an ideal target platform for OpenTV and we can provide a great opportunity for cable on this platform. Getting a proliferated platform is, obviously, our first goal. The second goal is, on this platform we have the ability to create interactive applications that run on these set-top boxes. And for OpenTV, that is a clear opportunity and a development that we are investing in right now, a core set of interactive applications that can run on these platforms.
TWST: What’s the essential message that convinces an investor today to buy in?
Steenkamp: First of all, the message in that interactive television is proliferating and growing worldwide. I think it’s very important for investors to know that although, in a lot of the activity and positioning, the US gets a lot of focus, this is a worldwide phenomenon, and OpenTV has addressed interactive television on a true global perspective. So we look at the world at large, and we see this development being worldwide. The second point is to see the proliferation of the platform in OpenTV.
As I said to you earlier, we have now passed the 11 million set-top box mark, which is a sizeable base, and I read in that, first of all, that the technology is now stable, and that the technology is being proliferated at quite a fast rate. I think that’s a good indicator for investors as well. Then, the third aspect, I think, and looking at OpenTV in specific, is looking at clear, measurable deployments. I think what is very important today, when you look around at the companies and who is getting traction out there, look at companies that are getting traction with set-top box deployment volumes, with network operators, the amount of network operators actually selecting the technology and launching the technology, which is a very clear differentiator.
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