As usual SRCM is not even mentioned: "Companies Battle for Beachhead As TVs Become Gateways
By EVAN RAMSTAD
Staff Reporter of THE WALL STREET JOURNAL
Television makers, cable systems and satellite-programming providers are
at war over the next big digital land-grab, and the battleground is your
television set.
Each wants to control the first picture you see when you turn on your
next-generation digital TV. That image is critical turf in television's
long-awaited metamorphosis from a boob tube into a gateway to the
Internet and interactive services.
Already several players have established interactive-TV beachheads, in the
form of on-screen program guides that pop up automatically when you
push POWER on the remote. The guides, grids showing what's on around
the clock, could evolve into menus for future interactive-TV functions such
as music, news headlines, shopping or Internet access.
The betting is that one day the
viewing guide will be to the TV
what Yahoo! and other Internet
"portal" sites have become to
the personal computer -- a
powerful position from which to
direct Internet traffic, sell ads
and provide other gatekeeping
services. It's a position that
Microsoft Corp. and America
Online Inc. also are staking out.
Unlike the crude guides that have been running on hotel TV sets for years,
and even the scrolling grids on certain cable channels, the newest
generation of viewing guides would pop up on the TV screen first thing, no
matter which channel had been tuned in the night before. If all the features
manufacturers hope to offer actually become available, the guides could
make their predecessors look as outdated as a game of Pong.
With twice as many TV sets as personal computers in U.S. households,
the guides represent an enticing new frontier for TV makers. Sharp Corp.
and Thomson Multimedia, a unit of French holding company Thomson SA,
already are starting to ship televisions loaded with software for enhanced
on-screen viewing guides that appear as soon as the set is turned on. New
models on the way from Sony Corp. and Zenith Electronics Corp. also
include guides, but not the kind that come on automatically.
These guides will work only if
cable-TV companies relay data
about times and channels over
their cable systems. But
cable-TV companies seem
increasingly unlikely to do that.
Lusting for their own control
over the revenue from
interactive-TV services, they
are backing on-screen guides
that equipment makers are
starting to load into the cable boxes that go on top of TV sets.
And there is more competition from another corner. Two California firms,
Replay Networks Inc., of Mountain View, and TiVo Inc., of Sunnyvale,
make a new kind of video recorder that uses a hard drive instead of
cassette tapes. The hard drive constantly records what the TV is tuned to,
allowing viewers to replay, pause for a run to the refrigerator and pick up
where they left off. The hard-drive video recorders, which are starting to
hit stores now, provide their own on-screen program guides, which pop up
in the coveted initial screen.
Smack in the middle of the fray is tiny Gemstar International Group Ltd., a
Pasadena, Calif., company with about $125 million in annual revenue.
Gemstar is best known as the creator of VCR Plus, a software package
that helped technology-challenged people program their VCRs using
numbers printed in newspaper and magazine TV listings. From there, it
was a short leap into the on-screen guide business. Gemstar now is a
major seller of on-screen viewing guides -- under the name Guide Plus --
to set-top box makers.
Gemstar is playing all sides in the game. In 1994, Gemstar signed a critical
licensing agreement with Thomson related to its RCA digital receivers for
satellite TV. Now Thomson is putting the Gemstar guide in regular RCA
TVs, too. (Thomson SA owns 7% of Gemstar.) Gemstar also licenses its
technology to about a dozen other major TV makers and even to
Microsoft, which uses Guide Plus in its set-top WebTV boxes. Just this
week, Gemstar signed a licensing pact with AOL for use in an interactive
service it is planning to offer via television sets.
The deals could put Gemstar in
a pivotal role for TVs, similar to
the one Internet search engines
fill for computers. "The
opportunity for [Gemstar] is to
act, similar to a Web portal, as
a toll-taker as they send
customer leads to merchants
and programmers," says
Michael Graham, a
BancBoston Robertson
Stephens analyst in San Francisco.
Until then, Gemstar is paying broadcasters. It pays TV stations to transmit
the data for its Guide Plus viewing guide the same way the stations relay
closed-captioning -- in the millisecond pauses that are part of the TV
broadcast signal. Cable companies end up relaying the Gemstar data for
free, because under federal "must-carry" rules they must relay each
broadcaster's entire broadcast signal. As the Federal Communications
Commission reconsiders its rules at the dawn of digital broadcasting, the
cable companies are lobbying the FCC to reconsider that requirement.
Gemstar has a back-up plan. It is considering using two-way paging
networks to communicate with TVs and already has formed an alliance
with Paging Networks Inc., of Dallas, one of the nation's largest
paging-service providers. Meanwhile, Gemstar is lobbying the FCC to
leave the must-carry rules in place.
All the while, Gemstar has been battling competitors in court. Its main rival
is TV Guide Inc., a joint venture of News Corp. and AT&T Corp.'s TCI
Cable. TV Guide sells its own on-screen guide to equipment makers and
produces the TV Guide cable channel. It has filed a patent lawsuit against
Gemstar in federal court in Tulsa, Okla., which Gemstar is contesting.
Meanwhile, Gemstar has traded patent suits with three set-top box
makers. The disputes have been consolidated in Atlanta federal court.
Henry Yuen, Gemstar's founder and
chief executive, says he isn't worried
that Gemstar's growing power will
put it at odds with customers, the
way Microsoft's power put it at
cross purposes with PC makers. "I
don't believe we will be viewed
negatively, because TV needs this
feature," he says. "To make the
screen guide better takes a lot of
money and the return is nebulous for a single company." Still, he concedes,
"we are sometimes misunderstood."
A few TV makers are hedging their bets. Sony is taking preliminary steps
toward possibly developing its own guide. And Sharp is limiting Gemstar's
role in its digital models. Says Frank DeMartin, director of advanced TV
product-planning at Sharp's U.S. subsidiary, "There's a reluctance to
accept that some external company is going to control what goes on inside
our TV."
A few years ago, Gemstar's on-screen guides would have added about
$100 to the cost of a new set. But as a result of declining prices for
components, Gemstar's on-screen guide adds only about $15 to the cost
of making a TV -- a figure easily absorbed in price tags of $500 or more,
which the models will carry initially.
This year, for the first time, Gemstar's Guide Plus will include space for
two advertisements on the screen, next to the schedule grid. Television
Data Network, a joint venture of Gemstar, Thomson and General Electric
Co.'s NBC unit, is selling the ads.
How ready are viewers to use the on-screen guides? Already, Gemstar
has retreated from some more fanciful features for Guide Plus, such as
automatically sorting the program grid by putting most-frequently watched
channels first. Consumers told Gemstar to keep the grid consistent. "We
don't want to hear 'This is good, but, boy, is it complex,' " Mr. Yuen says.
"That is the death sentence to us." |
