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Gemstar problems open door to rivals

Sep 16, 2002  •  Post A Comment

If Gemstar’s stranglehold on the interactive program guide market is to loosen, the time is now.
The incumbent, with its entrenched TV Guide Interactive, has found itself on the receiving end of unfavorable decisions regarding its patents. Those patent woes, coupled with its financial challenges, may open the door for a marketplace shift as new and growing interactive program guide makers position themselves to seize market share.
This year Gemstar scaled back its projections for IPG advertising, suffered a blow when the International Trade Commission ruled that rival IPG makers Scientific-Atlanta, Pioneer and EchoStar had not infringed upon Gemstar patents, and disclosed that it had reported licensing revenue it never collected. In late August, Pioneer Electronics received two favorable rulings in its patent litigation against Gemstar from the U.S. International Trade Commission and the U.S. District Court for the Northern District of Georgia.
Those factors have collided to create an environment in which competitors are more confident. Gemstar’s guide is found in more than 9 million digital homes, more than half of the nearly 17 million digital cable homes in the United States.
While cable operators aren’t jumping ship, the ITC ruling has given MSOs more freedom to consider other options, said Haig Krakirian, VP of software engineering at Pioneer, which counts 2.5 million households using its IPG, known as Passport. As operators contemplate the next suite of interactive services, such as personal video recorder functionality, they will feel freer to consider the options available to them.
Gemstar has been such a litigious company that MSOs and satellite providers in the past gave serious thought to whether to use its guide, said Jim Stroud, president of research group Blackbird Communications in Monterey, Calif.
The fear of facing a patent lawsuit when opting for a Gemstar competitor has subsided somewhat due to the ITC ruling, said Gene Feroglia, president & CEO of iSurfTV, the newest IPG player. “Those issues have told the market that they are not invincible,” he said.
TV Guide Interactive is unfazed by the decision. “We don’t have any concerns on that ruling,” said Todd Walker, senior VP and general manager of TV Guide Interactive. “We are fairly confident in our product’s ability to perform and compete in the marketplace, and that’s where everything flows from, not the patents. We gained distribution not because of the patents but because we were [first to market].”
He projects that TV Guide Interactive’s growth rate will continue at the same pace, about 1.5 million subscribers per year.
Regardless of the impact of the ruling and Gemstar’s financial quagmire, IPG players are forging ahead with new and upgraded products in recognition of the increased possibility for competition as well as the need to accommodate new interactive services such as PVR capability and video-on-demand.
TV Guide Interactive has focused during the past two years on integrating third-party vendors, including Worldgate and ICTV, into its platform. It recently designed software that will allow third parties to perform their own integration, freeing up time to focus on innovating the guide, Mr. Walker said. Comcast and Charter will be deploying a new VOD-centric release of the guide in the next two months. The base level IPG and on-demand IPG have been rolled into one product with unlimited SVOD capabilities, he said.
Next summer’s release will contain a different look, with improved graphics, performance and animation, permitting more flexibility in creating backgrounds for different channels, he said.
As interactive services and VOD become more prevalent, the traditional guide grows in importance because there is even more product to manage, said Bruce Leichtman, president of Leichtman Research Group. “How do you consolidate all this information and make it manageable to the consumer? That is the next step in IPGs,” he said.
S-A contends it is positioned well since its IPG is tightly integrated with the interactive services platform that forms the basis of the box’s Navigator, of which the IPG is a component, said Dave Davies, director of strategic marketing with the company. Such an end-to-end solution helps with speed of innovation, time to market and marketplace agility, he said.
As IPGs evolve over the next few years, the user experience will change drastically, Mr. Davies said. “The guide is really going to be a navigator to help subscribers figure out what to watch and the navigation on the guide is going to change from a tile fashion to other options. There will be increased navigation through other means. Search capabilities become more important. The intelligent agent becomes more important,” he said.
iSurfTV plans to concentrate its near-term efforts on international opportunities such as Mexico, where it expects to deploy services with Cablevision and United GlobalCom sometime next year, Mr. Feroglia said. To make headway into the United States, the company will need to partner with large concerns such as Motorola, which has invested in iSurfTV, he said.
The IPG maker is also pursuing certification testing on the Motorola platform, a process that should be completed in September. “We need to get bigger financially any way we can. The bigger we can get, the more comfortable MSOs will be,” he said.