ITV in 2003

Oct 21, 2002  •  Post A Comment

OpenTV last week had some good news and bad news.
The bad news: The interactive TV software company laid off nearly 50 percent of its 670 employees.
The good news: An interactive TV company actually had 670 employees.
ITV companies, which were supposed to have taken over our televisions by now, are instead being taken over by other companies, driven out of business or forced to lay off hundreds of workers. The tough times are reflected in stock prices that are so low they couldn’t be unearthed by the team that rescued the Pennsylvania coal miners. At press time, five major ITV companies-including OpenTV, Liberate Technologies and WorldGate-were trading under $2 a share. SonicBlue, the parent of ReplayTV, the digital video recording service, has been trading under 30 cents and faces a possible NASDAQ delisting.
What’s going on here? Is interactive TV a victim of the down economy? Or is this just a technology that will never live up to its promise? Before you answer, it might shock you that a few people say that interactive TV is ready to take off. And I’m one of those people.
Mass audience
For a decade, industry analysts have said interactive TV was just around the corner. Well, it must have been a big corner. Interactive TV, which permits viewers to send and receive messages via the TV, has yet to capture a mass audience. To be fair, if broadly defined, ITV features are now available in more than 15 million U.S. homes via a cable or satellite set-top box. But that number includes video-on-demand and digital recording services, which require limited interactivity. The pure form of interactive TV, called two-way ITV-TV shopping, Internet browsing and online games-is in just 8 million to 10 million homes.
In addition to the economic recession, interactive TV has been plagued by technical snafus and company meltdowns. Plus, the industry has done a poor job of educating consumers about the benefits of interactive TV. But I predict the ITV industry will turn things around in 2003.
Here’s why:
1. Economic improvement
Cable and satellite TV operators have been reluctant to invest in new services due to stockholder concerns and cash flow issues; long-term projects are always the first to be slashed in a down economy. However, most financial analysts say the economy is growing again, albeit slowly. If the analysts are right, this will encourage cable and satellite operators to spend more money on ITV and other future-oriented divisions.
2. Industry mergers resolved
For the past year the ITV industry has been hamstrung by pending mergers between Comcast and AT&T Broadband, and DirecTV and EchoStar. With their futures uncertain, the merging companies have put many new ITV projects on hold. (EchoStar, for instance, has delayed deployment of the TVG Network’s interactive gambling service, according to sources. The feature would allow viewers to bet on horse races by remote control.) Both mergers should be reconciled by year-end. The feds are not likely to approve the DBS merger. (The FCC voted this month to block the deal.) However, both companies will know what the future holds, which should loosen up things.
3. The cable-satellite war
Cable TV launches a video-on-demand service; satellite TV adds digital recording. Cable TV adds digital recording; satellite TV launches subscription VOD. The industries have concluded that new interactive services can give them an edge in the battle for new customers. When the mergers are reconciled in 2003 the war will escalate.
4. Cable infrastructure in place
The cable TV industry has spent hundreds of millions on the infrastructure that permits the delivery of interactive services. With the VOD rollout under way, cable can now concentrate on new ITV programs. Comcast, for instance, just announced that it will soon launch “video links,” which will enable viewers to retrieve on-screen facts related to the show they are watching.
5. Industry consolidation
In early 2002, several ITV companies appeared headed for bankruptcy. However, Liberty Media, headed by ex-cable mogul John Malone, announced it would purchase OpenTV, Wink and ACTV. Liberty gave the three ITV software companies-and the industry-a lifeboat. With fewer concerns about short-term cash flow, the companies can now focus on negotiating long-term deployment agreements. (In late September, Liberty Media sold Wink to OpenTV, and it permitted OpenTV to purchase ACTV. However, the three companies remain under Liberty’s control.) The consolidation trend should continue in 2003, which will strengthen the industry as a whole.
Phillip Swann is president and publisher of TVPredictions.com. He can be reached at swann@TVPredictions.com.