Mar 17, 2003  •  Post A Comment

Jeff Shell must want to crawl into one.
Shell, a former News Corp. exec, was named CEO of Gemstar-TV Guide International last October. Since taking the reins, Shell’s company has:
Paid a $5.7 million fine to the federal government for alleged anti-trust violations; announced in January that it needed to restate past earnings, and announced last week that it needed to re-state past earnings … again. Gemstar revealed it had overstated $110 million in revenue over three years.
No one is blaming Shell, of course. Gemstar-TV Guide, which has a promising interactive guide business as well as the legendary magazine, has become a money pit, thanks to the previous owner, Henry Yuen. Yuen, the company’s founder and long-time CEO, was sent packing last year after a series of legal and accounting blunders.
However, Shell is paying for the past. The ongoing financial chaos is now jeopardizing Gemstar’s on-screen guide business, the very core of the company’s future. The on-screen guide, which is becoming the home page of digital television, is expected to generate hundreds of millions in advertising and marketing revenue.
But cable and satellite operators, once weary of Yuen’s bullying practices, are now leery of Gemstar’s finances. Despite Shell’s efforts to polish the company’s image, the TV companies may want an on-screen guide partner with a less uncertain future.
And if that happens, guess who could benefit the most?
A company called Microsoft.
If any company symbolizes the failure of interactive television, it’s Microsoft. The software titan, cheered on by chairman Bill Gates, has tried to shove its interactive TV software down the throats of the American people. However, despite a $6 billion investment in two cable TV operators, Microsoft has come up empty. Viewers have shown little interest in the company’s software, which has offered everything from TV shopping to Internet surfing.
But Microsoft announced last year that it would focus on simpler interactive TV features, such as programming guides. Some industry analysts said the decision signaled that Gates was finally giving up on ITV. But Mitchell Kertzman, who heads Liberate Technologies, an interactive TV software rival, told me late last year that Microsoft was simply playing rope-a-dope.
Kertzman was referring to the strategy employed by Muhammad Ali in his victory over George Foreman. Ali rested on the ropes in the early rounds, allowing Foreman to tire himself out.
“I think they’re pretending they are whipped (by Interactive TV),” said Kertzman, whose company has strong ties to the cable industry. “But Bill Gates is still very interested in [ITV]. [Microsoft] is the company I worry about, not OpenTV or anyone else in this business.”
It looks like Kertzman was right. Last week, the day after Gemstar announced it needed to re-state earnings, Microsoft issued a press release to announce that a Mexican cable company would deploy its new on-screen guide to more than 100,000 homes.
The software would be added to a Motorola set-top, which is, of course, used by cable operators in the United States. It would be relatively easy for a U.S. cable operator to follow suit.
With Gemstar’s limping, along with other ITV companies in the United States, such as Liberate, WorldGate and OpenTV, Microsoft may be ready to come off the ropes. Cable operators are planning to roll out more interactive services this year, including interactive guides. Microsoft now has the right software to go along with those deep pockets.
Bill Gates could finally realize his vision after all.
Phillip Swann is president and publisher of TVPredictions .com. He can be reached at Swann@TVPredictions.com.