ITV’s Future Could Hinge on DirecTV

Nov 17, 2003  •  Post A Comment

Cable operators aren’t convinced that interactive TV has got the goods, even though competing satellite service DirecTV will aggressively launch ITV in the not-too-distant future.
That’s the finding of a Yankee Group study released last week outlining expectations for News Corp.’s interactive strategy once DirecTV officially joins its fold later this year or early next year.
ITV has stalled over the past year, but DirecTV’s line of attack could reinvigorate the industry. Cable operators are taking a measured approach because the waters surrounding consumer demand and willingness to pay for ITV are murky. In addition, video-on-demand is proving successful for cable.
“They are not convinced that ITV will make a huge difference in the market,” said Yankee Group analyst Adi Kishore, adding that multiple system operators will wait until 2005 at least to aggressively deploy ITV. Satellite providers have deployed ITV to 12 million homes, but cable counts only 2 million ITV homes, with only Cablevision, Insight and Charter widely pursuing the market, he said.
DirecTV’s introduction of three enhanced TV applications in September for the football season set the stage for what many expect will be a hard-hitting approach to rolling out ITV. Despite the expected ITV assault, Mr. Kishore said, most cable operators will wait and see how the applications play out in the marketplace. Besides, cable operators are still squarely focusing their interactive energy on VOD and now DVRs.
In a September Federal Communications Commission filing, DirecTV discussed plans to introduce a new set-top box user interface next year, roll out new middleware to enable more ITV services, including interactive news, sports, weather, traffic and games in 2004, and deploy at least 1 million integrated DVRs each year starting in 2005.
“DirecTV is not waiting for anybody,” Mr. Kishore said. He also expects that the satellite company will quickly launch “personalized video,” which means alternating camera angles to show different views during a sporting event. Based on Yankee Group consumer surveys, multiple camera angles is one of the top two most attractive interactive applications, along with additional programming information, he said.
Cable operators will watch DirecTV closely but are likely to wait until its new interactive services gain traction. “We still need to see which if any interactive TV applications really make a difference in terms of cutting churn or driving more revenue,” Mr. Kishore said.
While MSOs focus on specific applications such as VOD to differentiate them from DBS, DBS operators will deploy a wide range of ITV applications. Even if most consumers are not attracted to any one application, the combination of applications could prove to be a differentiator for DirecTV,” the report said.
Still, cable and satellite are locked in a competitive battle. Any extra attention paid to ITV by DirecTV will put pressure on cablers, said Gina Aumiller Bender, spokesperson with ITV company Digeo.
A wait-and-see approach can be risky, since it allows direct broadcast satellite to get a leg up and develop relationships first with the advertisers who are most serious about enhanced content, said Jacquie Corbelli, CEO of Brightline Partners, an agency specializing in interactive TV advertising.
Analysts are also curious as to whether DirecTV’s relationship with TiVo will continue, since the satellite provider now owns NDS, which can provide DVRs built into the set-top box. DirecTV counts for about half of TiVo’s 1 million customers.
Despite the speculation, DirecTV spokesperson Robert Mercer said DirecTV is focused on increasing the penetration of DirecTV DVRs with TiVo.
While the ITV possibilities are generating attention, DirecTV has more important issues once the acquisition is complete, said Bruce Leichtman, president of Leichtman Research Group. That includes lowering the subscriber acquisition and programming costs. “I think they’ll dabble in [ITV] and they have more important fish to fry,” he said.