ITV Business Model Seen as Hindrance to Success

Feb 13, 2006  •  Post A Comment

After a few quiet months, the interactive TV business is heating up again with several fresh deployments by cable and satellite operators. CNN is launching enhanced TV with EchoStar, while NBC debuted Olympics interactivity on DirecTV, EchoStar and Time Warner late last week.

But despite this movement, lingering questions remain for the ITV business, particularly in light of the recent rush to deliver content through new platforms such as iTunes, video-on-demand and broadband. Many industry experts still ask whether interactive enhancements to linear channels and traditional TV holds as much potential when consumers are interested in watching TV on their own schedules.

Vested parties insist interactivity in programming and ads is even more critical now as a means to keep viewers from using their TiVo trigger fingers to change the channel. But on the other hand, ITV has yet to prove its business potential, partly because it is still so new as a product offering.

“The business model is still a nice-to-have, not a must-have,” said Ian Olgeirson, an analyst with Kagan Research. “The business model still points to it as an incremental enhancement, maybe a little improvement to your digital video experience.” Unlike VOD, which generates revenue through fee-based content and is valuable as a clear competitive differentiator, or digital video recorders, with their nice, clean monthly fee-based business model, many ITV applications lack a direct revenue component.

But cable and satellite operators say interactive services can engender consumer loyalty. And in some cases, ITV makes money because interactive ads command a premium and some content, such as subscription games, comes with a tidy source of dollars.

NBC’s interactive Olympics content as a free slate falls into the first category. The Olympics package includes on-demand recaps of events as well as interactive portals dedicated to the Olympics on each of the service providers-NBC’s first interactive offering across more than one provider, said Megumi Ikeda, VP of strategic initiatives and new media at NBC Universal Cable.

“Interactivity is much more widely spread and no longer just an experiment that one of the operators is doing. It speaks to the platform or the technology maturing and becoming more viable,” Ms. Ikeda said. She added that future iterations of ITV content could be sponsored by advertisers.

There’s other work being done. In some markets Cox offers an ITV portal with local weather, movie listings and news content, while Time Warner has launched similar interactive suites and also introduced an interactive eBay application in Austin, Texas, and fantasy football in Green Bay, Wis., powered by BIAP Systems.

Then there’s DirecTV, which took the lead in ITV with interactive enhancements on a subscription basis to its Sunday Ticket football package. DirecTV’s current Olympics interactivity includes a “sports mix” channel with screens from all the NBC channels offering Olympics coverage, a medal counter and an Olympics program guide.

The Olympics package will be the start of regularly timed sports interactive packages on the satellite operator. Next up is March Madness, during which viewers can watch three basketball games on one screen, track their bracket and pull up scores from other games.

“The goal will be to do this for every major sporting event,” said Eric Shanks, executive VP of DirecTV Entertainment. The value for DirecTV lies in maintaining its sports dominance, he said. Satellite has an advantage over cable with interactivity because its national footprint makes it easier to offer ITV applications to a large portion of its customer base, he said.

Cable, on the other hand, must fire up the technology in each market.

Time Warner’s Olympics suite resides in seven markets. Customers can access the interactive features, including the athlete bios, program guide and medal tracker, through the ITV portal as well as when watching the actual linear feed of the NBC networks.

“[Interactive TV] is still important to programmers as much as it is with cable operators,” said Joan Gillman, VP of interactive TV and advanced advertising for Time Warner Cable. “Interactivity gives programmers a great opportunity to keep subscribers with live programming,” she said.

While the business case hasn’t fully crystallized yet for ITV, that’s partly because more experimentation is needed to know what consumers want, she said. “Programmers will come increasingly under pressure to enhance their brands and their shows to drive scheduled viewing and for advertisers to get creative and get viewers to respond and interact. In that regard, it’s a must-have.”