Cable Television – State of the Industry, 2001

Television and the technology  meet in the middle.  Is this what they mean by convergence?

As Seen In Television 2.0, February, 2001

by Elaine Morris Palmer

Luminaries of television and technology plus more than 400 exhibitors filled this year’s Western Show at the Los Angeles Convention Center.

Although the number of cable networks decreased (Showtime Networks, Encore Media and Starz!-Encore were missing and this will be HBO’s last year at the show), there were 140 first-time exhibitors. According to the California Cable Television Association, roughly 90% of the newcomers were technology or new media companies.

Despite its presence on the show floor, though, the key question still being asked was how long are investors willing to wait for the AT&T’s of the world to deliver on their interactive TV promises? “Getting iTV out there is what cable should be most concerned with,” said USA Network’s Barry Diller, who predicted iTV will evolve in the US over a 10-year period.

Liberty Media’s CEO, John Malone, declared interactive TV to be the “biggest, most profitable thing that will distinguish cable from its competitors” citing business uses and telephony as market pacers. Though 25 million digital set-tops have been deployed by US operators, Dr. Malone warned that programmers won’t create interactive programming until enough digital set-tops are deployed.

In keeping with this warning, much buzz at the show focused on the recent job cuts at interactive outfits such as Razorfish and Respond TV. However, there was good news as well. Both Microsoft and Open TV (pictured) announced further deployments of their interactive TV platforms. OpenTV has broken its seal on the US market through its first stateside deployment with relatively small operator USA Media Group, while Portuguese cable operator TV Cabo announced it had started its trial deployment of the Microsoft TV platform, marking its first roll out in Europe. Broad commercial deployment of the service is expected in the second quarter of 2001.

Microsoft also showcased its next generation Windows software, code-named Whistler, which incorporates the Microsoft TV platform software with entertainment features like a Windows Media Player, a DVD jukebox and CD games, while OpenTV demonstrated interactive content developed for Turner Sports, Cartoon Network and Shop At Home, and announced deals that will bring more web content to its platform. Through a broadband partnership with Los Gatos, California’s ICTV, Open TV will allow cable television customers to add email attachments and web-links to their interactive applications, while its Open TV Publisher repurposes broadband content for interactive TV.

The software is already being used by BSkyB as part of its Sky text service which launched to four million subscribers in December.

Other good news for interactive content producers included the launch of Liberate Technologies’ $50m development fund and WorldGate’s new content creation alliance, both of which are intended to foster the creation of interactive content, via cable operators deploying its service.

The Liberate Corporate Venture Fund will take minority equity stakes in developing privately held companies that are in the mid to late stages of financing. To launch the fund, Liberate invested $7m in the UK’s Two Way TV. Liberate’s investment will generally run between 15 to 25% of any given financing round.

Also demonstrating its commitment to iTV was AOL, which announced a series of agreements to create interactive content for AOLTV. New content providers for AOLTV include QVC, with whom AOL will develop an interactive shopping experience, and the National Geographic Channel.

However, another message from the show was that programm providers and advertisers may face legal battles as they find their interactive content is being stripped out by the cable MSOs who feel that they own the signal and should determine what goes down their broadband pipes.

Cable executives also wrestled with how and when video streaming will be a legitimate part of their business. While Glenn Britt, president of Time Warner Cable, doesn’t fear content providers using the internet to end-run cable operators because his contracts limit the amount of video cable networks can stream, others such as John Billock, president, US Network Group at HBO, think competition and consumer trends could force cable operators to deal with streaming quicker than they might think.

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