The lure of interactive television has always appealed to the direct response advertiser. And as the memories of failed eTV trials fade into the sunset, a new spark of activity has emerged and once again has ignited the eTV faithful.
Critics will say that the current, crowded marketplace of eTV middleware, application providers and set-top manufacturers is merely shifting its attention, trying to get in on the ground floor of the next technology boom. These naysayers’ arguments may have had a foundation if the battle for interactive television were based solely on interactive market share. But a greater battle between the direct broadcast satellite and cable industries is being waged as each platform fights to expand its video services subscriber base, and interactive television is an important tool in their strategies.
When interactive technology was being developed, the industry consensus was that cable operators would be the dominant eTV providers. After all, cable systems during the past 10 years have been evolving into digital networks capable of high-speed, two-way transmission of data streams (which will enable commerce applications and program enhancements) in clustered operations. Today, each major multiple system operator, after industry consolidation and technical advances, controls specific market areas.
Kagan Media Appraisals, a Carmel, CA, research firm, predicts that the conversion of one-way analog cable systems into two-way digital and eTV-ready cable systems will reach 51 million U.S. cable subscribers by the end of this year. However, before nationwide interactive television can become a reality, cable operators still need to install appropriate and open standards equipment and applications (including set-top boxes, middleware, operating system, billing software, etc.) on a mass scale.
DBS Closes the Gap. For the past several years, DBS providers (namely DirecTV and Echostar) have been nipping at the heels of cable. Once barely a threat to cable’s monopoly, and still a far cry from cable’s 70 million subscribers, DBS has grown to a respectable 13 million subscribers. As competition for new subscribers intensifies, DBS has started incorporating interactive technologies into its product offerings.
The DBS interactive data stream is inserted into programming from the satellite feed and dial-up connection. Viewer responses are collected through the dial-up connection or during overnight hours. Collecting the transaction data from the DBS subscriber, for the most part, is not done in real time.
DBS’ first attempt at interactivity, Microsoft’s WebTV, stalled out at 1 million subscribers. Industry experts attributed the lack of adoption to WebTV’s Internet focus, which is devoid of television program enhancements. Rebranded on June 13 as Ultimate TV, Microsoft’s service will be offered to Direct TV subscribers (8.6 million nationwide). Those who select the Ultimate TV box will be able to choose from more than 500 hours per week of interactive television, respond to promotions with the click of a remote and navigate additional video and text-based services.
Ultimate TV also promises to be a breakthrough in eTV advertising, allowing marketers to download ads directly onto the system’s hard drive with the capability of “targeting by box,” said Joe Poletto of Microsoft’s WebTV.
Echostar, which offers the WebTV product to its estimated 4 million subscribers, also has started activating OpenTV. OpenTV resides on Echostar’s “DISHplayer” boxes. At present, as Echostar ramps up interactive television, the only interactive features available through the OpenTV-enabled boxes are an electronic program guide and weather forecasting features.
In the near future, eTV content and advertising applications on Echostar should increase dramatically. The company signed a deal June 26 to deliver Wink enhancements and to use the Wink Response Network beginning in 2001, potentially reaching up to 4 million Echostar subscribers by 2003. The Wink Response Network will collect, route and report transactions that are generated by consumers’ interactions with their remote controls.
According to research firm Jupiter communications
o Simulated interactivity: Interactive functions are performed locally at consumers’ homes without a return path.
o Delayed interactivity: Interactive television, particularly in the direct broadcast satellite realm and in one-quarter of all cable systems, will rely on subscribers’ telephone lines as the upstream paths from set-top boxes.
o Real-time interactivity: An upstream path over cable allows for more time-sensitive manipulation of content and greater subscriber management potential for cable operators and programmers.
The method for collecting the ITV transaction data has been the primary difference between how the DBS and cable industries are positioned in the race for the interactive advantage.
Swimming Upstream. MSOs will most likely target attractive neighborhoods and markets as the first recipients of interactive television. Jupiter Communications predicts that by the end of 2005, 35 percent of U.S. households will use interactive services — through a combination of DBS and cable — but only limited regional two-way real-time rollouts will happen before then.
Sending the upstream path, or back-channel communication, back through the two-way architecture of the cable system allows for instant tracking and decision making in regard to the management of the direct response campaign. But initial rollouts of interactive television via cable, which will be on a system-by-system and regional basis, will discourage widespread direct response adoption.
“Advertisers should experiment with the technology now,” said David Card, research director at Jupiter. “But the ITV industry in the near term will be comprised of uneven and regional adoptions of different types of technology (that) will stymie the launching on any national advertising campaign.”
Bill Harvey, CEO of Next Century Media, New Paltz, NY, a company that has been involved in most major ITV trials since the 1970s, concurred. “Advertisers who are excited by the prospects of ITV and test the technology — if they are not seasoned direct marketers — for the most part end the test with a feeling of disappointment,” he said. Harvey, highlighting a key factor contributing to the cancellation, added, “The advertiser gets a certain ITV click rate, but then doesn’t know how to evaluate the cost per response.”
The fierce competition among ITV software providers, set-top box manufacturers and t-commerce applications has helped create an ITV cable industry that is in a state of flux.
The first round of ITV development is being won by the cable industry, for its early innovation and experimentation. The second round goes to DBS for leap-frogging over cable’s landlocked architecture, with plans to soon increase its distribution of simulated and delayed interactive content to the masses. However, as critical ITV mass is achieved through a combination of DBS and cable, the true winners will be the advertisers and video subscribers, both of which will benefit from this highly competitive and technologically diverse marketplace.
“The digital set-top box deployment [which enables ITV] happened because of the competition between cable and DBS,” Harvey said. “DBS began to take away some of cable’s best customers – therefore the handwriting was on the wall that cable had to deploy digital set-top boxes fast or risk losing even more of its customers. That will be remembered as the historical impetus to ITV.”
