Interactive TV players debate future

LAS VEGAS -- As interactive TV players search for workable business models, advertisers are taking precedence over customers.

That's because in the age of interactivity, "broadcast TV becomes the ultimate direct marketing tool," according to Gerard Kunkel, vice president of strategic programs for interactive TV software maker WorldGate Communications Inc.

WorldGate and others are developing products and strategies to exploit the advertising potential they say will be offered by the next-generation television market. But officials meeting here at the National Association of Broadcasters conference said they are still struggling with how to best build a successful business model.

Despite broad agreement on many of the features that will mark the next phase in the evolution of interactive television, there's little uniformity of opinion on just how to get there. But although the near-term picture remains unsettled, executives nonetheless painted next-generation TV as a can't-miss marketing tool.

"Each user can be precision targeted with advertising and programming that they are interested in," said Clinton Wolf, vice president of programming for interactive content provider Interactive Channel.

The numbers make for a compelling argument, according to Wolf. He said pilot tests done by Interactive Channel have found that consumers buy more goods on interactive TV.

During the pilots, participating interactive TV channels brought in almost $24 more per month, per subscriber than regular TV. The cable provider also profited because each subscriber added $6 per month for cable coffers (totaling more than $1 billion for a cable provider offering a single interactive channel to its 15 million subscribers).

"This focus makes sense," said Ron Rappaport, an industry analyst with the market research firm Zona Research Inc. "At the end of the day, if the broadcasters cannot make as much money as they can off of 'Seinfeld,' interactive TV is a bust."

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But for the consumers already using it, interactive TV is already a hit, said WorldGate's Kunkel. He said that 57 percent of homes surveyed prefer receiving services on their TV -- far more than the number of people who mentioned the PC or telephone as their cyber-portals of choice.

"It's a medium that everyone understands," said Kunkel.

Interactive TV service and software provider WebTV Networks Inc. agrees. According to the Palo Alto, Calif., firm, its subscribers are online an average of 41 hours per month, with more than 50 percent logging in every day. In the year since Microsoft Corp. bought it, WebTV has tripled its subscriber base from about 56,000 to over 300,000.

"We have tamed the TV," said Phil Goldman, co-founder and senior vice president of engineering for WebTV.

The key difference between the companies was in answering the question: How much PC should be put in the TV?

WorldGate's Kunkel was adamant.

"The integration of technology into the TV makes no sense," he said. "It's a waste."

Kunkel pointed to the rapid obsolescence of PC technology as being a major problem for broadcasters and cable operators. His company's product costs very little to put into a set-top box -- most of the "intelligence" is on servers run by the cable operator.

Allan Thygesen, senior vice president of programming and advertising for interactive TV technology firm Wink Communications Inc., agreed. "[The consumer electronics market] continues to be a different cost performance curve than the PC industry," he said.

The Alameda, Calif., company's WinkTV uses a similar minimalist approach to adding interactivity.

For cable providers, cutting costs makes sense, but the rudimentary graphics that come onscreen don't come close to the snazzy Web-like graphics found on systems from WebTV and its rival Network Computer Inc.

Those companies have decided that more PC is better.

"Consumer's want 'My TV,' " said WebTV's Goldman. "Personalization is the key." While Goldman agreed that keeping costs down is key, he said certain PC technologies are necessary. "[Interactive TV] needs to be compelling to the customer," he said.