'This is like everyone wanting to carve up Germany' after World War II. 'They all want control.'
-- Rick Doherty, analyst
Up to now, TV sets have been one-dimensional boob tubes, serving up nothing other than scheduled video programs. And when a set is turned on today, it typically displays the same channel it was showing when it was last turned off. But much of that is set to change. Digital broadcast, cable and satellite systems are bringing e-mail, Internet surfing and electronic commerce to the TV screen. And soon, turning on your TV could launch a display panel for a variety of interactive services.
To get to any of these services, consumers will have to pass through "portals" that are similar to those found on the World Wide Web today. And each of these portals represents a huge revenue opportunity - from both advertising and financial transactions - for whoever controls them.
Envisioneering Group An e-mail "channel," for instance, may well have an opening screen that allows space for advertising. Already, electronic program guides are emerging as highly popular features of satellite and digital cable services, providing subscribers a better way to surf through a 100-channel universe - and enabling the service providers to sell desirable advertising space on the screen.
And the most lucrative position of all may be the space on a digital TV service's "start-up" screen - which is expected to resemble America Online's option-filled opening screen. While today's TV providers rarely include such "start" pages, many of the digital-TV services coming to market will take the viewer to a pre-set start screen, much like a hotel-room TV service does.
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So far, the cable industry appears to be in the lead. Cable operators are aggressively installing the set-top boxes and back-office networks that bring computer-like functionality to the TV set. Late last year, for instance, a group of cable companies led by Tele-Communications Inc. agreed to purchase 15 million set-tops from manufacturer General Instrument over the next five years.
As a result, cable operators expect to maintain control over the most important navigation screens in a digital TV environment. "Cable is in the catbird seat," acknowledges Rick Doherty, analyst with Envisioneering Group in Seaford, N.Y.
But that doesn't mean other players aren't jockeying for position. Software companies like Microsoft Corp. (which is a partner in the venture that operates MSNBC), programming companies like Walt Disney Co., program-guide providers like Gemstar International Group, and TV-browser makers like PlanetWeb Inc. all are staking out turf on this emerging battlefield.
"Everybody wants control of the user interface of the next century," says Doherty. "TCI, HBO, Sun, Disney ... they all want to own it. This is like everyone wanting to carve up Germany" after World War II. "They all want control."
Most of the battles are taking place either behind the scenes or in esoteric industry planning meetings.
Disney, for instance, is developing an electronic program guide that could accompany all Disney channels, which include ABC, ESPN, the Disney Channel and others, according to Doherty, who says he has attended industry meetings in which Disney officials discussed the plan.
The idea: viewers watching a Disney-controlled channel wouldn't have to leave that channel to find out what else is on TV; the information would be overlaid atop the show in a portion of the screen, Doherty says. Meanwhile, the company could attempt to retain viewers by most prominently featuring other Disney channels on the program guide it displays, he adds.
Disney officials familiar with the plan couldn't be reached.
As for technology players like Microsoft and Sun Microsystems, it's not clear what sort of screen ownership the two have negotiated to date. Both companies have agreed to provide key technology to millions of the TCI-General Instrument set-tops, but neither is forthcoming about the terms of its deal.
Curtis Sasaki, Sun's group manager for consumer and embedded Java products, says Sun's primary aim in its TCI deal was to "get the Java platform in all the set-tops." Beyond that, he says, "Obviously we had other things in the contract, but I can't discuss them." Microsoft, meanwhile, wouldn't comment, and referred questions to TCI, which also wouldn't comment.
Cynthia Brumfield, senior analyst with Paul Kagan Associates, notes that cable operators have fought hard and openly to keep outsiders like Microsoft from gaining ownership of key TV screens. "Part of that entire struggle was the question of, if we use Microsoft operating systems, are they going to have control over what goes on the screen, and are we going to give some sort of prioritization to Microsoft products?"
According to Ken Soohoo, vice president and chief technology officer of PlanetWeb, determining ownership of TV navigation screens "is a hard fought battle" that inevitably "comes down to the letter of the contract."
So far, PlanetWeb has negotiated contracts to provide TV-based Web browsing capability for several clients, including game-maker Sega and the Japanese technology company Nishiden. Typically, PlanetWeb retains the ability to control at least a portion of the opening screen of any new service. This arrangement allows the company to subcontract that space to the likes of the Internet-directory firm InfoSpace, which pays PlanetWeb "a fraction of a penny" every time a customer links to InfoSpace from a PlanetWeb set-top.
TCI is making similar referral arrangements. Earlier this year, for instance, the cable giant agreed - in return for certain fees - to make a joint venture of Intuit and Bank of America its primary interactive banking service. As a result, Intuit and Bank of America expect to get prime placement on TCI's future navigation screens.
Even as these new relationships are fashioned, much remains murky about the on-screen appearance of interactive-TV services.
One key unresolved issue: Will future set-tops be customizable in the same way PC-based Web browsers are? (One analyst suggests that regulators are likely to demand the option for consumer choice, though there's no sign of any governmental interference on this front yet.) If so, a default "start" screen still will carry great value, but perhaps not as much as if it weren't changeable.
Another increasingly heated issue in the cable industry: should digital TV services use the time-tested "channel" approach to organizing content, placing each different item (ranging from HBO to e-mail) on its own separate channel? Or should the TV industry adopt some computing conventions, like detailed menus listing links to multiple services on the same "page?"
"There are two schools of thought on the user interface," says Bob Van Orden, director of Digital Video Systems for set-top maker Scientific-Atlanta. "One is that menus are bad, that TV means changing the channel ... The other one is, 'Let's market some of these [interactive] services more aggressively, make them more apparent than they are by just stumbling on them' " while channel surfing.
Early returns indicate that the latter view is gaining ground. "Funny you should ask," says Van Orden. "We have gotten requests from several operators recently" to configure boxes with default "turn-on channels," consisting of the computer-like menu of options.
Such a change in the TV paradigm isn't without risk. In fact, exclaims Bruce Leichtman, analyst with the Yankee Group, it "scares the heck out of me ... then the opening screen just becomes a billboard."
But that, of course, is exactly what the programmers of interactive television have in mind.
MSNBC's David Bowermaster contributed to this story.