TV execs plot convergence strategies

SANTA CLARA, Calif. - Convergence is creating a high-stakes game of musical chairs, and old school TV execs and new media companies are trying to guarantee themselves a seat.

The players know that when the music stops, the new economy will not have enough room for everyone.

"Each of the players is a king in his own right in their own market," said Greg Gudorf, vice president of marketing at Sony Electronics, speaking during a panel discussion here at Convergence '99. "But convergence means that each company has to play in someone else's kingdom, as well."

For Sony, the danger is that its products could turn into low margin commodities and it would lose out on potential revenue opportunities. The company has already signed deals to make set-top boxes for DirecTV and WebTV, but such deals are extremely restrictive, said Gudorf, leaving little room for the company to differentiate itself.

Meanwhile, while it remains unclear whether the TV in tomorrow's living room will connect to the Internet or have a sharper screen, it almost certainly will have a hard drive inside, transparently recording television content.

'It's not about ads or sponsorships - that's one part of the revenue stream - it's more about driving e-commerce.' -- Benjamin Feinman, Snap.com

Already, three companies - TiVo Inc., Replay TV Networks Inc., and WebTV Networks Inc. - and their partners have delivered such devices. All three technologies promise to let consumers watch programs when they want rather than on a set schedule.

"Digital TV has the ability to enhance content far more than just adding the Internet," said Jan Steenkamp, CEO of TV set-top software maker OpenTV.

Unfortunately for TV networks, that feature also means viewers can fast forward past all commercials, leaving advertisers without a way to reach the viewer.

"This is about providing consumers with more control over their TV," said Stacy Joina, vice president of strategic partnerships and network relations at TiVo. "We want to provide more relevant advertising."

That statement has changed the tune for the TV industry. Even though many of the big networks have invested in TiVo, they may also wind up suing it, in order to protect their business model.

The TV industry is not standing still, however. They're also looking to the Internet for new sources of revenue.

"It's not about ads or sponsorships - that's one part of the revenue stream - it's more about driving e-commerce," said Benjamin Feinman, group product manager at Snap.com, a subsidiary of NBC.

The potential for TV networks to not just advertise a product, but to let viewers purchase it on impulse, has companies practically salivating.

"People are going to be attracted to the content, but along the way we want to get them to buy something," said Feinman. Still, it won't get any easier for the TV industry. With such rich e-commerce potential, the market will become more crowded, said Jean-Marc Racine, CEO of set-top software maker Canal+ U.S. Technologies. "Convergence is the interactive TV gold rush."