Interactive TV Creeps Back Into the Vocabulary

When children in 1953 covered their tiny black-and-white TV sets with plastic sheets and began drawing over the “Winky Dink” program, they were making history, engaged in the industry’s first “interactive TV” show — not to mention shocking and startling their parents.

Now, more than 50 years, several wars and 10 presidents later, those same parents are in front of their big-screen monitors with their grandchildren, and they may wonder whatever happened to interactive TV.

Although it has met with some notable successes overseas, interactive TV has yet to take root in the United States, despite little-known fits and starts of activity that never amounted to much. But evolving TV viewing into an interactive experience could create massive new business opportunities for content providers and advertisers — as well as help the crowded field of companies offering TV services better compete with each other and such hot Internet video destinations as YouTube. So some champions in the industry continue to try to advance the idea of turning couch potatoes into active participants and possibly even buying machines. As a result, you soon may see interactive TV coming to a screen near you.

“Interactive TV is a potentially critical differentiator for the service provider because the real-time nature of the experience validates the use of premium delivery infrastructure rather than best-effort services,” says Tom Nolle, president of CIMI Corp., a consulting and analysis firm. “This is the sort of thing that consumers, advertisers, broadcasters and providers would all salivate over, and it could become a reality if the current capabilities and emerging tech-nologies are all properly exploited.”

Some, such as Verizon Communications Inc., see interactive gaming as a key driver of interactive TV. The telco already has announced plans for lim-ited interactivity on its FiOS IPTV offering, as it already carries GSN’s linear gaming channel (as reported in the July 2006 issue of xchange).

Yet today, what generally passes as interactive TV in the United States has viewers running to their computers (as in the Verizon/GSN example above) or texting in numerical codes from their cell phones — not their remotes — when prompted to vote for a contestant in a televised competition (see Page 58 of xchange’s March issue for more on this).

However, the vision for interactive TV is to allow folks to use their TV remotes to buy pizzas — or other, possibly more expensive, goods. Another goal is to give viewers the ability to seek out more information about products they may be interested in buying — potentially after they’ve seen a broadcast ad on the product — by using their remotes to launch videos or other information. This second model has the added benefit of providing consumer product makers with useful click-stream analysis.

From the individual’s perspective, the big payoff of interactive TV is the ability to fully control the viewing experience by participating in shows, choosing how video is displayed, having the option of launching an ad or informational video or even buying products featured in those ads or TV programs at the click of the remote.

“Interactive TV keeps folks with our programming longer and represents a whole new way for advertisers to reach potential customers,” says Will Kreth, director of product management for iTV at Time Warner Cable. “Last year was our test-and-trial year. We’ll launch interactive TV this year as a free ser-vice.”

The offering is key to future growth for the company.

“We need to offer products and services that our competitors can’t,” says John Martin, executive vice president and CFO of Time Warner Cable. “2006 was the best year in the history of our company. We have to continue driving penetration of our bundled services.”

Interactive TV is hardly new territory for the cable giant, or for telcos, for that matter.

Time Warner Cable became the first service provider to launch a service back in 1977 with its Qube offering in Columbus, Ohio. That allowed a limited group of customers to access additional information during a program. They also could participate in live polls. The system eventually was dropped, as additional benefits couldn’t justify the cost to maintain the equipment.

Interactive TV reared its head again years later, with many large telcos and cablecos launching small lab or field trials of the technology/service in the 1990s. But the biggest effort during this interactive TV resurgence came in 1994 when Time Warner Inc. gave interactive TV a second go, launching a multiservice platform called the Full Service Network to great fanfare. The service was available to a small neighborhood of upper-income homes in Or-lando, Fla., but flamed out shortly afterward when the company discovered that nobody wanted to pay for the required $5,000 set-top boxes.

Now, Time Warner Cable is at it again with plans to set the standard for interactive TV by both providing access to a wide variety of information as well as a boatload of functionality that lets subscribers do more from their TV sets. The planned service will enable subscribers to participate in voting, play games, track sports, be notified of breaking news and enjoy special event coverage. On the advertising side, viewers will be able to ask for more informa-tion or launch what Kreth calls a “video tour.”

From a telephony standpoint, the interactive service will enable subscribers to view their phone bills on their TV screens with a listing of calls and costs. On-screen caller ID also will be included.

Additional functionality will enable viewers to receive alerts from eBay as well as rebid for items and launch searches. Due to integration with the cable operator’s Internet service, subscribers also will have the option of viewing their personal digital picture libraries on TV.

At the end of 2006, a total of 6.3 million set-top boxes were enabled for interactive TV nationwide for all services providers, according to estimates by Time Warner Cable. The price of interactive TV support is included in the monthly rental costs of digital STBs. Kreth said he couldn’t provide specific pric-ing.

But how will service providers get consumers — who already have plenty of opportunities to interact with each other and the content of their choice via the Internet and their wireless devices — to buy in to interactive TV in a real way this time? Some experts agree it’s by making viewers comfortable with polling. That’s already happened, to some extent, at the hands of TV shows like “American Idol,” which prompt viewers to vote for contestants via text mes-sage.

But Time Warner learned through its interactive TV tests and trials that polling using one screen is far preferable to using the TV with a secondary de-vice such as a cell phone or a PC. “We saw a 3-to-5 percent response rate from viewers that use two screens, but in pilot tests of interactive TV, we’ve averaged about a 20 percent response rate,” says Kreth. “The key is having the return path. Voting and polling is a new way for advertisers to reach poten-tial customers as opposed to a banner ad across the bottom of the TV screen.”

To get a real feel for the power of polling, Time Warner worked with NBC and MTV in its 2006 pilot test. In an effort with Bravo’s Top Chef show, the re-sponse rate for polling hit 25.5 percent, says Kreth, noting that it was the show’s first season.

While Time Warner is prepping its interactive TV launch, BBC’s interactive group, dubbed BBCi, has been offering “red-button service” — the button on the remote that launches the “engagement” features — for roughly seven years now.

BBCi has settled on two interactive TV screen formats it believes work best, according to Philip Jay, executive producer for the group. The first provides viewers the ability to control multiscreen applications that are designed primarily for multilocation events, be they related to sports, such as Wimbledon tennis matches, or important elections. The second falls under the broadening heading of games; BBCi makes games available 24/7, but only as attached to a broadcast brand such as a children’s TV program.

Jay’s eyes light up when he discusses an interactive TV show from the BBC called “Test the Nation.” He describes it as a linear IQ test for the country where the audience at home can play along via remote. At the end of the show, each viewer’s score is displayed on his or her TV screen along with a con-textual ranking. “It’s the most outstanding example of an interactive application,” says Jay, adding that viewers receive their scores at the end of the show and can compare it to the scores of others.

BBCi estimates that roughly 30 percent of the U.K. digital television subscribers, representing more than 10 million people, used interactive TV each week last year. “That makes it a mainstream activity,” Jay maintains.

While the first focus for BBCi has been interactivity via the red button on the remote, the interactive TV pioneer sees interactivity as a multiplatform proposition. “There are ways of exploiting the Internet and wireless to reach a multiplatform audience,” he adds. With “Test the Nation,” 25 percent of view-ers interact via the remote, while 3 percent use the Internet and about another 3 percent use cell phones. The target for Jay and BBCi is reeling in the es-timated 45 percent that write down their answers on paper and the 25 percent that simply shout out the answers while viewing.

One way BBCi is leveraging other channels is by introducing a series of enhancements to Web sites dedicated to individual shows that drive interest around its interactive platform. “We give viewers somewhere to go after the show, providing additional viewing, including video clips of your favorite [parts],” he explains. Efforts to enrich interactive TV by going cross-platform, however, can add significant challenges in terms of dealing with content owners, he says.

While BBCi is a great example of a service provider offering interactive TV, it isn’t the only international operator making progress on this front. Telew-est launched an interactive TV service with CNN International one year ago. Hello D of South Korea has won awards for its offering in the interactive TV space. And Grupo Televisa S.A of Mexico has teamed with its partner, Cablevision, and Microsoft Corp. for the first to launch of interactive TV in Latin America.

So why the progress with interactive TV overseas, while all there seems to be domestically is its promise and potential?

One piece of the answer may have to do with content ownership and programming relationships.

BBCi is first and foremost a content owner with a network. Some of the large U.S. cablecos, like Time Warner Cable, also own content, and have long-standing relationships with the major programming companies. Yet the U.S. cablecos have been heavily focused on broadband access improvements, getting VoIP services to market and attacking the business services opportunity, so interactive TV has largely been a back-burner issue for them. Mean-while, U.S. telcos have been the ones focused most heavily on bringing new video services to market. The telcos don’t own content and just now are forg-ing ties in Hollywood, which may have forced them to focus first on the basics and not concern themselves much, at least not yet, with interactive TV.

Whatever the service provider type, another major hurdle to interactive TV seems to have been the dearth of standards-compliant interactive TV appli-cations

“We had to build our own infrastructure and applications over six years ago” laments BBCi’s Jay. “There aren’t even a lot of companies out there with applications expertise. We’re going to have to work hard with the industry to address this.”

Time Warner Cable’s Kreth expects to see more application availability this year and next as tools that make creating interactive TV applications easier become available. “This is a critical part of the interactive TV plan,” says Kreth, adding that CableLabs is focused on the issue.

In the meantime, Time Warner Cable has been working closely with Navic Networks, a provider of interactive TV applications, in advance of its planned service launch. Navic built the package Time Warner uses to support advanced ads as part of the interactive channel on its cable system in New York. “The channel lets viewers vote for the most important news story of the day,” explains Kreth, adding that this channel is something of a precursor to its entry into interactive TV service this year.

Jeff Weber, vice president of product and marketing for AT&T, a large driving force in the rollout of AT&T U-verse, an IPTV-driven triple-play package, agrees that the availability of interactive TV tools is in large part what’s holding back interactive TV. “We need a more robust applications environment,” he says. “Once we reach that point, things will really start to cook.”

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