Digital TV: The Future of E-Commerce (Part III)

In Parts Iand II of this series, the E-Commerce Times explored interactive television and how it is now developing at an extraordinary pace on aworldwide scale. By allowing interaction with television advertising and programming, it will significantly transform the e-commerce landscape. However, while satellite TV firms currently hold the lead, cable TV firms are primed to tilt the balance in a hurry.

Showcasing the Industry

In This Report:TechnologyThe PlayersCurrent StateProjectionsFour companies are well-positioned in the coming world of cable TV-based interactive TV services — Microsoft, OpenTV, Inc., Wink Communications, Inc. and WorldGate Communications, Inc.

OpenTV sells a complete line of software that can be used to develop interactive TV services. The company was set up by Thomson Multimedia and Sun Microsystems in 1994.

Today, OpenTV claims that its operating system is installed in 6.1 million set-top boxes worldwide. It also claims that more than 100 content development companies and 20 set-top box manufacturers have licensed its software to develop interactive TV services.

Wink offers an interactive TV system that is designed to be provided to viewers for free. Its service is being developed by both cable TV and satellite services in the U.S. and Japan.

The Wink system captures interactive responses at a server operated by the cable TV provider, aggregates them and then passes them on to the variousadvertisers or TV broadcasters. While it will provide interactive services, including e-commerce capabilities, it will not provide access to the Internet.

Combining Interactive TV with the Net

WorldGate and Microsoft, through the recent acquisition of Israeli company Peach Networks, Inc.,plan to offer true access to the Internet as part of their interactive TV experiences. They also say that they can work with personal TV capabilities in an integrated or stand-alone set-top box.

When the viewer is watching a show or an advertisement and wants to interact with it in some way, he or she presses a button and is connected directly tothe Web site without waiting for a dial-up modem.

Remarkable Trial Results

WorldGate recently underwent what it describes as a stunningly successful trial in Massillon, Ohio. The study, which was conducted with Nielsen Media Research in concert with national and local advertisers, showed that approximately 79 percent of the 1,000 subscribers in the trial used “channelhyperlinking” — Worldgate’s trademarked term for instantly linking from a TV program to a Web site — on a regular basis.

Channel hyperlinking is automatic — the user presses a button and the site appears. The study showed that on average, each household engaged inapproximately three interactive sessions per day and accessed the Internet an hour per day from a television set.

Low Price Adds to Allure

During the late 1980s, BellSouth and a number of telephone companies engaged in interactive service trials, such as game playing, e-mail and informationaccess. While the results were spectacular in terms of usage, consumers lost interest when they were told the services would have prices of more than $30per month, along with usage charges that could bring the bill to $50 or more.

By contrast, price should be a plus for WorldGate’s interactive TV service. WorldGate told the E-Commerce Times that the targeted range for its service would be $7 to $15 per month, although it added that the cable TV provider would be the one to set the price. WorldGate also said it is planning to set up affiliate shopping relationships with leading e-tailers to generateadditional revenues based on what their subscribers buy.

The company says that such revenues can be used by the cable TV company to subsidize the cost of the service or to add extra profit.

Where They Are Today

OpenTV (Nasdaq: OPTV), Wink (Nasdaq:WINK) and WorldGate (NASDAQ:WGAT) have annualized revenues of approximately $35 million, $1.5 million and $5 million, respectively. All three firms, however, recently raised tens of millions in IPOs.

OpenTV has a market capitalization of about $5 billion, while Wink is valued by its investors at $1.5 billion. WorldGate’s value is projected at $711 million.

Microsoft, of course, is functioning at a different level. Interactive TV is a tiny part of the company, although the software giant has made it clear that it does not plan to miss the interactive TV business.

Microsoft owns WebTV, which already has one million subscribers accessing the Internet, and the recently acquired Peach Networks. The two entities, however, are separate. WebTV operates from headquarters in Mountain View, California, while Peach Networks is being controlled from Redmond, Washington.

The software giant has also developed the Microsoft TV Platform, which is a series of software products that enable interactive TV services to be developed and deployed. The TV platform competes head-to-head with OpenTV.

Tip of the Iceberg

While Microsoft, OpenTV, Wink and WorldGate have gained the lion’s share of attention, the companies are far from the only players. Numerous new firms are springing up to grab a piece of the action, and consumers are poised and ready to reap the benefits.

1 Comment

  • “It seems that digital TV will be the previous 6th or 7th generation of e-commerce(who the hell knows in which generation we are right know)-Internet pages are becoming simpler, owning a more complex backround, a more customized and a more machinized environment (- only contradictions, I know).

    But nevertheless all digitazation, e-commerce is made by and for human individuals. The first step should be to understand human thinking, behaviour, culture and history and not enforcing wants which are based on marketing – against the human nature. The digitazation is such an example of a perfect, fast acting world which is in every respect against the human nature.

    But as far as I AM an economist (rational and egoistic), I will adjust and will try to profit from this developement.

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