TV for the 21st Century: The State of Interactive Television

by Edward B. Driscoll, Jr.
Winter 2002/Spring 2003

Interactive TV is experiencing a wide explosion of new technologies and concepts, foreshadowing what should be a great future for the industry in the 21st century.

Already, there are personal video recorders (PVRs), digital cable and satellite set-top boxes with interactive menus, interactive TV channels and other interactive services. Let's look at the most interesting ones.

Interactive DirecTV by Wink
The DirecTV satellite service offers a variety of purely interactive channels, as well as interactive services that come bundled with several of its conventional news and sports channels.

DirecTV Interactive, powered by software programs and firmware written by Wink Communications, adds interactivity to numerous DirecTV channels. Richard Henderson, Wink Communications' director of media relations, said that these interactive features include news, entertainment and shopping features.

"As far as news," Henderson said, "several all-news and all-sports channels (such as the variety of ESPN choices) include Wink-enabled interactivity. If you're watching CNN, you can get specific detailed news and information – world news, market news, financial news, that type of information."

You can see one obvious example of Wink's technology in action on ESPN's channels, where you can pull up scores from a variety of the day's contests while watching, say, Sunday Night Football.

Similar services are provided for financial channels such as CNBC and Bloomberg. Bob Marsocci, DirecTV's senior director of communications said, "In a matter of seconds, with the press of a button on the remote control, I can check up to five different ticker symbols instantly. Then, if I want to key in others using the remote control, I can check the price of other stocks that I own."

Wink offers a number of shopping features as well. One example is The Tonight Show with Jay Leno, where Wink's service brings up biographies of the guests as well as the opportunity to purchase a CD of the day's musical guest.

Wink also adds interactivity to commercials and even some infomercials. On certain set-top boxes, a small logo with an "i" in the middle of it appears. A click on your remote control then brings up a question on the screen: "Would you like to receive a brochure for this product?" Wink has also cut deals with magazines, so its possible to subscribe to Sports Illustrated, People and Time via remote control when one of their commercials airs.

Dishing Out Interactivity
Dish Network announced several interactive features at the January 2002 Consumer Electronics Show in Las Vegas. These features are built around a central Dish Home channel, where viewers can enter and then access movie reviews from Zap2it Entertainment Features, games from Playin'TV, Horoscopes, and Dish Network Customer Support, offering instant account information, as well as interactive entertainment enhancements.

These services will be available as an upgrade, delivered via satellite to existing Dish Network customers with the appropriate hardware (check www.dishnetwork.com for a list).

Just as DirecTV uses Wink to provide its interactive services, Dish uses OpenTV Inc. of Mountain View, Calif., to provide its interactive features.

I Want My ReplayTV!
Whether you call them PVRs or digital video recorders (DVRs), products such as ReplayTV, TiVo and Microsoft's UltimateTV have garnered lots of praise, controversy and fascination.

Kishore says PVRs have proven to be a difficult sell to consumers, for a variety of reasons. Perhaps that's one reason why Microsoft has announced it will discontinue the UltimateTV set-top box as merchants' current supplies run out.

Rumors from several sources suggest that Microsoft will add a PVR component to its more successful X-Box videogame system. More certain is the inclusion of new features in its Windows XP Media Center Edition (a.k.a. "Freestyle").

The winner in regards to DirecTV and PVRs has been TiVo, who recently announced a five-year deal with DirecTV to be its preferred PVR solution.

TiVo and the other major PVR player, ReplayTV, both plan to add additional layers of interactivity to their products, capitalizing on the merger of broadband and television. Both plan to allow their boxes to pull some form of digital video off the Internet, providing another avenue of video-on-demand besides those offered by cable companies.

Individual Interactive TV channels
Besides digital broadcast satellites and PVRs, several individual TV channels provide interactive features. FoxSports and ESPN both offer interactive versions of several of their sports broadcasts via multimedia-enabled Web sites.

Tune In, Turn On and Get Interactive
All of these different methods and levels of interactivity provide two conclusions: interactive television is becoming more and more popular, and there are a variety of methods to bring it to viewers. What will succeed? Probably several methods – and some that haven't even been invented yet.

The Future of Interactivity
Where does interactive TV go from here? What trends are appealing to consumers? Which product providers are going to make it and which won't?

Adi Kishore is a media analyst with the Yankee Group, a Boston-based technology consulting firm. He is bullish on interactive programming guides, video-on-demand and local interactive portals. He's less bullish on PVRs and DVRs such as ReplayTV and TiVo.

Why isn't he keen on PVRs? Because, as he describes them, "It's a very complicated value proposition. What we're seeing from our data is that a certain percentage of our consumers, when asked if they want a PVR, say 'we don't need one' or 'we already have a VCR.'"

The Yankee Group's data shows that many consumers (who don't read Smart TV & Sound, but probably should) who tend to watch television during prime time, just aren't interested in time shifting. And the ones who do time shift already own a VCR and don't see the convenience of boxes such as TiVo and Replay.

To some extent, Kishore blames the poor quality of the DVR manufacturer's advertising, and their lack of ability to explain why someone should buy their product in a 30-second TV ad, or image-driven print advertisement. But Kishore said, "It's tougher than that. I think it's always going to be very difficult to communicate the value of this to consumers."

The Yankee Group's data says that those people who do buy a DVR generally love them "but it's very difficult to get it into the consumer's home, because that benefit is not easily recognizable by the overwhelming majority."

Video-on-Demand: The Killer App?
Kishore believes that if PVRs are going to succeed, the technology is going to be bundled into the set-top boxes sold to consumers as part of their satellite or digital cable services. Satellite services, in particular, since they lack the technology to send individual video streams to each consumer, are counting on proprietary PVRs to provide a service that resembles video-on-demand.

Video-on-demand itself is the holy grail of the cable industry, which it hopes will cut down on the "churn rate" of its subscribers, many of whom can't see the difference between digital cable and plain old analog cable. And Kishore described video-on-demand's future as "pretty rosy, at least for the next few years."

Two Other Trends in Interactive TV
Kishore sees two other future trends in interactive television, one complex, the other simple, but with broad popularity.

The first would be viewer-chosen multiple camera angles for sports broadcasts and concerts. This has already been tested on Britain's Sky network and Long Island's Cablevision system, according to Kishore. The downside of this technology is that each camera angle requires the same amount of space in a cable or satellite feed as a conventional channel, but without the same advertising revenue that the primary channel receives. But this technology might also be extremely popular.

The other trend, which shows how a comparatively simple interactive technology can become extremely popular, is what Kishore called a "sort of television-portal-interactive environment kind of concept." It's a portal pioneered by Insight Communications Inc., a large Midwestern cable provider, among others.

A typical local portal includes such information as local events, restaurant reviews, movie listings and school information. Speaking of which, Kishore said an extremely popular application has been listing the lunch menus at local schools: parents apparently really wanted to see what their kids were eating. He readily admitted, "I didn't see this service coming, but I guess it's really caught on!"

These types of local portals are using comparatively simple technology, but organizing the information in a way that makes it extremely attractive to parents specifically, and neighborhood residents in general. And it gives cable companies a local edge that satellite providers would have a tough time matching. While much of that same information is also available online, with this interactive portal, Kishore said, "it's neatly arranged for your locality, for you, for your neighborhood, on your TV screen. So the convenience is a little higher, and again it becomes an interactive digital experience, so it adds values to the digital cable exercise."