| BUSINESSWEEK ONLINE : AUGUST 9, 1999 ISSUE | ||||||||
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| NEWS: ANALYSIS & COMMENTARY
Here's TV's Next 'Next Big Thing' TiVo's gadget makes your TV interactive--in a primitive way On July 27, a tiny startup called TiVo Inc. announced that it had lined up support from CBS (CBS), Walt Disney (DIS), cable operator Comcast (CMCSK), cable programmer Liberty Media, and others. Their commitment--$32 million--wasn't a grabber. But coming on the heels of deals worth $40 million with such giants as satellite-TV leader DirecTV, Philips Electronics (PHG), and NBC (GE), the effect was to give TiVo a big push toward becoming a leader in the race to convert television from a one-way affair into an Internet-age interactive medium. What's more, TiVo President and CEO Michael Ramsay plans to raise $80 million with an initial public offering in September. For now, TiVo, and its major rival, Replay Networks Inc., offer what amounts to smart VCRs. Every night, TiVo boxes connected to TV sets download a programming guide via telephone lines and seek out the shows they know their owners like to watch. And with favorite shows automatically recorded digitally, couch potatoes can now tune-in to must-see TV whenever they feel like it. TO ZAP OR NOT? But why are the three biggest TV networks buying into the ''personal-TV'' vision--which would seem to threaten their empires built on ads? After all, TiVo viewers can easily fast-forward through those costly 60-second spots that national advertisers buy. NBC Cable President Tom Rogers, a TiVo director, says the Peacock Network agreed to back TiVo because its machine lacks the ''zapping'' button that the Replay box uses to eliminate ads altogether. More important, NBC is interested in the possibilities of freeing popular programming such as Friends from its once-a-week time slot--and eventually using the interactive technology to customize advertising for the new audience. ''I don't think of this as a potential enemy,'' Rogers says. ''This is a friend.'' How big is the opportunity? Sean Badding, television analyst with the Carmel Group, calls personal-TV devices ''the next big thing'' and predicts that 220,000 will be sold this year. That includes Echostar's DISHPlayer, which combines satellite TV and a rudimentary computer hard drive. By the end of next year, Carmel Group, which analyzes the industry, expects nearly 900,000 couch potatoes will be enjoying personal-TV services, ramping up to over 10 million households by 2005, when prices are expected have fallen from about $500 now to the $150 range. Replay, meanwhile, is hardly throwing in the towel. It has its own roster of supporters, including Japan's Matsushita. Replay CEO Anthony Wood expects to announce after Aug. 2 a $65 million investment syndicate and ''major strategic alliances'' that include ''some of the largest media companies in the world,'' including a few that previously have put money into TiVo. Joachim Kiener, chairman and CEO of TV Guide Inc., says that his company's ''minimal'' investment in TiVo is nonexclusive and that his company has also talked with Replay. The key to the future for both companies is moving beyond the digital VCR to interactivity. On TiVo, viewers can actually teach the box their preferences by pressing ''thumbs-up'' and ''thumbs-down'' buttons while watching. That helps the system customize programming--and also gives advertisers vital data for customized advertising. Replay, on the other hand, is betting on ''couch commerce,'' interactive TV's answer to E-commerce. Starting next year, viewers intrigued by a commercial will be able to punch a button on their remote to make a purchase or request more information by mail. COSTLY BOXES. Are consumers ready for another gadget to put on top of the TV? Maybe not. For now, prices are steep; low-end models run upward of $500, plus TiVo charges a $9.95 monthly service fee. Replay charges no such fees, but its low-end model costs nearly $700. The core technology from both companies, however, can be built into other devices, including digital set-top cable boxes or DVD players--even into the cable system. Already, DirecTV plans to begin marketing a TiVo-enabled satellite box this fall. ''All of these companies are going to ultimately have to figure out what their hardware strategies are going to be,'' says Kiener. Then, perhaps, interactive TV will move from being a concept to being a market. By Janet Rae-Dupree in Sunnyvale, Calif., and Richard Siklos in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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