BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
BUSINESSWEEK E.BIZ -- EUROPEAN COVER STORY ONLINE EXTRA: Q&A: Netgem's Joseph Haddad: "The TV Is a Simple Multimedia Device" That's why the CEO is still betting that consumers will want to connect to the Internet via television rather than PCs When Joseph Haddad was 3 years old in 1961, his parents were forced to flee Tunisia because they were Jewish and the Arab country was gaining independence from France. Haddad's father was a textile manufacturer and reestablished his business in Bordeaux. But his son had bigger ideas. As a student at the Ecole Polytechnique -- France's version of MIT -- he needed to use Lotus 1-2-3. But he thought Lotus' graphic interface was poor. So he started a new company that made a better interface and sold that to Lotus. After a stint in Boston, he returned to France. Back home, Haddad thought the next Big New Thing would be digital TV and Internet access on the Web. So in 1995, he started Netgem, which produces software allowing TV viewers to surf the Web. It was hard going. For four years, the company struggled. Then in 2000, Netgem landed some big contracts, including one with Britain's ONdigital. The company's sales nearly quintupled last year, to $103 million, while Haddad's staff grew more than fourfold, to 170. Netgem's initial public offering last April raised $65 million, and its stock now trades at $20, about 20% above its launch price. Netgem finds itself in the middle of one of the most controversial debates surrounding interactive TV: Will the masses stick to manipulating basic broadcasting, such as video on demand or switching camera angles for football games, or will they end up connecting to the Internet over their televisions? Skeptics say the Net doesn't translate well to a TV screen, pointing to Microsoft and its failure with WebTV. But Haddad believes Europeans will prefer to do everything online via the television. Haddad spoke to BusinessWeek's William Echikson at Netgem headquarters in the Paris suburbs. Q: How did you start Netgem? A: I am a born entrepreneur. After I sold my company to Lotus 10 years ago, I went to live in Boston. But I got homesick. My family wanted to come back. The U.S. was in the middle of a recession, and from a business point of view, it wasn't so exciting to stay. Remember, this was before casual Friday and Silicon Valley really took off. Q: When you started Netgem, did you think it would be successful because Europeans would be more attracted to surfing on their TVs than Americans? A: No. I didn't think this would be a European type of success. I thought it would be much more global. Television has 99% penetration everywhere in the developed world. Once people get money, the first thing they buy is a TV. It is associated with information, education, and entertainment. Q: But doesn't this technology fit European needs better than American ones? After all, Europeans have fewer PCs and using them to surf the Net is more expensive than in the U.S. A: That's true. In some cases, the U.S. adopts new technology faster. Europe likes simpler devices. The U.S. is more technology-driven, whereas Europe is user-centric. The PC is a technological device. The mobile telephone is much more a service device -- and it has higher penetration in Europe than the U.S. But I really want to emphasize that from Day One, I was driven by the vision that the Internet would be a global medium and that everyone needed to get access to it. And I saw that there is a TV in every home, that the TV is a simple multimedia device. In my mind, it was inevitable that the TV became a prime way of accessing the Internet. Q: Hasn't it been difficult to convince others of this inevitability? A: I am stubborn. I have been driven by this idea since 1995. It has taken all this time to become accepted. Interactive TV is only taking off now, with home shopping, home banking, and other services. There are finally millions of users. But if broadcasters try to restrict the users to a fixed set of services, it will not work. In the end, people will not want to shop in a walled garden. If you don't open the door of the garden, it will not work. The best example is AOL. A few years ago, AOL was the best walled garden in the world. If Steve Case had one smart idea, it was to anticipate the need to change and open the door from AOL to the Internet. Q: How is the market developing? A: We have struggled. We were a little ahead of our time. The market was not mature in the first few years. In Europe, the Internet only started becoming a consumer device last summer. That's the first time you saw ads about dot-coms. And I expect the Internet will continue to grow here. Eventually, every device will be Internet-enabled. There will be Internet access in the coffee machine, in the fridge, and in the television. We will help provide the software. Q: What about Microsoft and its WebTV? What about Microsoft's efforts more generally to get into this business? A: Microsoft wants to do Microsoft. It wants everything based on Wndows CE. But they don't really have a commercial solution. No such systems are deployed by broadcasters. My No. 1 competitor is really another U.S. company called Liberate. Q: Why is the contract with ONdigital so important? A: Overall, our sales grew sixfold last year. We are very busy. ONdigital is important because it is a success in the world's most competitive interactive-TV market -- the U.K. Even the French market is slightly behind it. Q: How do you see the market developing? A: The market is converging. In the U.S., AOL buys Time Warner, so the TV operators are with the Internet operators. Same thing here in Europe with Vivendi buying Seagram. Everywhere Internet companies are buying content, merging with TV content. They are preparing for the time when the world goes broadband and video can be easily downloaded. But this process will take time. The broadband pipes are harder to construct and more expensive than people think. Both cable and ADSL solutions are lagging behind. We must continue working with the narrowband solutions that are now available and prepare for the future. Q: What do you think will happen with interactive TV in the U.S.? A: The American market will be big. But it has been slow in our field, and we don't have the resources in our company to spend a lot of time developing it there. You have to spend a lot of time evangelizing. We have a lot of potential business right in our backyard. We must stay a B2B company and not concentrate on selling boxes to the public, but on selling to broadcasters who include our solution in their offering. Q: What about yourself? A: I own 35% of the company, and I don't think about retiring. I am focusing on driving this product into the market. When you create a product, you want it to succeed. That is your priority. I want our investors to get the rewards they deserve for trusting us. Q: Are you thinking about listing on Nasdaq? A: No, we are on the Nouveau Marché. We try to work like an American company, and we have a strong investor-relations department. But going onto the Nasdaq won't give us anything extra. We don't need the cash. We already have raised $50 million and have a strong enough cash flow. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Europe's I-TV Advantage (int'l edition) TABLE: I Want My I-TV (int'l edition) ONLINE EXTRA: Q&A: BSkyB's Tony Ball: "We Will Compete with the PC Screen ONLINE EXTRA: Q&A: CanalSatellite's Bruno Delecour: "Our Digital Customers Spend Much More" I-TV's Software Upstart (int'l edition) ONLINE EXTRA: Q&A: Andre Kudelski: "Our Independence Is Our Strongest Force" Surfing by Boob Tube (int'l edition) ONLINE EXTRA: Q&A: Netgem's Joseph Haddad: "The TV Is a Simple Multimedia Device" INTERACT E-Mail to Business Week Online

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