TECHNOLOGY: Is it finally time for PC/TV?

Service providers are gearing up to offer interactive television

Futurists have long predicted that consumers would be using their television sets and remote control to shop. That day has finally come, now that companies such as Microsoft’s WebTV, Wink Communications, U.S. West, and more recently AOL/ DirectTV are providing, or are about to offer, some form of interactive television (iTV) to consumers. In fact, more than a third of broadcast and cable networks plan to offer interactive television services in the next two years, according to research firm Forrester Research’s “Interactive TV Cash Flows Report.”

Defined as any activity in which viewers use a remote to interact with information displayed on a TV screen, iTV has three applications that catalogers can take advantage of: electronic program guides (EPGs), in which advertisers can sell services and products alongside TV listings; Web-on-TV, which connects the viewer to the Internet via the TV screen; and enhanced broadcasts (EBs), in which marketers can include interactive content, such as real-time product offerings as well as one-click pizza orders and magazine subscriptions, into broadcasts and commercials.

Early statistics show that some consumers are more than willing to buy products via the TV. Microsoft’s WebTV, which offers consumers Internet access over the television set through a set-top box, found that 49% of its nearly 1 million subscribers have purchased a service or product online in the past year. The average WebTV user spends 14.6 hours a week online via the TV, or 2.1 hours per day.

Convergence still a question

According to U.K. research firm Datamonitor, more than 11 million households worldwide subscribe to some sort of interactive television, and 67 million households in the U.S. and Europe will have access by 2003. But the setup remains burdensome to the consumer.

For instance, consumers need to purchase a set-top box, which cost about $100 at consumer electronic retailers. The set-top box is typically the size of a VCR, and plugs into the television. Users must also have a phone line for connection to the Internet, and pay a monthly fee, typically $21.95, to whichever service company they choose to connect with. The costs are high “because people are logging on and staying on,” says Sean Kaldor, an analyst at research firm International Data Corp. “If service providers get to the point where they can eliminate the service charge and just make money on the advertisements, subsidizing the hardware makes perfect sense.”

Consumers also have several iTV service companies to choose from, each with its own programming and hardware. “People don’t want more than one set-top box, but each company out there makes a separate one,” says Alan Breznick, senior editor at Cable World magazine. “The key is to get the core technology integrated into existing set-top boxes.” But some iTV developers envision the day when access will be via a separate cable channel that consumers can subscribe to through their local cable operator, or when the technology is integrated into the television itself.

The good news is that those marketers with Websites may already be poised to take advantage of this growing distribution channel and not even know it, because iTV works on a series of links that contain URLs that point to specific Web pages. (Web pages are created using HTML, a series of symbols and text, known as tags, that are placed around content and tell receivers how to display the content on Web pages.) When a TV viewer chooses to display the interactive show, the receiver interprets the code in the link and displays the appropriate Web page. Those links are then transmitted as part of the television broadcast, similar to closed captioning.

Marketers can use TV links to show viewers Web content relevant to the TV show the user is watching. For example, a consumer watching a cooking show may see an offer at the bottom of the screen for the pots and pans the cook is using. With one click of the remote control, the consumer can order the products immediately.

For Web marketers planning to try iTV, developers suggest creating Web pages designed specifically for a particular TV show rather than simply linking viewers to the Website, because unrelated Web pages can be distracting. When the Web content fits with the television program, viewers will continue to watch the show and engage in the interactive program at the same time.

The catalogers contacted by Catalog Age remain fairly conservative about iTV. “Our robust Website has positioned us to jump into iTV at any time,” says Peter Howard, vice president of marketing at jewelry and tabletop products cataloger Ross-Simons. “We’re just waiting for consumers to accept it.” And once they do, the Cranston, RI-based cataloger plans to provide more video-based content on its site specifically to accommodate delivery of that content through the TV.

And while Performance Products, an auto parts cataloger, is not participating in iTV, the company isn’t ruling it out. “The key is to make it simple and similar to the Website so customers are willing to spend the time on it and feel comfortable with the medium,” says chairman Mel Kay. “We’re interested in what’s going on in interactive TV, especially if that’s the way customers want to buy from us.”

ITV is no longer synonymous with the ill-fated Full Service Network (FSN), Time-Warner’s attempt to integrate the PC with the television in the early ’90s. Not only was the technology insufficient, but costs were too high. Time Warner spent about $4,000 per household with FSN, estimates Alan Breznick, senior editor at Cable World magazine. “But because of the Internet, interactive TV is back,” he says. “The same techniques used on the Web can be used on the TV, and the development costs are much cheaper.”

And catalogers have a more compelling reason to embrace the next generation of iTV. Forrester Research predicts that iTV-stimulated impulse buys are expected to generate $7 billion by 2004. “Interactive TV has gone from being a laughingstock to becoming a potentially massive revenue generator,” says Josh Bernoff, Forrester’s principal TV analyst. “It’s like a home shopping channel on steroids.”

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