OpenTV has announced a second quarter of increased revenues and reduced losses as Sky Italia royalties boost sales. The company is working on developing functionality that will enable interactive services to be recorded and is increasingly focussing on the market for addressable advertising.

Announcing second quarter results for the period to the end of June 2004, OpenTV reported revenues up 21% to $19.1 million compared to $15.7 million for the same period in the previous year, largely as a result of $5 million royalties from Sky Italia.

Net loss for the quarter decreased by 79% to $2.0 million, compared to $9.2 million, in the previous year.

“Our revenue improvement in the quarter largely reflects the continued deployment of our middleware by large network operators, in this case Sky Italia,” said OpenTV chairman and chief executive officer, James Chiddix.

OpenTV was selected by Sky Italia in preference to middleware from NDS, which is also controlled by News Corporation.

PVR functions
In a briefing to analysts, OpenTV revealed that is adding PVR features to its middleware that will uniquely support the time shifting not just of television programming but also of associated interactive features.

The middleware is also being extended to support broadband networks to enable OpenTV applications to run on such systems.

Addressable advertising
OpenTV singles our advertising as the area with the most growth potential. The company is developing technologies to meet the needs to network operators as they move to addressable and targeted advertising models. The company says it has positive meetings with Comcast about its SpotOn addressable advertising product.

“With SpotOn we have the capability of sending different addressable commercials to different individual homes,” said James Chiddix. “That’s a really fundamental tool that really does get the interest of the advertising community.”

The system uses software in the set-top box to provide seamless switching of commercials so that the targetting is transparent to the viewer.

Patent issues
OpenTV recently settled a patent dispute with Disney regarding the synchronisation of internet applications with television programming. The company sees this as a potential business opportunity rather than an indication that it will pursue other companies such as Microsoft and RealNetworks over similar intellectual property claims.

“We’ve seen some of the difficulties of building a business primarily on intellectual property, as Gemstar struggled over the years,” said Chiddix. “Our primary thrust is to develop products for customers. The reason that customers are going to by our products is the value the products bring, and not just the fact that we have the intellectual property.”

Greed and fear
The OpenTV chief executive cited greed and fear as the two stimuli to which large organisations tend to respond. He suggested that in an increasingly competitive market, interactivity offered opportunities for network operators to differentiate their offering.

“The conventional wisdom has been for years in US cable that there wasn’t much revenue in interactivity,” he said. “We’re pointing out that BSkyB actually shows there is significant revenue there, but it may be that a more rapid catalyst for movement in the US cable market will be fear of the inroads that satellite makes.”

Open standards
In response to OCAP, the initiative to develop a standards-based middleware for the cable industry, Chiddix pointed out that there was still much work to be done and it was unlikely that it would be applicable to any of the set top boxes that have been deployed to date.

“The dream of OCAP is actually that the cable industry would develop a middleware very much like that the OpenTV provides,” he said. “At a very high level it sounds like it’s very competitive to OpenTV. In reality these are slow-moving processes, it is far from clear that the very competitive companies that are involved in these markets are going to have the patience to wait for these standards based platforms, or ultimately to make the judgement that its in their best interest.”

Nevertheless, in the event that OCAP becomes deployed on a significant basis, he claimed OpenTV had the potential to be a significant player, adding value and using it as a platform for a variety of applications, including those in advertising.