The seventh annual Interactive TV Show in Rome drew several hundred delegates from over 30 countries, providing an important international perspective. In this special extended report, informitv presents some of the highlights of the conference.
The seventh annual Interactive TV Show in Rome drew several hundred delegates from over 30 countries, providing an important international perspective. In this special extended report, informitv presents some of the highlights of the conference.
It is evident that the enhanced and interactive services pioneered in France and the UK, and successfully applied by BSkyB and other News Corporation backed operators around the world, will finally face competition from cable and telephone companies as communication technologies converge.
What is also clear is that personal video recorders, video-on-demand, high-definition, and broadband video will radically change the landscape not just for interactive services but for television in general.
Tom Mockridge, the chief executive of Sky Italia, opened the event, reflecting its venue this year in Rome, or more accurately a rather uninspiring hotel off the ring road.
Sky Italia was forged three years ago from the merger of two pay-tv broadcasters, Stream and Telepiu, and is now a wholly owned subsidiary of News Corporation, with around 3.3 million subscribers, which has now broken into profit for the first time.
Having scrapped the existing interactive services, Sky Italia has clearly drawn on experience from around the News Corporation group. Tom Mockridge was previously president of Sky New Zealand and a former chief executive of Foxtel in Australia.
“We want interactivity that is integrated with programming. It’s got to add value. It’s got to be simple, and where we can, generate new revenue streams.”
With significant emphasis on football, “interactivity has been a very critical part of the branding of Sky Italia”. A personal video recorder is due to be launched and Sky Italia will have high-definition programming from the beginning of the World Cup.
It seems that Rupert Murdoch has also recently rediscovered the internet, with a number of new acquisitions. “One of the compelling things about these new businesses,” said his representative in Rome, “is that the people running them talk like and look like media people, and they are focussed on generating audiences and selling advertising to those audiences.”
BSkyB in the UK recently announced the acquisition of broadband service provider Easynet and is expected to make further investments in broadband, perhaps adding significance to Tom’s comments that “Sky Italia is already available on broadband through our wholesale relationship with Fastweb, and we’re actively in the process of negotiating with other telcos.”
The chief executive of Sky Italia could not resist the opportunity to take a swipe at the Italian government, which has provided a state subsidy to set-top boxes that support the MHP software standard, favouring the digital terrestrial platform.
“It’s an intervention which to us just seem to be unwarranted.” He observed that the digital pioneers in Europe have been the satellite television companies that are using systems other than MHP. “We’re not particularly in love with the systems we’re using. They happen to be the historic things that we’ve inherited, and we’re working with what we’ve got, and it seems to be an unnecessary intervention for regulators to determine one particular software system.”
Ian Shepherd, the managing director of Sky Interactive in the UK followed with an articulate keynote presentation that demonstrates how BSkyB has established and maintained its world leadership position in interactive television.
“For a long time, interactive television around the world has been a big promise, translated into a small industry, but the range of countries, business models and countries represented is testimony to the fact that promise might be coming to fruition,” he announced.
“One of the things that has held the evolution of interactive television back is that it is complicated, but by classifying some of the things around the world that are overtly successful, and also by being candid with ourselves about the things in interactive television that don’t work so well , there are some signs of what the future might bring.”
He argued that the basic building blocks for making interactive television pay were a uniform set-top box population, at least in terms of a common middleware, a connected return path, and the corporate will to invest for the long term. He added that the availability of a return channel, and the ability of companies to stick with that vision, during what can be a very deep investment curve, is going to be a defining factor in terms of building successful interactivity.
Four organising principles of interactivity can be identified, he said: adding value to programming; generating alternative revenue streams; connecting directly with customers; and enabling brands to reach consumers in new ways.
“As widespread as enhanced television is today, it’s my view that we’re only scratching the surface of what that can be.” Enhanced television programming, he suggested, is the first application that people tend to explore in that it is arguably the most straightforward. “As technology advances, as PVRs become more widespread, as broadband connections into set-top boxes and more powerful processing become the norm, I think we’ll see a whole variety of new functionality being brought to bear to make programming better.”
Future generations of Sky set-top box will be enabled with broadband connectivity, although it is still not entirely evident how this will be used. In the longer term, this could provide more than an always-connected high-speed return path. It could offer an additional means of delivering on-demand material.
Operators in other countries, where set-top boxes are typically not connected by a dial-up modem, may have an opportunity to leap forward to a broadband connection that offers considerably greater capabilities.
The new high-definition capable personal video recorder previously announced by BSkyB will also provide increased processing power and greater storage that will potentially enable significantly increased capabilities.
It is clear that BSkyB is starting to think about new opportunities both inside and outside the box to enable customisation, persistence and connectivity. “All of these will become possible, firstly, and then will become widespread as people find ways of gluing them together to make services that really enrich programming and connect with customers.”
“Understanding the casual need state of the customer is key to making these revenue streams work.”
What is particularly impressive about presentations from Sky is their emphasis on the centrality of the user experience. “What works,” according to Ian, “is building interactive television services that are rooted in an understanding of who the audience is and what it is that they actually want to get in the experience of pressing the interactive button.”
However, it seems that a lot of time at Sky is also being taken up with poker. “The vast bulk today of our design and development resource in Sky Interactive is focussed on the formidable challenge of making playalong poker real,” confided the Sky executive. “There are lots of people in the interactive television industry that will tell you that they can do poker now, but there are very few that can actually glue together all of the pieces that are necessary to make an end-to-end service work, and that’s a big priority for us today.”
T-commerce will be back on the Sky platform, building on the expensive experience of previous initiatives, in the “slightly more mature, more considered form” of a new e-business portal, which is due for a consumer launch. This will enable businesses to use web technology to gain access to the interactive television platform.
Speaking to informitv after the presentation, Ian was keen to point out that this was not going to be the web on television, but using web technology to enable interactive television services much more cost effectively. “It’s not intended to be the web on TV. If we didn’t learn the lesson that re-purposing web sites onto TV doesn’t work five years ago then we’re never going to learn it.”
“I see this as lowering the barriers to entry into interactive television rather than trying to replicate the web on TV and that’s a fundamentally different philosophy,” he added. “You can, theoretically, now get your own interactive television service for nothing, and that’s the first time that’s been even close to being true.”
Sky is also beginning to realise, by its own admission rather late in the day, that interactive television provides a powerful channel through which to connect directly with their own customers. Over a third of Premiership Plus football pay-per-view season tickets are sold through an interactive television application on the relevant channel, providing a better experience for the viewer, and significantly lowering the cost per sale compared to using a call centre.
Meanwhile, interactive advertising is now a proven business model that is becoming the norm for some categories of advertising, but again the managing director of Sky Interactive noted: “I think we’re only scratching the surface of what this technology can do.”
The emphasis now seems to be on further enhancing the platform, and enabling interactive services to take advantage of the personal video recorder, high-definition television and a broadband return path.
“We have a lot of work to do to make the Sky platform easier for operators to create and launch services on and it’s an important priority for us over the next six to twelve months to make some step changes in that direction.”
There was also some cause for optimism among developers, agencies and service providers. Sky Interactive has “a very conscious strategic goal over the next twelve months to increase the proportion of our development and design work which we outsource in order to grow the community of people who are able to make a living out of bringing their creativity and their ideas into this marketplace.”
In conclusion, Ian Shepherd observed that the common challenge shared by everyone in the interactive television business around the world is engaging with customers. “If we could really understand what it is and how it is that people press the red button, the green button, and the interactive button, in different countries around the world, and really connect with why people use interactivity, then we have the opportunity to build big businesses. We can see that there is miles more potential in this marketplace.”
Eric Shanks, responsible for advanced services at DIRECTV in the US, represented the third major operator from the News Corporation backed family.
The US satellite broadcaster is now embracing some of the interactive developments pioneered in Europe, with some local variations.
A mosaic screen allowing subscribers to view up to six sports channels has been augmented by a host presenter. This can be viewed by the two thirds of DIRECTV subscribers that are currently incapable of receiving interactive services.
DIRECTV is placing the emphasis on their new digital video recorder, with NDS software. This will have 160 hours of storage, of which 60 will be reserved by the platform operator. A couple of hours will be reserved for interactive advertising. It will also enable the possibility of substituting locally targeted advertisements. When viewing an interactive advert, the digital video recorder will automatically enter pause, allowing the viewer to rejoin the channel where they left off.
What this conveniently seems to ignore is overwhelming evidence that once viewers have a digital video recorder they typically avoid the majority of advertising impacts altogether.
In addition, DIRECTV is planning to use the digital video recorder to allow games to be downloaded, providing a very rich interactive video environment.
Subscribers to premium NFL packages will also be able to receive highlights of games downloaded to their digital video recorder. In the future they will also be able to watch games live over broadband or keep track of their team on their mobile phone.
According to Eric Shanks, interactive television has started to reach critical mass in the US. “Advertisers have started to pay attention and the DVR plus interactivity is really going to be something that we think helps leapfrog the US market in interactivity.”
Europe remains patchy in its take-up of interactive services. Italy has seen renewed interest in MHP, no doubt supported by the state subsidy of set-top boxes. The cost of an MHP set-top box has fallen from 380 euro at the beginning of 2004 to under 100 euro. RAI, the Italian national broadcaster, has launched over 100 applications in the last 18 months.
Spain appears to be making up for lost time with an industry commitment to MHP, while the recently launched Imagenio broadband television service is expect to reach 700,000 subscribers by the end of 2006.
The Germans are struggling to accept that they lag behind in interactive television. With the vast majority of households having satellite or cable, with a wide selection of channels, digital penetration remains among the lowest in Europe. An interactive remote control known as Betty that works with analogue television seems unlikely to bring them up to speed.
In Belgium Telenet and Belgacom are going head to head with recently launched broadband television services.
Tom Williams from the BBC gave a presentation on what makes good enhanced television. Two particular formats stand out as being successful: using multiple streams to cover live events, and the playalong quiz.
He suggested that enhanced television can combine the shared experience of a television event with a personal journey that allows the individual viewer to find out more about themselves, although he also indicated that viewers may participate as a household, underlining the social dimension of television.
Qualitative research appears to demonstrate a significant increase in audience appreciation among those that interact.
While the BBC remains pre-eminent in enhanced television, there was little to see this year in terms of further innovation. For the BBC, interactive television has simply entered the mainstream of programming.
Stefan Jenzowsky of Siemens Communications explained how the TIME industries of Telecoms, Internet, Media and Entertainment are going to converge in their business models, with their value chains twisted and bent beyond recognition.
Siemens is involved in internet protocol television deployments in Belgium and the Netherlands, and Stefan promised: “I can assure you that this is just the beginning of what we hope to do worldwide”.
With no representation from the alliance of Alcatel and Microsoft, Siemens had this segment of the show to themselves.
One of the most notable suggestions from Siemens was for a virtual set-top box. The premise is to use hardware that is already in the home.
“What if we could make a zero euro set-top box that costs nothing? If there is already a processor hooked up to your TV and the internet in your home, why not use it?”
The hardware in question is a Sony PlayStation 2 games console, which they claim could be turned into a fully-fledged set-top box using software distributed on a CD. Apparently there are more than 50,000 PS2 boxes in Belgium alone, with 90 million in homes worldwide, while 20% of US households have one. There was a hint that we might expect an announcement from Siemens before long.
Paolo Agostinelli of Fastweb in Italy outlined their pioneering broadband offering, which includes the ability to catch-up on selected programmes transmitted in the last three days, together with a network personal video recorder. Strangely this offers only five hours of recording as standard, although more storage can be purchased. This seems unlikely to encourage the same viewing behaviour as standalone recorders providing 40, 80 or 160 hours of storage.
Fastweb is due to relaunch its programme guide to provide a more televisual experience. Overall the ambition is to simulate the experience of DVD as far as possible.
Their 160,000 video customers currently generate 100,000 buys and 1,000,000 views a month of on-demand services, both free and pay, but this is still less than the 2,000,000 hours a month spent viewing pay-television channels.
Jack Davison of cable operator NTL in the UK talked about their initial experiences with video-on-demand services. Their “pick of the week” catch-up television service is proving most popular, with an average of seven views a week, ahead of music, kids, movies and adult services. Initial results suggest that programmes available through the pick of the week service receive a 20% lift in overall viewing figures.
Robert Leach, head of interactive services at Sky Media presented some of their own research that demonstrates the significance of their Sky+ personal video recorder, with 45% of users sampled saying that they “could not live without Sky+” and 99% saying that they have no intention of leaving Sky. “There is no point in pretending Sky+ will not change the way television is viewed,” he said, although he argued that the impact on advertising is not as significant a problem as some suggest.
Advertising remains enormously important to Sky, not just for its own channels, but in supporting the other channels carried on its platform.
Interactive advertising provides a powerful means for advertisers to extend their relationship with consumers, moving beyond simple direct response campaigns to more sophisticated brand-building experiences, such as those presented by Simon Smith of agency Weapon 7.
The problem is that, for the moment at least, interactivity is incompatible with the functionality of the personal video recorder, although both OpenTV and NDS have both demonstrated tight integration of interactivity and local storage and Osmosys can offer similar features for MHP personal video recorders.
Unfortunately, many of the models proposed for preserving advertising in the world of the personal video recorder remain wishful thinking. Anecdotal evidence and independent research suggests that owners of personal video recorders actively avoid adverts.
The Sky View panel of 20,000 homes may soon provide the most robust evidence of actual user behaviour, but it may not be good news for advertisers.
In transition
It seems that interactive television is in transition, as some of the tried and tested models that are now mainstream in some countries are beginning to be deployed elsewhere, while the personal video recorder, video-on-demand, high-definition and broadband offer new opportunities to extend interactivity in ways that are yet to be fully realised.
For those that may still be new to interactive television there is probably still much to learn, while those that have been working in interactive media for a decade or more are perceptably impatient for the next breakthrough developments.
After much anticipation, the rate of change is if anything accelerating and it is operators and service providers, rather than traditional broadcasters, that seem to be setting the pace. As new entrants challenge existing platforms, the ability of the leading satellite pay-television operators to embrace and extend broadband should not be underestimated.
Interactive television is no longer a sideshow. It is becoming an integral part of the future of television. Significantly, the organisers are following up with a new event, the Future TV Show, which could hold more promise in its wider scope and may attract an audience beyond the regular interactive television crowd.