ITV IS ALREADY A PART OF LIFE IN THE U.S., AND ONLY CABLE CAN MAKE THE MOST OF IT

Ever heard the saying, “Life is what happens while you’re making other plans”? While cable industry watchers have been waiting for enhanced TV and other visions of what interactivity should be, consumers have gone ahead and adopted the interactive methods available to them. ITV is no longer a future — it is. Already, over 50 million digital cable and DBS subscribers interact with their TVs daily, clicking through program guides, ordering video-on-demand, using PVRs. At an average 100 clicks per subscriber household per day, that’s 5 billion clicks. One of the profoundly encouraging aspects of this situation is that we no longer have to worry about changing subscriber TV viewing behavior — behavior has changed. And anyone who still doubts subscribers want interactivity should get over it. Five billion clicks a day is compelling evidence that subscribers indeed have the interactive urge — they want to control their TV experience. This interactive urge represents a bigger opportunity for the cable industry than for any of its competitors. Cable is best positioned to provide TV viewers with the control they want because cable — and only cable — has a real-time, two-way return path. To date, the industry hasn’t been able to leverage this huge competitive advantage due to the processing, graphics, memory and storage limitations of set-top boxes (which also limit middleware solutions). Today, however, these limitations are irrelevant. Inexpensive, standards-based platforms now enable interactive content to be delivered from central locations over the existing HFC plant to any set-top box, thick or thin. The upshot is that cable operators can immediately capitalize on widespread subscriber acceptance of interactive TV by offering new services that increase customer lifetime value. Among the cable executives I’ve spoken with over the past few months, high-priority agenda items include: Cutting customer service costs and improving retention by providing online support right at the TV. Improving community presence and demographic targeting through local news and information services. Boosting VOD revenues and margins by improving menuing and merchandising. Offering more exciting games subscribers really want to play, and will pay for. Such initiatives represent a natural evolution from the solid foundation we’ve already achieved to greater levels of ITV success. But what of those who point to Europe’s deployment of enhanced TV services and say the North American market is a bust in comparison? It’s a simplistic argument, in my view. Markets are complicated things, affected by a myriad of interrelated factors. Success doesn’t come in only one form, and it rarely develops in the same manner from market to market. There are many reasons enhanced TV has worked in Europe better than in the U.S. The PAL standard, of course, provides TV displays with 53% more pixels than the NTSC standard, providing more space for overlays. Europeans tend to watch TV in smaller rooms than North Americans, and are therefore closer to the display, so overlay content can be made visible using fewer pixels on the screen. Moreover, because digital TV deployment began later in Europe, with DBS taking the lead, the European market didn’t have the challenge of launching enhanced TV service to an installed base of 25 million thin boxes, as has been the case in North America. Because of these market differences, we’re unlikely to see enhanced TV take off in North America until high-definition sets and set-tops are widely installed. In the interim, to ignore the success of ITV — and the immediate opportunities to profit from it — is, in my view, misguided. Those cable operators who move now to build on success and respond to subscriber desire for more control, will build loyalty that stands up to the enticements of DBS and other competitors. They’ll increase the lifetime value of their subscribers by offering them a compelling array of new revenue-generating services. And all the while, interacting with TV will become habitual across their installed base. When it’s time to weave in enhanced TV, these savvy MSOs will be in the best position to merge the new technology smoothly into their operations and to gain the most from its deployment. Ed Forman is SVP of marketing at ICTV Inc.