Interactive TV Has Regressed Since 1993; Will the Economy Delay iTV Expansion for Another Decade?

The following commentary is reprinted from my 1993 book Adbashing: Surviving the Attacks on Advertising. My perspective on interactive television from 15-years ago sheds light on the shocking state of the current iTV industry, which has advanced technologically but arguably regressed as a marketing tool. Considering the state of the economy and investors' lack of appetite for unproven media technologies, the set-backs that stopped iTV dead in its tracks in the early-1990s and again in 2002 could once again force delays in the media industry's most important marketing advances. You can read additional Classic Jack insights at www.classicjackmyers.com

From 1993: Many of the future opportunities for marketers revolve around the growth of interactive capabilities. The first step in interactivity – merging television and telephone technologies – has been in place for years but has been underutilized by America's marketers. A primary reason for this is telephone lines cannot handle the large volume of calls television advertising can generate.

But direct response advertisers, the two-minute sellers of everything from Time-Life Books to Hank Williams' albums and Ginsu Knives, have long understood the potential of lower rated cable television and local independent television stations. As far back as 1970, local telephone companies were developing the capacity to handle huge call volume, anticipating an increase in television-telephone interactivity. Many major telemarketing firms are headquartered in Omaha because of the advanced capacity capabilities developed there by U.S. West.

With fiber optic wiring and cable, plus increased telephone company involvement in programming distribution, the trend toward interactivity will continue. Sony Pictures Entertainment and United Video Group are launching The Game Show Channel, taking advantage of the new interactive television technology that will enable viewers to participate in the televised game show activities. United Video, which distributes to local cable systems Superstation WGN-TV and the Prevue Channel, will provide marketing, distribution and technological support. Sony's Columbia Pictures TV Group will develop the programming.

A second Game Show Network is being launched by The Family Channel, one of the earliest cable networks (originally Christian Broadcasting Network). The Game Show Channel will use 900# interactive technology to attract viewers/contestants throughout the programming day. Games will cover a range of topics such as sports, movies, music, history and news.

GTEand Philips Electronics are co-developing a new type of interactive television, which combines broadcast TV with computer-based interactive compact discs. This two-way system sends encoded television signals to Philips CD-1 sets, allowing consumers to order products, vote, participate in game shows, etc. Time-Warner and IBM have explored an alliance to link IBM's technology with Time-Warner's extensive library of movies, television shows and cable television capabilities. The early emphasis would be on pay-per-view movies. Video-on-demand to the home is a computer-intensive technology that currently is in use. The new technologies utilize interactivity in real-time, enhancing the power and immediacy of pay-per-view and allowing viewers to participate live with a variety of programs.

TV Answer, developed by manufacturer Hewlett-Packard, is committed to placing 1.5 million interactive wireless television appliances into homes in 1993. TV Answer is a licensed Federal Communications Commission low-power television service promising to provide viewers with low-cost interactive services, including programming, check-paying, games, information, etc. Most observers consider it the least likely to succeed of the emerging interactive technologies, primarily because of its dependence upon a franchised distribution format.

LeGroup Videotron's Videoway service has been underway in Montreal for several years and is now being expanded to Ottawa, the United States, England, and Denmark. The U.S. version, developed and marketed by ACTV, has received resistance from cable television operators but interest from marketers and programmers. Two hundred thousand subscribers in Montreal use the system. It gives viewers access to more than 100 data services, animated video games, electronic mail, broadcast teletext, electronic magazine and newspaper services, home shopping and banking, PC modem communications, video cataloging, couponing and audience metering. Is most appealing services, in addition to PPV movies, are interactive capabilities that allow viewers to choose camera angles in live sports or concert events. A weekly lottery game asks subscribers to deposit up to $20 for the right to receive a series of numbers delivered electronically to their screens, which are matched to winning numbers when they are drawn on the live program.

Many of these programs are reminiscent of an early cable effort, UTV Network, which was in development from 1980 – 1982, but did not receive sufficient support from the cable industry to launch its interactive programming services. The UTV Network concept was that the telephone and the television represented a logical combination that could be exploited by creating programming for mass audiences. The distribution limitations of cable in 1982 worked to UTV's favor, since they allowed the network's distribution to grow along with telephone trunk line capacity.

UTV, in 1982, was negotiating with Sears to create the first home shopping network, a daily three hour to five hour late-night and weekend programming block. UTV was discussing with program creator Chuck Barris a live version of The Dating Game, which would allow viewers to call in and select the dating partner. The New Gong Show permitted viewers to call-in and, when enough calls accumulated, gong the talent. Existing telephone hardware created a real-time capability for tracking calls. A lottery show called Super Ringo was successfully tested on the Suburban Cable System in New Jersey with host John Kerr, and planned for national UTV roll-out with retailer tie-ins. Steve Allen was signed for a weekly live Larry King-type call-in talk program, plus soap operas, business shows, sports gambling shows, sports talk and much more were all on the boards for development. [Jack Myers was executive vice president of UTV.]

UTV's vision was that the cable industry would fund the development of programming and distribution, attracting viewers to the programming and the 800# interactive participation. Once 900# technologies were developed and home shopping fulfillment capabilities expanded, UTV would begin feeding tremendous revenues back to the cable operators. Unfortunately UTV was seeking financial support at the same time that CBS developed and then bailed out of CBS Cable, a channel featuring costly cultural programming. CBS's highly visible failure [and a softening economy] made banks and capital sources very wary of cable networks. Although cable today appears to have been a "no brainer" for financial sources, in 1982 cable programming was considered a financial risk. Although several entrepreneurs successfully began cable networks, cable lost its best opportunity to establish a huge revenue stream through the early development of programming designed to drive interactivity.

In the 1990s and beyond, several marketers are aggressively developing interactivity via both the telephone and new technologies. For advertisers, the best opportunities continue to be driven by the natural affinity between television and telephone, and investments in programming combining these technologies are the most likely to succeed. The technology that dramatically alters this relationship in the longer-term is the computer and computer-like capabilities made possible by fiber optics.

Lucie Fjeldstad, an IBM vice president, feels this combination creates a whole new industry. She recently told the Associated Press that IBM sees "four industries converging: computers, consumer electronics, telecommunications, and media and entertainment, to form a new industry that will deliver a wide spectrum of digital goods and services to businesses and homes."

Rick Parkhill, president of Response TV Magazine, [now president of iMedia] believes that "This convergence of technology may add up to a new industry for vendors like IBM, but for media and marketing people it represents the most significant evolutionary stride in media since the printing press. Think of it – media that communicates two ways, invites involvement, and personalizes the information and entertainment consumers choose to receive."

[JM 2008 Note: In the early part of this decade, cable operators led by John Malone decided to withdraw from several iTV initiatives and delay investments in advanced set-top box interactive technologies. Current investments and commitments by the cable industry need to be viewed in the context of history, especially with the current economy causing companies to question long-term investments.]

Jack Myersfounded the Forum for the Development of Interactive TV in 1998 and hosted six events between 1998 and 2001. He continues to advise companies on business models and the evolution of interactive television. He can be contacted at jm@jackmyers.com.