• INTERACTIVE TV, PART II: FRESH START, OR STATUS QUO?
Last month, Part I of our series on interactive TV outlined the four levels of interactive TV. Part II opens by examining the new, yet-unconfirmed Cablesoft alliance between Microsoft, TCI and Time Warner — a teeth-rattling wakeup call if ever there was one — and moves on to blast the mythology of interactive shopping, shows why NTSC must go away, predicts the death of mass media advertising, examines narrowcast advertising, and hails the importance of security and privacy in the land of digital commerce.
But we still didn’t cover it all. Despite our fervent desire to cover all the bases here in Part II, it looks like there will have to be a Part III. Stay tuned.
• HP FINDS WHAT CUSTOMERS WANT
When Hewlett-Packard decided it might want to deliver hardware for the new interactive TV market, it did something almost unheard of in Silicon Valley: it did a real market research survey. The results were both predictable and surprising: Consumers are more sophisticated than we thought.
• ALLIANCE FEVER: A SNAPSHOT IN TIME
Unbelievable as it may seem, we actually sat down and compiled as exhaustive a list as we could muster of the alliances, business agreements and shared financial interests of companies involved in the nascent interactive TV/services industry. We’re aware that attempting 100 percent accuracy on such a list, which seems to change almost minute-to-minute these days, is an exercise in futility. But it seemed eminently worthwhile to capture a moment within the ferment.
Although the bigger question, of course, is the long-term significance of such cooperative arrangements in the face of the new Cablesoft venture, we thought that if nothing else, we’d provide you with a snapshot in time. Someday we’ll all look back on this and laugh.
• I/O
Why make education as mindless as entertainment?
• CHANNELS
Distribution and the art of negotiation.
• NEWS FROM CES
ITV, PDAs, VR, 3DO abound.
• VR DEAD, YOU SAY?
Not at this conference.
• FROX RESURFACES
Digital TV co. re-enters market.
• APPLE LAUNCHES PUBLISHING GROUP
A major new strategy for Newton and CD-ROM titles.
• THE HDTV ALLIANCE
Are we starting or stopping?
• TI DOES IT WITH MIRRORS
New screen display technology from TI is a good fit for HDTV.
• PHOTO CD TEAM LEAVES KODAK
Brownstein, McCabe et al. move to color prepress company AGT.
• BRIEFS
Proposal for CA legislative info online; Microscopes for high-density storage; Rae’s PIM; Sanctuary Woods expands.
• EVENTS
International Networking Conf.
THE INTER-HYPER-MULTI-ATOR
Why make education as mindless as entertainment?
Peggy Weil is an independent author/producer living in Los Angeles. She began working with interactive multimedia at the Architecture Machine Group (today The Media Lab) at M.I.T. in 1980. She created and produced A Silly Noisy House, a CD-ROM for children published by The Voyager Company.
Publishers, worried about missing the multimedia bandwagon, are scrambling for ways to capitalize on their vast holdings by repackaging material for the electronic age. There is a collective search for the alchemist’s “Inter-Hyper-Multi-Ator” — a Rube Goldberg machine that will process existing books, magazines, television programs and movies into electronic gold. This may well occur, but not without serious thought. The opportunities are real, but likely to be squandered on ill-conceived products prized initially for their gimmickry, discarded ultimately as banal.
Consumed by hysteria. The children’s and educational markets are equally consumed by this hysteria. Publishers and authors of educational software need to step back and evaluate the premise as well as the promise of “edutainment.” Merging education with entertainment to provide easy learning may not be desirable. The word (offensive in itself, and an immediate clue to the discerning parent) devalues both entertainment and education as it seeks to improve them. The assumption is that the essential attribute of entertainment is that it is fun and mindless: if we could just make education as mindless as entertainment our nation’s educational problems would be solved.
The attitude is pervasive and is reflected in statements like “… these programs will make learning fun … will make kids forget that they are learning … will trick kids into learning while they are playing a game….”
While the intentions behind such statements are optimistic and well-meaning, they backfire and give our children the message that education is dry, difficult, boring and tolerable only when disguised. This may be the case when applied to that subset of education that demands rote memorization and drills (a large and successful subset of educational software), but it misrepresents the broader scope of education which encourages questions, provides tools for finding the answers to those questions and fosters the ability to find and critically evaluate information. Problem solving and communication skills are intrinsically rewarding; watch a beaming child after she has been allowed to figure out something for herself.
PACKAGING LEARNING AS DISTASTEFUL IS WRONG
Learning isn’t distasteful; why do we insist on packaging it as such? Dean Kamen, an engineer concerned with American education and founder of USFirst, an organization pairing engineers and students, observes that while American high-school students admire and recognize sports heroes and advertising icons, very few can name a single Nobel Prize-winning scientist. If marketing can create an aura around Ronald McDonald, he reasons, why not use equal public relations muscle to push inventors? We need new role models and we need to provide educational experiences that guide children toward their own inventions; even very small discoveries are enormously satisfying. The message should be that learning has value.
Entertainment is similarly misrepresented. While the term “mind-numbing” certainly applies to a lot of entertainment and has lucrative appeal, it is not the whole story. Entertainment also incites, stimulates, angers, comforts and inspires. I’m not just talking about Shakespeare, but about any of the videos that your children were watching last night. While they were sitting there motionless, eyes glued to the screen, something was going on in their minds. When the kids start spontaneously play-acting the parts from the fairy-tale the following morning, they are participating in last night’s media. Storytelling is the bedrock of education.
INTERACTION YOU DO WITH YOUR HANDS
Interaction (in the context of today’s home computers) is something you do with your hands, not with your mind. Interactive is not the opposite of “passive.” Books, television and recorded music are anything but “passive” media; they are engaging and involving. Maybe we could redefine mind-numbing media as passive and mind-involving media as active. Discarding “mind-numbing” as having no place in any considered scheme to improve education, we need to concentrate on what I would like call “active media” — programs not defined by the amount of button-pushing “interaction” they contain, but designed to encourage children to become active participants in the process of learning.
Parental confusion over children’s software is reinforced by the “wonk” mystique surrounding computers. Upscale parents, terrorized that their children are going to grow up to be computer illiterate, are sending children to classes (and computer camps!) to familiarize them with the fundamentals of today’s home computers: the mouse, the screen and the keyboard. Most likely, today’s toddler who has mastered the mouse will not hold any significant computer-related advantage over her friend who spent those hours playing outdoors. In a dozen years, when they are applying to colleges, the mouse may well be extinct.
A LITTLE MULTIMEDIA GOES A LONG WAY
This is not to pan all computer programs for children or discourage their use. It is a call for restraint. A little multimedia goes a long way. Encyclopedic programs are dazzling for the sheer quantity of information, references, cross-references and features. While they make terrific demonstrations, if we expect students and their instructors to stay afloat in this dizzying array of material, it is essential to design a coherent navigational guide. It may not be necessary to use every available feature all of the time. Notably, The Voyager Company has elected not to use voice-over for its celebrated Expanded Books collection. It has chosen to complement the text, not overwhelm it.
In the educational arena, pairing audio with text has unleashed programs where the words are highlighted as the text is read aloud — a sing-along-with-Mitch, or follow-the-bouncing-ball approach to learning to read. The child is cheated out of the chance to sound out or recognize the word for herself. Biting your tongue while a child struggles to sound out a word — now that’s interactive.
Believe it or not, the “Hyper” component of the Inter-Hyper-Multi-Ator doesn’t stand for hype, it refers to a notion of a non-linear or non-sequential network of information. Theaters are testing films with branching story structures and audience participation to determine the outcome. These have already proven to be unsatisfying. A multiple choice mystery takes the “who” out of “whodunit?”
Leaving some things out gives us a chance to fill in the blanks. A non-linear superstructure doesn’t mean the demise of a good story. Leave out the scrolling text in a move toward the oral traditions of storytelling.
Only recently have stories been so homogenized, strictly linear in presentation, uninterrupted (except by commercials) and constrained to the capacity of a video cassette. The oral tradition has always been participatory; the audience interrupted, the dancers provided diversion, and the storyteller had license to digress and modulate the tale for the audience and for the occasion. The Inter-Hyper-Multi-Ator, when properly tuned, could play an important tune: Learning is not a game, it is a quest.
Peggy Weil
INTERACTIVE TV, PART II: FRESH START, OR STATUS QUO?
Now more than ever, be mindful of how you proceed
The first public speculation about Tele-Communications Inc., Time Warner and Microsoft’s joint venture, called Cablesoft, was a nasty wakeup call for those in cable, content or software who thought interactive TV was their chance to break the stranglehold of the status quo.
As we went to press on June 14, no formal announcement had been made about the proposed TCI-TW-Microsoft joint venture to develop a standard interactive TV system, though the companies did confirm they were “talking.” So unless for some reason they’re stopped by the government from proceeding or the deal falls apart, the world’s three largest companies in their respective fields could potentially spearhead the movement of ITV services into millions of American homes.
The numbers. For a bit of perspective, here’s the most recent published industry statistics, courtesy of the National Cable Television Association (NCTA) in Washington, DC: In the U.S. today, 92 million households have televisions. Almost 89 million households have access to cable services, but only about 57 million of them, or 61 percent, actually subscribe. NCTA says TCI and Time Warner together control about 17 million, or roughly a third, of all cable subscribers. The next largest operator is Continental Cablevision, which has less than half the subscriber base of Time Warner Cable.
However, do not make the mistake that we used to make when looking at these percentages. In any other industry, you would say that controlling a third of a market isn’t really all that much. With the cable industry, the salient detail is not that they control a third or so of all cable homes. What’s important about a cable provider, which is the same kind of regulated monopoly as a local phone company, is that it controls 100 percent of its service area.
As one cable watcher put it, “Where they are, they’re it.” You don’t win or lose customers in onesies or twosies. If one cable company provides better service than its neighbor, whole cities or counties of business can be won or lost when cable provider licenses come up for renewal.
Companies like Time Warner and TCI, which are deeply invested in and connected to the programming world in addition to the cable systems they control, are able to keep growing because their size, connections and investments in cable give them influence over entertainment properties they don’t own or control, and their ownership of entertainment properties give them influence over cable systems they don’t own or control.
Even if AT&T doesn’t decide to hop into the action (a longtime rumor), to say that Cablesoft has clout will be the understatement of the decade.
Whatever you say. One of the funniest lines in the New York Times, which broke the story on Sunday, June 13, was an unnamed executive saying the partners didn’t want the alliance to be seen as threatening to other companies. Right! If true, it would be the first time in recorded history that any of these companies didn’t want to be seen as a threat.
In fact, we think you could have sold tickets to any of the meetings between TCI’s John Malone and Microsoft’s Bill Gates — two of the toughest deal makers on the planet — as Cablesoft was being formed. Any executive would have paid big money to watch the masters at work.
A CYNICAL PRE-EMPTIVE MOVE
If it comes to pass, the venture has the potential to accomplish something everyone says they want: a de facto technology standard for the delivery of interactive TV and information services. Unfortunately, it may do so before there is even a system to base a standard on.
We continue to believe (as we stated in last month’s ITV piece) that it is a mistake to allow market clout — such as that yielded by TCI, Time Warner and Microsoft — to set standards for the communications infrastructure of the next century.
Such a pre-emptive move in a new, highly volatile market, without consulting with others who are doing good work in the area (and who are begging all three of these companies to collaborate with them), is a display of brute cynicism. In addition, it is unmindful of history, which has proven over and over that the best ideas are not formed in boardrooms of major corporations, but in the minds of creative entrepreneurs who do not perceive the future in terms of preserving the status quo.
It’s too early to say whether Cablesoft might be good news or bad for developers of interactive programming and services. If the venture develops a truly open architecture — i.e., if licensing the operating system is virtually free or if companies other than Cablesoft can provide it as well, and if there are no hidden upstream costs such as expensive developer tools or tolls for getting programming and services onto the network, then we may see the industry move forward rather quickly. But frankly, the chances of a Cablesoft system meeting those criteria are rather slim.
SATISFACTION IS JUST A PHONE CALL AWAY
The other, equally critical “if” is the quality of the system, and it is a question that will be asked of any ITV architecture. Consumers do not have the patience of business computer users, who have historically forced themselves to put up with flaws and bugs because they couldn’t do their work any other way, and they’ve already shown they aren’t any more fond of cable systems that cost a fortune and don’t deliver much.
So we pity any company working on these systems that attempts to take short cuts through this particular mine field. Consumers do not yet (if ever) need interactive TV. Precious few consumers will put up with the nonsense that computer users tolerate every day, with system crashes, viruses, bad applications software, incompatibilities and more. If they don’t like something, anything about it — the settop box, how the screen looks, its responsiveness to their commands, how reliable the system is and how well it works, the kinds of programming they get — they’ll just call up their local cable company and say, “Get this thing out of my living room.”
LET’S GET ON WITH THE WORK AT HAND
Short term, Cablesoft certainly has the potential to obviate or at least slow the momentum of cooperative ventures developing interactive TV architectures, such as First Cities or Kaleida Labs, or even other Time Warner ventures such as the one just announced with Silicon Graphics to deliver the digital core to its full service network in Orlando.
However, it would be a mistake to treat any of these alliances — Cablesoft included — as anything but very early stage tests. Even John Malone himself can’t make subscribers like a 500-channel interactive cable service, and if they don’t like it, they won’t buy it.
Instead of the industry spinning its wheels spooling out Cablesoft scenarios, it should instead refocus on the various critical issues that must be solved to create a national public network that enables interactive TV — as well as other digital consumer services — to be not only financially viable but of the most utility to the public at large (and we use the word “utility” advisedly).
Since many ITV pilots may undergo some internal changes, we’ll leave them out, even though we promised in Part I that we’d discuss them here. Some of them — Time Warner’s Orlando test and Viacom’s in Castro Valley — will be discussed at this week’s Digital World conference, and we will report them in the next issue. We will continue to explore more issues, such as community access and public policy, over the coming months as the battle lines continue to be redrawn. These subjects are worthy of closer, individual examination.
This month’s installment will focus on the issues — interactive programming, advertising, privacy and security — that are most critical to examine as we move forward even more quickly than we’d imagined into the age of interactive TV.
SHATTERING SOME MYTHS ABOUT INTERACTIVE’S BENEFITS
The concept of interactive TV is almost synonymous with video-on-demand (VOD), interactive games, home shopping and customized advertising. Though VOD and games are fairly straightforward and are likely to be pretty much as popular as people claim they’ll be, home shopping and custom advertising have become part of a mythology about interactive services that is in need of serious examination.
It’s not hard to see why people believe that home shopping via interactive TV is the wave of the future. Unless you dig below the surface, it’s a perfect 1-to-1 map with the existing catalog sales market: instead of spending money designing and printing glossy mailers full of merchandise, stick the merchandise in front of a camera and let the person sell it who designed it, or carved it, or who dug the crystals out of a hillside in Sedona.
With a catalog, we pick up the phone, engage in a transaction with another human being, and merchandise appears at the door. With two-way interactive TV, our transaction is a point and click, and the merchandise appears. It is the ultimate in eliminating the middleman.
Yes, but. There are a large number of qualifiers that we should all be thinking about before we decide that TV-based shopping will provide the revenue base needed to move on to less venal pursuits for interactive home systems such as adult education and news delivery.
Although the catalog-to-TV map looks like a natural, we need to question whether or not the metaphor will be sustained over the long haul. Today’s home shopper is someone who, not surprisingly, spends a lot of time at home with credit cards. As the preponderance of material sold on home shopping channels today is junk, it is safe to assume that there is some sand running through the hourglass in terms of how long Visa et al. can support the compulsive spending habits of the housebound.
However, it is clear from the catalog shopping business — which racks up a whopping $60 billion per year, according to a commonly cited statistic — that there is a big market for the convenience provided by not going to a store to shop. What, then, is the difference between delivering product information via a paper catalog and seeing it on TV?
NTSC, the great equalizer. The answer is “screen resolution.” One of the oddest stories about high-definition TV — yet most obvious when you think about it — is that people love it for nature programs, but hate it for game shows and sitcoms because you can really see the cheesy materials and poor set construction.
We’re accustomed to seeing our illusions presented in NTSC, which turns all texture into blur. With NTSC, the North American standard for broadcast TV transmission, there is no perceivable difference between burlap and linen. It’s the great equalizer. And equally disturbing in the context of home shopping is the problem of NTSC color, which seems impossible to match from minute to minute on the same set, let alone from one to another.
This will not do. Because today’s upscale catalog shoppers can see a very high resolution, high-quality photograph that’s as close a representation to the real item as the seller can make it, they feel less threatened spending $300 for a silk suit they can’t try on. If it’s a bad photo, the seller will be flooded with returns (“It wasn’t anything like the picture”), which is more costly than not selling it in the first place.
Because of TV’s low resolution, this level of detail simply cannot be provided for merchandise ordered from NTSC TV. Unless they’re already familiar with the exact product, TV shoppers today really have to take it on faith that what they order will arrive looking even vaguely like it does on television.
There are good short- and long-term ways to work around this problem, but until something is done about the bad quality of NTSC video, serious shopping via TV — i.e., the kind that generates return customers — will not live up to its promise.
SHOPPING FOR STAPLES HAS A LOT OF POTENTIAL
There are people like me, driven to the wall with work and family pressures, who would kill to find something useful to buy on TV, be it interactive or otherwise.
But the 10-pound box of Tide Unscented, trash bags or toilet paper made from recycled stuff, a nice white Egyptian cotton shirt — in other words, staple products in the lives of professionals who can’t afford live-in help — just aren’t available, or if they are, they aren’t available in the time slots in which we watch TV. Certainly we won’t sit through a half-hour of retail histrionics to get to them, even if we are perversely fascinated with the Caruso Molecular Hairsetter.
And even if we did happen to see and order them, when would the goods be delivered? While we’re at work, so we have to spend Saturday picking them up at the post office or UPS? Would they be delivered to the office? Is that where professionals really want their laundry detergent delivered?
We don’t think so. What we would want is to have our order delivered when we need it to be — say, between 7 and 10 pm — to our homes. If we need to return things, we want someone to come pick them up when it is convenient for us, at no extra charge. If shopping channels are going to make millions and millions of dollars on our need for convenience, then they’re going to have to provide real convenience — by our definition, not theirs.
These points may seem beside the point in a discussion about interactive TV. But if these services — cornerstones for discussion about the financial viability of interactive TV — are to move beyond the housebound to people who have both urgent need for convenience in their lives and enough cash to satisfy it, then these are just some of the questions that have to be addressed before we even get to the interactive stuff. That’s just enabling technology, and the biggest questions about it have to do with privacy and security, which we address on page 6. These services could be money makers now, using the telephone or an online service — both of which use that “other” interactive network.
MASS MEDIA ADVERTISING IS DEAD
Television advertising. Now there’s an unlucky business to be in these days. Who watches ads on TV anymore? Channel surfing was born of ad hatred. Isn’t it odd, then, that advertising executives are often quoted saying that interactive TV is the catalyst that will revitalize this flagging industry?
Truth is that the advent of interactive technology sounds the death knell for mass media advertising. We are not privy to any secret information here. Let’s just look at the facts.
The myth of custom broadcast. One of the most popular misconceptions is that interactive TV will somehow deliver to advertisers, on a silver platter, you. You who will then be thrilled to be barraged with product information that appears to know everything from when you bought your last pregnancy test kit to your preferred flavor of Crystal Light.
They’ll know when you’ve been sleeping. They’ll know when you’re awake. They’ll be able to insert luxury car ads specifically targeted to you, even if you’re watching Studs — not exactly your upscale-type program demographic — because they’ll know that you’re out there, watching.
Fat chance. This may seem like a dream come true for advertisers, but it is a nightmare of vast proportion for real people. Be sure to read the accompanying story about Hewlett-Packard’s interactive TV market research on page 10. The number-one concern that early adopters have about interactive TV is personal privacy. Consumers absolutely will not stand for advertisers knowing who they are. They will require any service provider to prove that their personal information remains private.
Second, let’s just say that maybe for some reason — a kickback from the TV channel, or some other financial incentive — you’ve decided to go ahead and make your TVs (you have two) known on the system. It knows that you’re married and you have three kids — two teenagers (boy and girl) and a 6-year-old.
WHO IS TONIGHT’S ADVERTISING TARGET?
Who should the evening’s advertising menu target, and on which TV? The professional man? The professional woman/mother who does most of the shopping (not a stereotype, just true)? Who is sitting in the room with Mom and/or Dad? The teenagers, who have bigger allowances than their grandparents’ mortgage payment 30 years ago? How about that spoiled rotten baby of the family?
There’s absolutely no way to know unless they’re “logged in,” and considering the level of paranoia out there about personal privacy, that’s not likely. The fact is that interactive TV advertising, even if the “narrowcast” approach above was feasible, will not work.
It ignores the reason that people would choose interactive TV in the first place: control. The idea is to put you in front of the TV and make you feel like you can see, do or be anything you want. If you want to shop, you’ll shop. If you want to watch a movie or play a video game, you want to be left in peace. The last thing you want to see is an ad, especially not one “targeted” for you.
The intelligent agent. But we do need to buy things, and anyone with a busy life, which is most working folk these days, wishes they could hire a really smart person to work for them, someone who understands the value of a dollar, knows what has to be done and does it.
Any Level II (video on demand/multimedia) or Level III (on-demand information services) should be able to do the same thing. If I want to invest in a small camcorder, I should be able to select that product category on my shopping channel and my electronic slave should (and will) be able to search the network and find out what company listed on the network has the best price, features and service policy, deliver the information to me for a “yes” or “no,” and then buy it.
Desperate for customers. Manufacturers are desperate to get good products into the hands of customers and they’ll be the first to admit advertising isn’t pulling them in. An interactive network offers new solutions, but it will require a radical change in the way that both manufacturers and advertisers approach their customers.
A likely solution is the development of shopping areas on the network where manufacturers can rent “space,” so to speak, for online multimedia kiosks that provide detailed information about products. If I want to buy a miniature camcorder, I should be able to get all the product specs, reviews from consumer publications that I trust, and a list of authorized dealers of many brands of camcorder that have stores within five miles of my house. Such kiosks are among the few multimedia applications that has actually been successful outside the research labs.
Incentives to go out. Another variation on the theme would allow immediate online purchase and delivery. Another might give you a rebate for coming to the store instead of buying online — a way to get people into the retail outlets, looking at things they don’t necessarily want or need.
This still does not solve the problem of how you inspire brand loyalty over a network that “shops” for you based solely on price and features, but we have to leave a few topics for advertising executives to chew on in their spare time.
THE DOUBLE BIND: ADVERTISING VS. PROGRAM COST
A more fundamental problem in the long term is how the existing model of advertiser-supported programming is being ground up in the crush of new technology. Television programming has long been supported by mass media advertising, which in turn provided networks with enough revenue to cover TV’s high production costs.
As TV advertising gradually becomes a less potent force in the mass merchandising of products, manufacturers are taking their ad dollars away from TV, thus reducing the amount of money available to networks for program creation. (This has been most noticeable in the downsizing of network news departments, where production values are small and the returns are traditionally high; news just isn’t attractive to advertisers.)
Less money for more programs. So the dilemma is that there is less money available for the creation of TV programming — most of which is still generated by the major broadcast networks and repackaged or sold for retransmission on cable — at the same time that cable is gearing up to provide 500 channels of the stuff.
Assuming that 490 of them are not likely to be pay-per-view movies, how and what will fill all that channel capacity, if the production of programming is not being underwritten by advertising? George Lucas says that he can produce TV programs for one-tenth their former cost using digital media technology, but we don’t think these kinds of savings, which tend to lend themselves both to certain kinds of programs and to Lucasfilm’s particular computer expertise, will be the rule for a few years.
This fundamental discontinuity between channel capacity and capability to support it financially is not being addressed. In fact, at the recent National Cable Show in San Francisco, there seemed to be more niche, narrowcast programming than ever. The Golf Channel. Comedy Central. The Sunshine Network for regional sports. Black Entertainment Television. The Nashville Network. The Military Channel. The Russian-American Broadcasting Co.
NICHE PROGRAMMING AND THE DEATH OF SERENDIPITY
Who pays for this programming? In some ways, it seems that narrowcast could solve some of the problems of demographics — you’d probably have a fairly high rate of response for flannel shirt and army boot ads on the Grunge Channel, for example — but you still wouldn’t change the larger trend away from mass media, toward specialized interests and splintered audiences.
Narrowcasting begs the larger question, of course — the social implications of the death of serendipity in mass media. Those who watch the NeoNazi Channel (just wait, it’ll come) won’t search out, and aren’t likely to stumble across, the New Age Channel. Though it’s rare to change a certain type of person’s mind, occasionally a chance encounter can change for the better the way people respond to others in the world around them.
We’ll miss mass media. With so little tolerance for our fellow citizens remaining, it seems almost ironic that we’ve hated the “blandification” of cultures and lifestyles that has typified mass media for the past 40 years. By the turn of the century, we may actually mourn the passing of mass media’s representation of diverse points of view, even if they were skewed toward the status quo.
Aside from whatever problems we’ll have to iron out technically, a custom interactive network of the scope that’s being planned will indeed fundamentally change the way we live our lives and relate to each other. If the medium is the message, what is the message in a world of niche programming and special interests? How do we make people unlike ourselves care about our wants and needs, and vice versa, if we won’t change our own channel? Sticky questions, no good answers. But what’s hopeful is that it’s all brand new and we’re the ones who’ll get to decide. Let’s keep raising the level of discussion.
Denise Caruso
HEWLETT-PACKARD FINDS WHAT CUSTOMERS REALLY WANT
Market research quantifies the fan club for ITV
Before the grand old Silicon Valley computer company Hewlett-Packard decided that the market for interactive TV hardware was one it would pursue, it did something unusual for a technology company going into a new business: It did some real market research instead of bluffing itself into believing its brilliant business and engineering “intuition” was leading it in the right direction.
UNDERSTANDING A NEW TYPE OF CONSUMER
HP queried more than 4,000 people — the largest sample we’ve heard of yet — from the deep South, New Jersey, the Midwest, Los Angeles and the East Coast about what they’d like to see in an interactive TV system.
“We didn’t understand this type of consumer, so we did tons of market research,” says Laurie Frick of HP. She said part of the process was to find out what was actually happening in people’s lives and how they might be able to use such a system. Another was showing them mockups and prototypes of actual systems in focus groups. In addition, HP sent videotapes and descriptive brochures to their homes.
Starting to size the market. The quality of the survey made HP more comfortable about starting to size the market, as well as providing valuable data on people’s attitudes toward, and barriers about, using an interactive TV system.
As a result, HP came up with a profile of the first interactive TV user that was quite different than you’ve been hearing shouted from many rooftops. Initially, though, it isn’t any different from most of the pyramids you see for the adoption of a new technology. (In other words, thank God for early adopters.)
“Fan clubs” for interactivity. HP calls its innovators the “fan club” for interactivity. “They’re the ones who bought into the concept right away,” says Frick. “They liked all the standard stuff” — i.e., video on demand, interactive shopping services, games, etc. That group, she said, extrapolated out to about 6.5 million households.
“Utilitarian” time savers. The “utilitarians” weren’t of the same enthusiastic bent as fan club members, but liked the practical benefits they heard they’d be able to derive from a full-service TV network. Comparison shopping, the ability to purchase goods and the ability to retrieve all kinds of information from the ITV network held great appeal to this group, which HP estimates is eight million households. They are interested in time savings, but are equally concerned about network privacy and security issues.
“Lukewarms” and “ambivalents.” The second tier of ITV users were called “lukewarms and ambivalents.” Those who required the price to be very low or who loved some features and hated others, fell into these categories.
“TV rejecters” and “laggards.” These either hate TV or don’t buy technology. They would adopt ITV “late or never,” according to Frick.
BARRIERS TO WANTING INTERACTIVE TELEVISION
HP was able to isolate some significant — and perhaps surprising — barriers to the adoption of interactive services.
Personal privacy risks. First, says Frick, was the fear of “Big Brother,” a quite valid fear when the two-way nature of a full-service network allows the TV to become an eye into the living room that sees what movies you watch, what kinds of goods you shop for, whom you play video games with and what kinds of video games you play with them.
“When we showed them the standard applications, the first thing they said was, ‘Oh, someone could track everything I did’,” said Frick. Indeed, “someone” can do that now, too, but it could get worse. (See section on privacy and security, p. 6.)
Hacker crackdown. The second most-voiced concern was security. If the system used the customer’s credit card, people wanted to know how safe the system was, how it had been buttressed against hackers and how the electronic transactions were tracked and executed.
“The Potato Kid.” Frick said another big barrier was parents who said, “My kids already watch too much TV; they’re TV addicts.” Or for themselves: “My God, I’ll never leave the couch!”
Impulse control. The fourth barrier is actually quite compelling, and may turn out to be more of a problem than people think: “I’ll never be able to control my impulses — manage my spending, etc.”
Frick said when this topic was raised, she and her team were astonished by how many people said they “couldn’t trust” their mothers or grandmothers (or whoever happened to be living with them) with the home shopping channels now; what would happen if they could order just by punching a button on the remote?
A control issue. Frick says the underlying theme of all objections to interactive TV had to do with control. “If there was any sense that the TV was controlling them, that was really negative,” she said. “If they control it, it’s okay. If the people building these systems don’t take this into consideration, the whole thing will blow up.”
A DIFFERENT BREED OF CONSUMERS
As we had suspected even while the ITV hype pump was being primed, HP’s extensive survey showed that today’s consumers are much more savvy than they’re thought to be. For example, one of the most anticipated applications for ITV is the ability to do comparison shopping, which will drive the final nail into the coffin of advertising as we know it today (see p. 8).
And they’re smarter about obsolescence than industry would like them to be. Not only are they perfectly clear that hardware is worthless without applications, but they are quite discerning about where value resides in such a system. The example Frick gives is a question common to her early adopters. They ask, and for good reason, “Who will update the online restaurant guides when their menus change?”
And they will pay. HP’s survey was surprising in another way. Not only will word of mouth be sufficient propulsion to spread the adoption of ITV services, but based on its sample, HP is happy to report that consumers will be willing to pay for them, too.
“We don’t know whether to believe it or not, but people said they’d pay $18 to $22 per month for transactions — not just entertainment, but information lookups and shopping transactions,” said Frick.
POWER TO THE PEOPLE A DRIVING MARKET FORCE
It’s clear to HP, after conducting this survey, that a system designed to meet consumer needs will make those consumers much more powerful, and that is the attraction. If they don’t get what Frick calls “the wow” from such a system, they won’t buy in. Period.
“For example, Philips’ CD-I is for the mass market, but it missed the innovators,” Frick says. “The innovator looks at CD-I and says, ‘What’s amazing? What’s the wow?’”
She claims HP’s survey found that the wow for early adopters is access to information, the ability to control and personalize what comes through the TV set into the living room. They are savvy about computers and about getting what they want, when and where they want it. The race is on to see who will deliver it to them first.
Denise Caruso
SECURITY AND PRIVACY IN A DIGITAL WORLD
Nearly every benefit you hear about interactive TV and services in some way involves the capability to “pay for it over the network.” Home shopping. Home banking. Home movie rental.
Call it “pay-per-do.” When anything you buy over the network is tied to a transaction of some sort — let’s call it “pay-per-do” — what it means is that at some point in the process, you’ll have to send over a network (cable, fiber, copper, wireless) some piece of sensitive financial data.
Beyond financial transactions, two-way TV means that whoever is on the other end of the wire — Big Brother, perhaps, and all his nosy, felonious little cousins — can see you, too. The programs you watch, the product information you seek out, the movies you download from that certain section of the online video store — all is potentially valuable data to someone, whether it’s a direct marketer, a blackmailer or a bill collector.
A SCI-FI SCENARIO IF EVER THERE WAS ONE
The potential of such scenarios hasn’t been lost on the science fiction writers, those chroniclers of our technological nightmares.
One of the consistently amusing vignettes running through Pat Cadigan’s excellent cyberpunk novel Synners involves the GridLid in the Los Angeles of the future, a computer network built into cars designed to keep traffic flowing around jammed areas. Riddled with viruses, it becomes an enormous playground for hackers and digital pranksters, absolutely never works as intended, and traffic is worse than ever.
Cadigan’s novel paints a pretty bleak picture of what can happen when people rely too heavily on unprotected commercial networks, and the seeds for her particular disaster scenario can be seen nearly anywhere you look today.
Are we nuts? So what are we, crazy that we’re talking about interactive TV, which at its apex will be a global, high-speed computer network that we’re setting up to be the pinnacle of human reliance on technology?
There are solutions to this problem, but naturally they are not simple or even straightforward. As the national security agencies feel threatened by technologies, they try to roll legislation into place that may not necessarily serve the greater good (see “The FBI wants Dumb Networks,” Vol. 1, No. 11, p. 7).
If you’ve been keeping up with your reading about the Clipper chip, you know that the Clinton administration is embroiled up to its earlobes in controversy on the subject even as you read this.
ENCRYPTION IS THE ONLY SURE PROTECTION
The only way to protect the individual privacy of people using a network, and to provide security for the information and intellectual property that travels over a network is via some type of data encryption.
Computer-based encryption is an arcane art whereby a message is transformed via mathematics into a pattern of gibberish that can only be translated if you have the correct key.
DES and public key. There are only a couple of widely used encryption schemes. The best known today, called DES, belongs to the federal government, and it requires that both you and I have the same key to unlock the message. The sticky problem is finding a secure way to get the key to you if you’re in a different place than me, which is likely if I need to send you a message rather than just whisper in your ear.
Another method of encryption that’s gaining popularity as “the net” reaches toward ubiquity is called public key encryption. A process patented by RSA Data Security in Redwood City, CA, public key solves the key security problem by creating a system based on two keys per person, one public and one private.
Allows for many levels. Public key allows for a number of levels of security and privacy. Here’s how it works in a nutshell: If I simply want to send you a private message, I encrypt my message to you with your public key (public keys can be published in a directory just like a phone number without compromising security), and you decrypt it with your private key.
Now since handwriting analysis is a useless art in electronic data exchange, public key can also provide a way of authenticating that I was the person who sent you that message. To do that, I encrypt my message to you with my private key, and you decrypt with my public key.
Protection against alteration. A bonus benefit to authentication is that if any of the data had been altered, even one bit, your key would have been unable to decode it.
It’s also possible, if I want our message to be both secret and authenticated, to use both of our keys to encrypt and decrypt the message.
This is particularly helpful to owners of intellectual property who don’t want movies, music or photographs being lifted off the network, altered (or not) and resold. It can help assure them that at least for their leg of the journey, the information is being delivered only to the person who paid for it.
Furthermore (and this is an added benefit), using encryption regularly for information sent over a digital network is an excellent way to inoculate system software, applications (and the network itself, if used widely) against viruses.
If I want to sell and distribute software over the network — which is expected to become big business — especially application software that has the ability to manipulate data, it’s important for you and important for my continuing business that I don’t unwittingly send you an infected product.
Public key plus DES. Because public key uses more computer power than DES, companies such as pay-per-view cable providers are using combination systems to perform what’s called “key management.” Instead of encrypting the entire movie, for example, the cable operator simply uses public key to encrypt the DES key that will allow you to “unlock” the channel and view the movies you paid for.
The extra authentication step isn’t necessary because your key is built into your cable decoder box, or into a “smart card” provided to you by the cable company.
Digital cash goes one step beyond. Some encryption schemes go even further to protect personal information. Called digital cash, they are an electronic means of paying for goods and services over a network; but unlike today’s credit cards, there is no personal identification tied to the transaction.
Companies like A-Squared Systems in Oakland, CA, and researchers such as David Chaum at the Center for Math and Computer Science at the University of Netherlands in Amsterdam are working on digital cash systems that will make it absolutely none of anyone’s business who you are and where your money is coming from.
HOW DO YOU MAKE SURE IT’S NONE OF THEIR BUSINESS?
Solutions such as encryption will have to be adopted if we are indeed to conduct commerce over the network. But now that we’ve solved the security problem, what about the broader one of privacy? How do we handle the potential abuses of personal information that are ripe for the picking in a two-way interactive network deeply connected into the workings of your home?
As we’ve mentioned elsewhere in these pages, Hewlett-Packard’s consumer research shows that people are very concerned about their privacy as a two-way network is deployed.
Magnifies the present. A two-way, high-capacity network certainly increases the potential for abuse; but really, it’s only a magnification of the problems we have now. And many of those problems are based simply on the fact that the United States has a very powerful direct-marketing lobby that screams bloody murder every time citizens ask for more direct control over what is done with their personal information.
Just say no. Other countries, most notably the European Community and Canada, have very strong privacy laws — Canada even has an appointed office that acts as liaison in cases where people think their privacy is being compromised — that require companies to contact you personally if they intend to sell your name to another firm. They have to tell you who the firm is, what they want to do with the information, and specifically which information they are releasing. If you say no, they can’t release it. Period.
This of course doesn’t sit well with advertisers, but as we point out in the main story, the two-way network obviates advertising as we know it anyhow. There has to be a different solution. If we want an intrusive technology like interactive TV to really reach its potential, the U.S. may need to consider a more proactive stance on personal privacy.
Denise Caruso
ALLIANCE FEVER: A SNAPSHOT IN TIME
Here’s as exhaustive a list as we could muster of the alliances, business agreements and shared financial interests of companies involved in the nascent interactive TV/interactive services industry. All things considered, this list is probably already out of date.
The more important question is what significance do any of these cooperative arrangements have in a world where Cablesoft exists? As TCI chairman John Malone said in a recent magazine interview, “When you’re driving plate tectonics, you’re going to squeeze people’s tails.” We bet the people on this list wish it was only their tails getting squeezed. We predict that in the next six months, many of these alliances will be materially altered as a result of Cablesoft, even though it will be years before a full-service network is actually operational.
THE 3DO COMPANY WITH…
• MCA/Matsushita, Kleiner Perkins Caufield & Byers, Electronic Arts and Time Warner: Strategic partners.
• AT&T: AT&T is a hardware licensee of 3DO Interactive Multiplayer. AT&T plans to manufacture and market a network version of the player. AT&T is also an equity partner is 3DO.
• Sanyo: Sanyo is a hardware licensee for the 3DO Interactive Multiplayer.
• Over 300 software companies have signed licensing agreements to develop software for the 3DO Interactive Multiplayer.
ACTV INC. WITH…
• Washington Post: To provide interactive services for television, called ACTV Interactive.
AMERICA ONLINE, INC. WITH…
• Paul Allen: Allen owns 24.9 percent of America Online (AOL).
• Sprint: Sprint has a warrant to purchase 450,000 shares of AOL, around 7 percent.
• Tribune Company: Tribune owns approx. 10 percent of AOL.
• Apple Computer: Licensing agreement to use AOL technology for its future online services, including for use with Newton devices. Apple has a warrant to purchase about 5.8 million shares, approx. 8 percent, of AOL.
• Tandy and Casio: AOL to provide a version of AOL for Zoomer.
AMERITECH WITH…
• Apple Computer: To provide advanced messaging services for Apple’s Newton devices.
• Cardinal Communications and BroadBand Technologies: Ameritech subsidiary Indiana Bell, Cardinal and BroadBand Technologies to test a fiber distribution system for video and voice over fiber-optic, coaxial and twisted-pair lines.
• IT Network: To create electronic Yellow Pages.
• Dun & Bradstreet Information Services: To market business information and advice offered over the telephone to small businesses.
• Audio Services Inc.: To provide information, product ordering, polling and ordering services to telephone customers.
• Wisconsin Health Information Network (WHIN): Ameritech has an interest in WHIN, a company that operates an automated health care information service.
APPLE COMPUTER WITH…
• First Cities: See First Cities.
• General Magic: See General Magic.
• Ameritech: See Ameritech.
• BellSouth: To test banking and other information services with an Apple Newton prototype.
• US West: To explore screen-based telephony, identification and communication services for Apple’s Newton devices.
• Kaleida Labs: Formed by IBM and Apple to develop a cross-platform scripting language for multimedia.
• Toshiba: To develop multimedia personal digital assistants (separate from Newton development).
• Public Broadcasting Service: Project “Media Fusion” to test networked multimedia, including video, voice and text, in schools.
• America Online: See America Online.
• Sharp: To develop and manufacture Newton personal digital assistants.
• Motorola: Motorola has a licensing agreement to manufacture and market a handheld device based on Apple’s Newton technology.
• Siemens-ROLM: To develop NotePhone, a combination of Siemens-ROLM telephony and Newton technology that will provide access to telephone and fax features.
• Cirrus Logic: Cirrus to develop and supply Newton-compatible chipsets for use by licensees of the Newton operating system and by Apple itself for Newton devices.
• Kyushu Matsushita Electric: To explore the opportunity to include KME-provided technology in future Newton-family products. KME has also licensed the Newton operating system.
• LSI Logic: LSI is manufacturing an application specific integrated circuit (ASIC) chip for Newton devices.
• GEC-Plessey: Licensed the ARM chip at the heart of the Newton.
• VLSI Corp.: Licensed the ARM chip.
AT&T WITH…
• Compression Labs: To develop a settop box to deliver movies and other video services to the television via phone lines.
• Viacom International: To provide advanced technology (i.e., ATM switches) for a test of interactive consumer video services via Viacom’s two-way cable system in Castro Valley, CA.
• StarSight: To provide an on-screen programming guide for the AT&T/Viacom Castro Valley trial.
• TCI: Letter of intent to order subscriber (settop) boxes from AT&T.
• US West and TCI: Viewer-Controlled Cable Television (VCTV) venture to test customer demand for interactive television services in Englewood, CO.
• General Instrument: GI customized settop boxes per specifications from AT&T Bell Labs for the Englewood, CO, trial.
• General Magic: Equity partner AT&T is building an enhanced network service based on General Magic’s Telescript communications language. See General Magic.
• 3DO: See 3DO
• Go Corp.: To develop underlying technology, based on AT&T’s Hobbit family of microprocessors, for personal communications devices, including EO appliances.
• Sega and PF Magic: To launch a low-cost platform, called the Edge 16, to make video game play with multiple users possible over regular phone lines. Also, AT&T is an investor in PF Magic.
• Time Warner Cable: AT&T to supply ATM switch for video delivery at Florida site.
• EO: To develop personal digital assistants. AT&T is a major investor. See EO.
• Sierra Network: Letter of intent to become a strategic partner in Sierra Network.
• AT&T Bell Laboratories, BellSouth and Appalachian University: To test an ISDN driven distance learning network for voice, image, data and other services.
• Bell Atlantic: To supply video dial tone (asymmetrical digital subscriber line, or ADSL) technology for a Bell Atlantic test of video over twisted-pair copper lines. Also, to test voice, video and data transmissions using ADSL technology in the Union City, NJ, school system.
• Southwestern Bell: To research “The Intelligent Home” of the future, which includes a prototype ISDN Personal Video System from AT&T Networks Systems.
• GTE: To supply GTE with ATM switching technology for a video and data services trial in the Dallas-Ft. Worth area.
• US West: To trial a distance learning network based on AT&T ATM technology. This test is part of a long term project called Communications Programs for Advanced Switching Services (COMPASS).
• Comstream Corp. and News Datacom (subsidiary of News Corp.): To provide companies with compression, transmission and network access control technology for video-on-demand services.
• Zenith Electronics Corp.: To develop video compression technology, primarily for HDTV.
• Mead Data Central, Inc. (a subsidiary of Mead Corp.): AT&T Easylink Services and Mead have alliances for providing information services, such as Nexis and Lexis online services, to AT&T messaging customers.
• Experimental University Network (XUNET): AT&T Bell Labs, National Center for Supercomputing Applications, Sandia National Laboratory and seven research universities to research a coast-to-coast ATM-based network, co-sponsored by the National Science Foundation.
• McCaw Cellular Communications, Inc.: AT&T to invest $3.8 billion for a 33 percent stake in McCaw.
BELL ATLANTIC CORP. WITH…
• FutureVision of America Corp.: Bell Atlantic to install an advanced fiber optic network in Dover Township, NJ, using technology from BroadBand Technologies, which will enable information services and video on demand.
• Loudon Cablevision: To test transmission of video signals and voice over an advanced telephone network (fiber to the curb, or FTTC) in Loudon County, VA.
• IBM: To supply video server technology and customized software to Bell Atlantic for test trial of video on demand over copper telephone wires in Loudon County, VA.
• AT&T: See AT&T.
• Northern Telecom: To employ prototype video-on-demand ADSL technology from Northern Telecom in Loudon County, VA, test.
• Westell: Bell Atlantic to employ prototype video on demand (asymmetrical digital subscriber line, or ADSL) technology from Westell in Loudon County, VA, test.
• Compression Labs: Supplying settop boxes in Loudon County, VA, trial.
• Philips: To test electronic Yellow Pages on CD-I in Loudon County, VA.
• Sammons Communications, Inc.: To install an advanced fiber-optic network in Morris County, NJ, using technology from BroadBand Technologies, which will enable information services and video on demand. Sammons is leasing space on this system.
• Columbia/TriStar, MCA/Universal, Disney, MGM/UA, MTM, Paramount, Touchstone, 20th Century Fox, Warner Bros., NBC, National Geographic: To supply content for video-on-demand trial in Loudon County, VA.
BELL COMMUNICATIONS RESEARCH (BELLCORE) WITH…
• Northern Telecom (Bell Northern Research): To test video dial tone technologies.
• First Cities: See First Cities.
BELLSOUTH TELECOMMUNICATIONS, INC. WITH…
• Apple Computer: See Apple.
• U.S. Order: To develop ScanFone, a device combining a telephone with a bar code reader, a dedicated computer, a modem and a credit card magnetic stripe reader.
• IBM: To study high-speed networking technologies for voice, video and text transmission.
• Dow Jones: To explore and implement new information services, Personal Info Clips and Interactive Advertising Service, for cellular phone customers. Also, to develop an interactive advertising service called The Reader Service Line for newspaper readers.
• The Palm Beach Post: To provide information services at three-digit phone numbers.
• Cooperative Healthcare Networks, Inc.: Bell South owns CHN, a company that operates an automated health care information service.
• AT&T Bell Laboratories and Appalachian University: To test an ISDN-driven distance learning network for voice, image, data and other services.
• Cox Enterprises: To develop and market electronic information services based on newspaper classifieds and Yellow Pages advertising.
CABLEVISION SYSTEMS CORP. WITH…
• R.H. Macy & Co., Don Hewitt and Tom Leahy: To start a cable TV channel, called TV Macy’s, in the fall of 1994 devoted to selling merchandise from Macy’s and Bullock’s stores.
• Interactive Network: Cablevision is a strategic investor.
• Digital Equipment Corp.: To develop an advanced fiber-optic network in New York using DEC’s Digital Channel technology.
CASIO COMPUTER CO. WITH…
• Tandy Corp.: To develop a personal information appliance, called Zoomer. See Tandy.
CINCINNATI BELL WITH…
• R.R. Donnelley: To research electronic Yellow Pages.
COMCAST WITH…
• Amcell: Cellular phone service supplier owned by Comcast.
• Metromedia Co.: Cellular telephone service supplier acquired by Comcast for $1.1 billion.
• Fleet Call, Inc.: 5 percent owned by Comcast.
• QVC: 11.8 percent common shares in QVC.
• Eastern TeleLogic Corp.: 51 percent of telecommunications company owned by Comcast.
• Turner Broadcasting: Minority investor ($5 million).
• Viewer’s Choice: Investor.
COMPRESSION LABS WITH…
• Bell Atlantic: See Bell Atlantic.
• AT&T: See AT&T.
COMSAT WITH…
• First Cities: First Cities member.
• Comsat’s On Command subsidiary has video-on-demand service agreements with Hilton, Fairmont, Marriott, Westin, Ritz-Carlton and ANA hotels, Holiday Inns and the Boca Raton Resort & Club.
COX ENTERPRISES, INC. WITH…
• Teleport: A fiber-optic company and alternative telephone service provider owned by Cox and TCI.
• Southwestern Bell: Cox Cable owns 25 percent of Southwestern Bell’s cable and telco business in UK.
• Discovery Communications: Cox Cable owns 24.6 percent of The Discovery Channel.
• BellSouth: See BellSouth.
DISCOVERY COMMUNICATIONS WITH…
• TCI: TCI has a 49 percent interest in Discovery. Discovery to develop video-on-demand service provisionally called Your Choice TV.
• Cox: See Cox.
• GTE ImagiTrek: To test interactive television using Philips’s CD-I networked to television sets to add a layer of interactive information to Discovery Channel shows.
• World Book Encyclopedia: To provide information on CD-I for GTE ImagiTrek and Discovery.
• Archive New Media: To supply photos and images on CD-I for GTE ImagiTrek and Discovery.
• Geosphere: To provide global images on CD-I for interactive programming on Discovery Channel.
EO, INC. WITH…
• Kleiner Perkins Caufield & Byer, Matsushita, Olivetti and Marubeni: Partners.
• General Magic: EO has license to develop General Magic’s Telescript technology for Go Corp.’s PenPoint operating system in EO personal communications.
• AT&T: See AT&T.
• Go Corp.: To incorporate the PenPoint operating system from Go Corp. into EO personal communicators.
FIRST CITIES WITH…
• Apple Computer, Bell Communications Research (Bellcore), Bieber-Taki Associates, Comsat Video Enterprises, Corning, Eastman Kodak, Kaleida Labs, Microelectronics and Computer Technology Corp. (MCC), Philips Electronics North America Corp., Southwestern Bell Technology Resources, Sutter Bay Associates, Tandem, and US West: To test and develop a multimedia services network for consumers.
GENERAL INSTRUMENT CORP. WITH…
• Microsoft and Intel: To develop settop boxes.
• TCI: GI to provide TCI with 1 million settop boxes for digital cable services.
• Newhouse Broadcasting: Newhouse to purchase settop boxes from GI.
• Sammons Communications: To test video on demand in Waterbury, CT, using GI settop boxes.
• TV Answer: To develop settop boxes compatible with TV Answer service.
GENERAL MAGIC WITH…
• Apple Computer, AT&T, Sony, Motorola, Matsushita and Philips Consumer Electronics: Equity partners to build personal digital assistant with interactive network technology.
• Mead and News Corp.: To provide news and other information for the General Magic device.
• EO: See EO.
GM HUGHES ELECTRONICS WITH…
• National Rural Telecommunication Cooperative (NRTC): To create packages of programming services for DirecTV, Inc., a subsidiary of GM Hughes Electronics, direct-broadcast satellite service.
• Thomson Consumer Electronics (RCA subsidiary): Thomson to manufacture and market DirecTV receivers, and to develop compression technology.
• The Disney Channel, Paramount and Sony Pictures Entertainment (Columbia TriStar International Television): Signed a service agreements with Hughes and NRTC.
• News Datacom: News Datacom is developing a conditional access and encryption system for DirecTV.
• Digital Equipment Corp.: DEC is operating the national billing center for DirecTV.
GTE CORP. WITH…
• Apollo CableVision: To test interactive video and services at the test bed for interactive video and services in Cerritos, CA with a service called GTE Main Street. The Cerritos test includes true video on demand, a 30 channel pay-per-view system and a full-motion video phone system.
• Daniels Cablevision: To offer interactive video and services in Carlsbad, CA, with a service called GTE Main Street.
• Continental Cable: To offer interactive video and services in Newton, MA, with a service called GTE Main Street.
• AT&T Network Systems: Testing AT&T Network Systems switching equipment in test bed for a full-service interactive network in Cerritos, CA.
• Fujikura: Fujikura to supply fiber optic splicing equipment for Cerritos test.
• Sumitomo Electric Fiber Optics Co.: Sumitomo to supply fiber optic equipment to develop a mass fusion fiber optic splicer which splices 12 fiber cables simultaneously.
• American Lightwave Systems: GTE is using American Lightwave’s switching equipment in Cerritos, CA.
• BroadBand Technologies: GTE is using BroadBand Technologies’ technology to develop a delivery platform for interactive video.
• Discovery Communications: See Discovery.
• World Book Encyclopedia: See Discovery.
• Archive New Media: See Discovery.
• Geosphere: See Discovery.
• Interactive Network: To provide interactive content for GTE Main Street.
• NTN Communications: NTN to provide interactive games and entertainment for GTE Main Street.
• AT&T Network Systems: See AT&T.
• NEC: NEC to supply GTE with ATM switch for a video and data services trial to begin in early 1994 in the Dallas-Ft. Worth area.
HEWLETT-PACKARD WITH…
• TV Answer: Hewlett-Packard Interactive TV Appliance Group plans to sell an add-on box for the TV Answer system.
HOME SHOPPING NETWORK, INC. WITH…
• R.H. Macy & Co.: HSN to provide fulfillment and customer service functions for TV Macy’s, a shopping network to be launched by R.H. Macy & Co., Cablevision Systems, Don Hewitt and John Leahy.
• Liberty Media: Liberty owns 70 percent of HSN.
IBM CORP. WITH…
• Rogers Communications: To study information services over cable and telephone wires.
• ICTV and New Century Communications: IBM to supply digital video server technology for tests of the ICTV and NCC interactive television system called the Interactive Television Solution.
• Digital Domain: James Cameron, Stan Winston and Scott Ross establish a digital production studio with IBM.
• Blockbuster Entertainment Corp.: To distribute digital entertainment to retail stores via a network.
• Prodigy: IBM and Sears are owners of this online service.
• Pacific Bell and Northern Telecom: To research interactive services.
• NBC and NuMedia Corp.: To develop and test market a multimedia news delivery service, called NBC Desktop News, to send customized text, graphics and video to PC users.
• Bell Atlantic: See Bell Atlantic.
• BellSouth: See BellSouth.
• Kaleida Labs: See Apple.
• MCI and Merritt Corp.: To develop the high-speed backbone for NSFNet and the Internet.
ICTV WITH…
• New Century Communications (NCC) and IBM: See IBM
INTERACTIVE NETWORK WITH…
• TCI: To market and distribute IN programming to TCI cable subscribers. TCI owns 22 percent of IN.
• National Broadcasting Co., Gannett Co. Inc., Cablevision Systems, A.C. Nielsen: Strategic investors.
• NTN Communications: IN licenses interactive content from NTN.
• GTE: See GTE.
IT NETWORK WITH…
• Cableshare, Inc.: IT Network owns 52 percent of Cableshare, a company that has developed a patented interactive television technology utilizing the cable television and telephone networks. IT Network holds a license for unlimited use of Cableshare technology.
• Sammons Communications: To test interactive television services, including video on demand, home shopping, multimedia information services and games, in Denton, TX.
• Booth Communications: To test an interactive television network service, called Teacher’s Assistance Program (TAP), with teachers, students and parents of Midvale Elementary School.
• Wunderman Cato Johnson Worldwide: To develop interactive advertising, incorporating images, sound and text.
• Foote, Cone & Belding: To develop interactive advertising, incorporating images, sound and text.
• Freedom Newspapers: To develop, market and sell an interactive television classified service over IT Network’s Interactive Channel.
• Ameritech: See Ameritech.
KALEIDA LABS, INC. WITH…
• Apple and IBM: See Apple.
• Hitachi, Toshiba, Mitsubishi, Creative Technologies: To build hardware products incorporating ScriptX interoperability software by Kaleida.
• Scientific Atlanta and Motorola: To develop open-architecture terminals, servers and networks incorporating Kaleida scripting technology and Motorola’s microprocessor technology based on the PowerPC architecture.
• United Video Satellite Group: To use Kaleida ScriptX technology to develop a multimedia graphical user interface for digital settop boxes.
KBLCOM WITH…
• Zenith Electronics: To supply settop converters for Star Response, a two-way cable system for information delivery, polling and advertising developed by KBLCOM in San Antonio, TX, and for Rogers Interactive Systems, a two-way cable system in Portland, OR. KBLCOM has developed the interactive software for these Zenith systems.
• FBRCOM: A fiber company owned by KBLCOM that handles high-speed multiplexing telephone lines for AT&T and MCI in San Antonio, TX.
• StarSight: Investor.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music services.
LIBERTY MEDIA CORP. WITH…
• Encore Media Corp.: Liberty owns 90 percent of Encore, a mini pay cable channel.
• TCI and Encore: To create a new pay-cable network, with Universal films as its cornerstone.
• TCI: Owns approximately 5 percent of Liberty. Liberty is a TCI spinoff company.
• News America Publishing: To produce an electronic program guide called TV Guide On Screen with Liberty affiliates XPress Information Services, Ltd., and Star Net, Inc.
• QVC: With TCI, Liberty owns 23.5 percent of QVC.
• Home Shopping Network: See HSN.
• Scientific Atlanta: Scientific Atlanta to supply Star Net with equipment for digital advertising insertion capability.
MICHAEL MILKEN WITH…
• Michael Jackson: To start the Education Entertainment Network, an interactive education channel.
MICROELECTRONICS AND COMPUTER TECHNOLOGY CORP. (MCC) WITH…
• First Cities: See First Cities.
• Sprint: To provide network support services for the Enterprise Integration Network (EINet).
MICROSOFT CORP. WITH…
• Intel and General Instrument: To build settop boxes.
• TCI and Time Warner: Joint venture called Cablesoft to develop software for high-capacity interactive cable system software.
MOTOROLA CORP. WITH…
• Kaleida and Scientific Atlanta: See Kaleida.
• General Magic: See General Magic.
• Apple Computer: See Apple.
NEWHOUSE BROADCASTING WITH…
• General Instrument: See General Instrument.
• Time Warner: Vision Cable Communications (a division of Newhouse Communications) and Time Warner to form company called Charlotte AxS L.P. to build a fiber-optic network that would provide telephone service.
NEWS AMERICA PUBLISHING INC. WITH…
• Liberty Media Corp.: See Liberty Media.
• Zenith, GI and Scientific Atlanta: Zenith, GI and Scientific Atlanta settop boxes will receive TV Guide On Screen. TV Guide On Screen is based on an open architecture, with software for the guide distributed at the headend.
• TCI: A field trial of TV Guide On Screen is underway in the Denver area in households served by TCI.
NORTHERN TELECOM WITH…
• Bellcore: See Bell Communications Research.
• IBM and Pacific Bell: See IBM
• Bell Atlantic: See Bell Atlantic.
• Amati Communications: To develop discrete microtone technology (DMT) — an ADSL technology — for video-on-demand services.
• Bank of Boston: To test banking services via a screen-based telephone.
NTN COMMUNICATIONS WITH…
• GTE Main Street: See GTE.
• GE: NTN provides interactive games and entertainment to GE’s GEnie, a PC-based online service.
• Interactive Network: See Interactive Network.
• TV Answer: NTN provides interactive games and entertainment to TV Answer.
• Sierra Network: NTN provides interactive games and entertainment to SN.
• LodgeNET Entertainment Systems: NTN and LodgeNET provide interactive games and entertainment to hotels.
NYNEX CORP. WITH…
• Liberty Cable Television: New York Telephone, a Nynex subsidiary, and Liberty Cable to test video dial tone in New York City.
• Philips: To develop and test a system that integrates text and voice information services, including home banking, electronic mail and electronic White Pages, using visual-display telephone.
• Dow Jones & Co., Inc.: To develop and test a video news service to include video programming and other services over the Nynex telephone network.
• Newsday, Inc. (a Times Mirror Co.): To test audio information services among Nynex telephone subscribers in Long Island, NY.
ORACLE WITH…
• US West: To develop a multimedia information server.
PACIFIC TELESIS GROUP, INC. WITH…
• Northern Telecom, IBM: See IBM.
• KRON (Chronicle Broadcasting): To develop community services, such as traffic updates, by employing Pacific Bell’s network to transmit news data to remote display screens in the San Francisco Bay area.
• Dow Jones News Service: To provide information services to telephone customers.
PHILIPS ELECTRONICS NORTH AMERICA CORP. WITH…
• First Cities: See First Cities.
• GTE Corp.: See GTE Corp.
• Capital Cities/ABC Video Productions: To develop CD-I titles.
• Paramount Inc.: Paramount will distribute its full-length movies on CD-I.
• Whittle Communications: Philips Electronics owns 25 percent of Whittle.
• Nynex Corp.: See Nynex.
• Blockbuster Entertainment: Philips owns a percentage of Blockbuster Entertainment. See IBM.
• Propaganda Films: Philips P.O.V., a division of Philips Interactive Media of America, and Propaganda to produce an interactive film for CD-I.
PRODIGY CORP. WITH…
• IBM and Sears: See IBM.
• Sierra Network: Prodigy signed a letter of intent to link Sierra Network and Prodigy online services.
PUBLIC BROADCASTING SERVICE (PBS) WITH…
• StarSight: Investor. PBS to insert StarSight information in vertical blanking intervals (VBI) for all PBS broadcasts.
• TV Answer: PBS to use TV Answer technology for interactive broadcast.
• New Learning Project: PBS is working with a number of multimedia producers nationwide to develop interactive network systems.
• Apple Computer: See Apple.
QVC NETWORK WITH…
• TCI and Liberty Media: See Liberty Media.
• Comcast: See Comcast.
• Time Warner : 5.8 percent of common shares in QVC.
• Individual shareholders own 47.7 percent.
• British Sky Broadcasting: To develop electronic retailing program services in Europe (excluding Spain and Portugal), similar to the QVC shopping channel in the U.S. BSkyB is half owned by News Corp.
• Grupo Televisa S.A. de C.V.: To develop electronic retailing program services, similar to the U.S. QVC service, in Mexico, Spain and Latin America.
RADIO TELECOM AND TECHNOLOGY WITH…
• OKI Electric of Japan: to build hardware for interactive TV systems.
R.H. MACY & CO. WITH…
• Cablevision, Don Hewitt and Thomas F. Leahy: See Cablevision.
• Home Shopping Network: See Home Shopping Network.
ROCHESTER TELEPHONE CORP. WITH…
• USA Video Corp.: To test market true video and information services on-demand in Rochester, NY.
• New Richmond Cable Co., Inc.: A cable co. owned by St. Croix Telephone, a subsidiary of Rochester Tel, in WI.
• Mid-South Cablevision Co., Inc.: A cable co. affiliate of Mid-South Telephone, a wholly owned Rochester Tel company, in Mississippi.
• Thorntown Telephone Co.: Thorntown, a wholly owned subsidiary of Rochester Tel, owns and operates a cable company in Indiana.
ROGERS COMMUNICATIONS, INC. WITH…
• IBM Corp.: See IBM.
• Canadian Home Shopping Network: Rogers owns 94.5 percent of CHSN.
R.R. DONNELLEY WITH…
• Cincinnati Bell: See Cincinnati Bell.
SAMMONS COMMUNICATIONS, INC. WITH…
• Bell Atlantic: See Bell Atlantic.
• IT Network: See IT Network.
• General Instrument: See General Instrument.
• Scientific Atlanta: To supply Sammons with settop boxes.
SCIENTIFIC ATLANTA WITH…
• Kaleida Labs and Motorola: See Kaleida.
• Time Warner and Toshiba: Scientific Atlanta and Toshiba to provide fiber-optic transmission gear, subscriber equipment and integrators for Time Warner’s full-service network in Orlando.
• TCI: To order additional settop compressed digital terminals and related equipment from Scientific Atlanta.
• United Video Satellite Group, Zenith Cable Products and Pioneer New Media Technologies: To create a full-service platform for the delivery of interactive video, audio and data services.
• Viacom: To purchase Scientific Atlanta compression technology.
• StarNet (Liberty Media affiliate): See Liberty Media.
• Sky Connect: Scientific Atlanta to supply equipment for digital advertising insertion capability.
• Digital Music Express : Investor in DBS-delivered digital music service.
• News America Publishing Inc. and Liberty Media, StarSight and Prevue Networks: Scientific Atlanta to develop cable converters compatible with these various electronic program guides.
• Sammons: See Sammons.
SEGA WITH…
• TCI and Time Warner: To launch the Sega Channel, an interactive video game channel.
• AT&T and PF Magic: See AT&T.
SIERRA NETWORK WITH…
• Sierra On-Line: Sierra Network is a wholly owned subsidiary of Sierra On-Line.
• AT&T: See AT&T.
• Prodigy: See Prodigy.
SILICON GRAPHICS, INC. WITH…
• Industrial Light & Magic: See ILM.
• Time Warner: To develop technology for a full-service interactive network in Orlando, FL, based on SGI’s MIPS microprocessor architecture.
SKYPIX CORP. WITH…
• Sky King Investment Corp.: Sky King was an original investor in SkyPix Joint Venture L.P. to develop a direct broadcast satellite home entertainment system. SkyPix has filed Chapter 11 bankruptcy in a Seattle, WA, court.
• OI, Inc.: Former strategic partner.
• The Calafia Group: Former strategic partner.
• Richard Owens Investment Corp.: Former strategic partner.
SONY CORP. WITH…
• General Magic: See General Magic.
• United Video Satellite Group and Mark Goodson Productions: To launch an all-game-show channel, with interactive capabilities to be added.
SOUTHWESTERN BELL WITH…
• Hauser Communications: Southwestern Bell to purchase two cable systems from Hauser for $650 million.
• First Cities: See First Cities.
• Cox Communications: See Cox.
STARSIGHT TELECAST, INC. (FORMERLY INSIGHT TELECAST) WITH…
• AT&T and Viacom: See AT&T.
• Zenith: To build StarSight electronic program guide technology into Zenith TV sets.
• Scientific Atlanta: See Scientific Atlanta.
• Mitsubishi: To build StarSight electronic program guide and one-touch VCR recording capability into Mitsubishi TV sets and VCRs.
• Tribune Co., Times Mirror Cable Television, Providence Journal Co., KBLCOM, Spelling Entertainment, Sumitomo and TV Data Technologies: Strategic partners.
• PBS: See PBS.
• Viacom: To provide an on-screen programing guide for Castro Valley system. Viacom owns 23 percent of StarSight.
TANDY CORP. WITH…
• Casio Computer Co.: See Casio.
• Intuit: Intuit is to provide Pocket Quicken, a personal finance application, for Zoomer.
• GeoWorks: GeoWorks to provide the GEOS operating system for Zoomer.
• Palm Computing: Palm to provide applications such as a personal information manager, reference programs and calculations programs as well as the PalmPrint handwriting recognition software for Zoomer.
• America Online: AOL to provide a version of AOL for Zoomer.
TELE-COMMUNICATIONS, INC. (TCI) WITH…
• Microsoft and Time Warner: See Microsoft.
• Time Warner: To develop industry standards in hardware and software for high-capacity interactive cable systems.
• US West and AT&T: See AT&T.
• General Instrument: See General Instrument.
• Scientific Atlanta: See Scientific Atlanta.
• Sega and Time Warner: See Sega.
• Request Television: A pay-per-view satellite network partly owned by TCI.
• Turner Broadcasting Co., Guest Cinema: Investor.
• Discovery Communications: See Discovery.
• Liberty Media Corp.: See Liberty.
• Interactive Network: See Interactive Network.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music service.
• Carolco: To distribute first-run movies from Carolco in a pay-per-view window.
• News Corp.: To create a cable channel for TCI with both Fox shows and original programming.
• Encore Media: See Liberty Media.
• Teleport: See Cox.
TIME WARNER WITH…
• U.S. Satellite Broadcasting: Service agreement for Time Warner properties, including HBO and Cinemax.
• TCI: See Tele-Communications.
• TCI and Microsoft: See Microsoft.
• US West: To provide interactive television services, initially in Orlando, FL, then in suburbs of Wekiva, Lake Brantley, Sweetwater and Spring Valley by early next year. Also, US West purchased 25.5 percent interest in Time Warner Entertainment for $2.5 billion.
• Scientific Atlanta and Toshiba: See Scientific Atlanta.
• Toshiba: Owns 6 percent stake in Time Warner Entertainment (TWE).
• 3DO: See 3DO.
• AT&T: See AT&T.
• Sega and TCI: See Sega.
• Itochu (formerly C. Itoh): Owns 6 percent of TWE.
• MetroComm: Time Warner purchased 50 percent of this Ohio-based fiber-optic competitive access telephone network.
• QVC: See QVC.
• Vision Cable Communications (a division of Newhouse Communications): See Newhouse.
• Silicon Graphics: See Silicon Graphics.
• Whittle Communications: Time Warner owns 37 percent of Whittle.
• Various network channels investments, including Comedy Central.
TV ANSWER WITH…
• Hewlett-Packard: See HP.
• Phoneworks: To supply TV Answer reception service for transactions.
• Public Broadcasting Service: To air interactive programming.
• NTN Communications: See NTN.
• General Instrument: See General Instrument.
• More than 50 service providers, including financial services, food and groceries, and direct marketers.
U.S. Satellite Broadcasting with…
• Hughes: USSB bought five transponders from Hughes at a cost of $100 million.
• Viacom International: Service agreement for Viacom properties, including Nickelodeon, MTV, VH-1, Showtime, Movie Channel and Flix.
• Time Warner: See Time Warner.
UNITED VIDEO SATELLITE GROUP WITH…
• Scientific Atlanta, Zenith Cable Products, and Pioneer New Media Technologies: See Scientific Atlanta.
• Kaleida Labs: See Kaleida.
• Sony Pictures Entertainment and Mark Goodson Productions: See Sony.
• Trakker Interactive Services, Inc.: Trakker, an interactive delivery service employing FM subcarrier, is an affiliate of United Video.
• Prevue Networks: Prevue, developer of an electronic program guide, is an affiliate of United Video.
US WEST WITH…
• Time Warner: See Time Warner.
• Oracle: See Oracle.
• TCI and AT&T: See AT&T.
• First Cities: See First Cities.
• Apple Computer: See Apple.
• France Telecom: To test an electronic directory in Minneapolis-St.Paul, MN, and to explore the development of information services worldwide.
• Spectradyne: To test an interactive travel information service for hotels based on Philips’ CD-I.
• Fujitsu Network Switching of America, Inc.: Fujitsu is providing switching technology to the Communications Programs for Advanced Switched Services (COMPASS) series of tests for video and other applications conducted by US West.
• Siemens-Stromberg-Carlson: Siemens-Stromberg-Carlson is providing switching technology to the COMPASS series of tests.
VIACOM INTERNATIONAL WITH…
• AT&T: See AT&T.
• Scientific Atlanta: See Scientific Atlanta.
• StarSight: See StarSight.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music service.
GROUPE VIDéOTRON WITH…
• Zenith Electronics: Zenith to supply settop converter box for interactive programming.
WHITTLE COMMUNICATIONS WITH…
• Time Warner: See Time Warner.
• Associated Newspaper Holdings PLC: Owns 24.6 percent.
• Philips Electronics: See Philips.
• Christopher Whittle: Owns 8.5 percent.
• Limited partners: Own 4.9 percent.
ZENITH ELECTRONICS CORP. WITH…
• Groupe Vidéotron: Zenith to supply settop converter box for interactive programming.
• United Video Satellite Group, Scientific Atlanta and Pioneer New Media Technologies: See Scientific Atlanta.
• StarSight, Prevue Networks Inc., News America Publishing Inc. and Liberty Media: Zenith to develop cable converters capable of receiving electronic guides by Prevue, StarSight, News America and Liberty.
Compiled by Amy Johns
DISTRIBUTION AND THE ART OF NEGOTIATION
The finer points of distribution and retail for new media
Pricing for the majority of new media titles ranges between $39 and $99. The retail channel is skeptical, if not uninterested, in dedicating valuable shelf space to new media titles. This is slowly changing, and the software stores are stocking more and more product.
The retailer. A key factor in the development of this market is the attitude of the retailer. He is the access to the primary customer. He will take no risk. He demands, and receives, 100 percent return privilege on all products — thus passing the risk back to the distributors of new media (sometimes two tiers of them) who ultimately pass it back to the developer/publisher. (For more on this, see “Choosing the Best New Media Distributor,” Vol. 2, No. 9, p. 7.)
The food chain. There are many tiers of distribution between the developer, who may self-publish or take his title to a publisher, and the consumer. The developer/publisher will take his product to a new media distributor. The major players include Electronic Arts, Compton’s New Media, Brøderbund and Time Warner Interactive, formerly Warner New Media.
The new media distributor then takes the product into the larger software distributors, the top tier of distribution.
These top-tier distributors include Baker & Taylor Software (formerly known as SoftKat), Ingram-Micro and Merisel. These larger mass-market distributors then move the product into retail, beginning with software-only stores and computer superstores. Later they will move product into the video, audio and bookstore channels.
While selling “up” to the top tier, the new media distributors also sell “around” them, placing the product directly into retail chains, to gain shelf space and to leverage more margin. Major players in the retail market currently include only high-tech stores such as Egghead, Comp USA, Babbages and Software Etc.
Little attention from the retailers. Retailers then assign shelf space for the titles, based on the number of titles they agree to try. This agreement is generally arrived at by a deal that includes 100 percent return and stock-balancing privileges against the floppy-based software carried by that distributor, and some serious marketing dollars from the distributor for the promotion of the CD titles.
At this time, there is generally a single set of shelves, perhaps four shelves by three feet each, dedicated to new media titles. Some leading stores, like Egghead in New York, stock three times this amount. The titles are rarely segmented between Mac and DOS, and some titles publish both platforms on a single disc. There is no retail clarity for the positioning or selling of these products.
In retail outlets that focus on Sega and Nintendo games, new media titles receive secondary or tertiary shelf space positioning. There is rarely a demonstration unit available for the viewing of a title. This is because the market is in its infancy, and because retailers will not give over the four square feet of space required for a kiosk without a financial commitment for the leasing of that space by the publisher or platform vendor.
To date, demo units for new media in retail are rare except in superstores. The first experiments are beginning now by platform developers. The notable exception is Tandy, which is the producer, distributor and retailer of its own product line and affiliated titles.
The retailers’ lack of commitment to stocking, marketing and merchandising titles means that the publishers and distributors who are developing this market for their titles must create demand by extensive marketing and “pull-through” programs, to “pull” the customer into the store to buy the product.
A costly proposition with profit built in. These many tiers of distribution cost money, but they function successfully and create a profit because the cost of goods produced is so low (about $1 to press a disc in quantity, and another $1 to package it) in comparison to the amount of data contained on the disc.
With these costs of goods in mind, and the knowledge that top-selling entertainment titles may sell 30,000 to 50,000 units a year, mostly through retail and mail-order channels, and that all other categories of successful titles sell 5,000 to 20,000 a year, and the price averages $39 to $69 per title, we can put together a market projection and a plan.
The plan shows that the market is still emerging. Once compelling titles of quality are broadly available, and the price of the hardware and the titles falls even further, the market will grow rapidly. The cost of goods will stay constant, or will fall, and the profit will appear more substantial as the volume of sales grows.
A publishing deal. The new media distributors, who are also publishers, are the pioneers taking the risk to create the market, and they are gathering titles through their own publishing divisions and through their Affiliated Labels divisions.
A developer may bring a title in finished programming form to any of these new media distributors and negotiate a deal for the distributor to publish and distribute it. This means that the developer provides a “one-up,” also known as a “gold master” (language borrowed from the record industry), to the new media publisher/distributor.
As the publisher and distributor, then, Electronic Arts or Brøderbund or the others position, market, press, package, merchandise and put into distribution the developer’s title. For this publishing deal, the developer will generally receive about 10 cents of the purchase price in the form of a royalty payment.
This publishing model is appropriate for small technology businesses that are more focused on programming and development than they are on business development and management. If developers have not created and do not wish to create the business infrastructure to produce, market and sell their product, they should bring the title to a publisher and return to their computers to develop the next one.
At some point soon the conflict of interest inherent in being both a distributor and a publisher, as are Electronic Arts, Brøderbund and others, may become problematic, as the distributor can offer preferential exposure to its own published products. These questions are only now beginning to be raised.
A distribution deal. If the developer is a savvy businessperson as well as a new media artist, he should press, package and produce the title, and commit resources and attention to its marketing and selling. This involves the development of an entire business infrastructure that is separate from the development team.
When a developer/publisher brings a finished, packaged title to a new media distributor, negotiations begin with the distributor’s Affiliated Labels division.
Signing an Affiliated Labels agreement with a new media distributor generally means negotiating for two Christmas buying seasons and the subsequent three months until March 31. Sometimes the distributor asks for exclusivity for three Christmas seasons. The deal is exclusive for that distributor into retail. The publisher may leverage mail-order and direct-marketing channels and other channels than retail.
This allows the distributor to launch the product the first year at Christmas, the key buying season, and to carry the product through its initial life cycle to the second season. This term of the contract is rarely negotiable, although one competent developer has succeeded in renegotiating every year in March.
THE SNAKE PIT OF CONTRACT LANGUAGE
The initial contract language usually specifies exclusivity for the title and mentions nothing about platforms, thereby covering all CD-ROM hardware. This language must be negotiated out.
Generally the distributor insists on both Macintosh and MPC product exclusivity as a minimal condition, even if only one platform is ready or planned. It is wise to specify that the publisher retains the distribution rights to all other platforms (list them), transmission over cable and satellite downlinks, and any other platform and media now known or yet to be developed. This is generally not a problem since the distributor is only interested in retail distribution at this time.
The new media distributor (Brøderbund, Electronic Arts, etc.) receives a 70 percent profit margin (a 70 percent discount from suggested retail list price) on the product — that is, the publisher is offered 30 cents on the dollar. Sometimes, rarely, this margin is negotiated to 65 percent or 68 percent.
When the new media distributor passes the product up to Baker and Taylor/SoftKat, Ingram-Micro and/or Merisel, they’re offered 50 to 60 percentage points. When the product is passed directly to retailers (usually the large chains), they’re offered 40 to 50 points. The new media distributor maintains a business on this 10- to 20-point differential, and from the profits of development and participation in cooperative marketing programs with publishers.
More deal points. Notice that if the distributor has 100 percent return privileges (and at this time he always does), the publisher is essentially signing a consignment deal with up-front purchases. The distributor buys a volume of product and stores it in a warehouse. As it sells through, the publisher gets monthly sales reports and a check for the per-unit amount agreed upon in the contract.
Suppose that amount has started with 30 cents on the dollar to the publisher. The publisher then contributes more cents to the distributor’s fund in the form of co-op advertising funds and reserves for defective products and returns. The level of these funds is agreed upon during the contract negotiation, and expressed as a percentage off the invoice to the publisher, and is deducted from the payment sent to the publisher from the distributor.
Co-op funds are generally 5 percent of the invoice amount to the publisher; a “reserves” fund can be 10 to 15 percent, again calculated off the invoice amount. If we apply the 5 percent co-op and the 10 percent reserve fund to the 30 cents on the dollar (the publisher’s gross invoice amount from the distributor), we are left with 25.5 cents on the dollar for production, packaging and marketing of the product.
So the publisher gets 30 cents less 1.5 cents for co-op less 4.5 cents for reserves, or 25.5 cents per unit. To participate in co-op programs beyond this 5 percent fund, the publisher pays more into the fund (usually in product). If returns exceed the reserve fund, the publisher is responsible for the difference. If the product flops, it can all be returned to the publisher, who is liable for any monies advanced by the distributor for the initial pressing and packaging of the title. The reserve fund is reviewed every six months, and adjusted at that time based on sales and returns figures.
The implications. Although all this may be fair business dealings, it is not clearly spelled out in the contract, especially if read by the uninitiated.
The contract (usually) says the distributor will advance $X to the publisher for a certain volume of units, and will pay $Y to the publisher as they sell through, less returns.
It never mentions that this advance should be listed as a liability on the publisher’s balance sheet (which may hinder finding new investment capital for the next product) or that it is due back, rather like an interest-free loan, if the product never sells through. This is assumed in the language of “advance.”
Again, as we borrow language and concepts from other industries, certain assumptions are carried in the language, and the agreement is often not clear. It is not the distributor’s responsibility to advise the publisher on business decisions, but it is wise for the publisher to understand all this.
The publisher must also handle how these agreements affect cash flow, especially during a first product launch. Suppose the publisher accepts an advance of $50,000 for the company’s first title, and uses the money to publish and package the product and deliver it to the distributor. If it is early in the buying season, the publisher may sell enough product to recoup his advance and begin to see revenue coming in.
If the product is launched during a slower season, it may take several more months to see revenue. In the slow seasons (anytime other than September–March), the distributor is unlikely to stock more than a thousand units at a time. So if the product is released in a slow season, advance money will be quite limited.
Marketing programs. The distributor gains a great deal of profit from his cooperative (co-op) advertising programs. These include offering the publishers shared booth space at trade shows, shared advertising space in leading trade journals, participation in direct-mail campaigns, launch announcements and so on. During the initial launch of the product, many of these promotions are offered without charge, to sweeten the contract and to announce the new product for the benefit of both the distributor and the publisher.
After launch, co-op advertising is the most straightforward form of marketing available to the publisher, and most have a charge attached to them. This charge is expressed in dollars but exchanged in product. Actual money rarely changes hands.
But this is not nearly enough. The publisher is responsible for the marketing of the product, and extensive market development is required to gain the attention of the buying public. This is achieved by aggressive promotions such as 3-for-2 sales or “software bundles” of two or three titles at a reduced price, driven through retail and mail-order channels, generally using programs handled by the distributor.
Other promotions include “guerrilla marketing” tactics such as co-marketing with similar but noncompeting products, sharing customer lists, direct mail and so on.
Joanna Tamer
MORE VIRTUAL PRODUCTS THAN REALITY AT CES
Showgoers glimpse a world full of ITV, PDAs, VR and 3DO
The motto of this Summer CES show should have been “You can’t touch this.” So much of what was hot in Chicago was not real — that is to say, the show-stopping “products” exist primarily in development labs today, and are taken out on rare occasions only to whet the appetites of potential consumers.
Slick demos and promises abounded on the floor and in the conference rooms of Chicago’s McCormick Center, and grabby showgoers enthusiastic about acquiring new toys were often gently reminded that they could look, but they better not touch — and forget about buying, at least for right now. The only thing missing was the Oz-like reminder to “please ignore the man behind the curtain.”
3DO GOES HOLLYWOOD, PANASONIC GETS REAL
Undoubtedly the greatest showman in Chicago was Trip Hawkins, president and CEO of 3DO and the star of CES. He gave his 3DO pitch on Thursday morning to a standing-room-only crowd. The company’s press conference to unveil some of the 91 titles in development for the Interactive Multiplayer, and to announce hardware licensing agreements with AT&T and Sanyo, spilled out of two large banquet rooms. (The stock jumped almost $5 a share after Hawkins’s press conference. The IPO has already garnered $48.5 million for the startup.)
Hollywood producers, not known for excessive amounts of patience, stood in line to watch the 3DO demo, and at the Panasonic booth there was a line of people that doubled back and forth on itself, just like the rides at Disneyland — all waiting to get up close and personal with the FZ31 REAL, the company’s 3DO Multiplayer that is expected to be shipped in October.
No 3DO naysayers could be found outside of the press room, where rumors of disgruntled title developers and sticky negotiations regarding silicon and player manufacturing came home to roost among the skeptics. The crowds were besotted, and there was no evidence of dissatisfaction among the third-party developers that shared the booth with 3DO. Companies including Crystal Dynamics, which plans to develop interactive game software exclusively for 3DO, were positively dewy-eyed at being part of the entourage.
During the press conference Hawkins announced plans to enter into the coin-operated game market, with both Atari Games and American Laser Games planning to deliver coin-operated 3DO games by the end of the year. He also stated that the custom graphics chips from Matsushita were “far along,” although he did not elaborate.
Hawkins outlined his full-motion video strategy, which includes support for SuperMac Technology’s Cinepak software-only codec and MPEG-1 when the first Multiplayers are shipped. (The MPEG-1 compression scheme is the same C-Cube-based cartridge that Philips Interactive Media will sell as an add-on to its CD-I players this fall.) Eventually, he says, the Interactive Multiplayer will support the higher quality MPEG-2 compression standard.
According to Hawkins, the 3DO strategy is on track, with the time line as follows: In 1993 the standalone consumer Multiplayer will arrive, with about 20 titles available by Christmas. In 1994, we will see an Interactive Multiplayer with built-in support for MPEG-2 and an analog TV tuner. By 1996, Hawkins says we will see the arrival of a networked system as well as starting price points for the Multiplayer below $200.
Perhaps the most telling statement Hawkins made during his time in the limelight was that backward compatibility is not a prerequisite to success when introducing a new technology platform to the consumer. It is a concept not easily understood by the computer industry, where many of the players, including Microsoft, are struggling to be all-inclusive as they deliver their first consumer devices.
TANDY’S ZOOMER STEALS THE SHOW
Three different types of personal digital assistants (PDA) and communicators were on display at CES, but the Zoomer — a hand-held PDA developed through a joint venture among Tandy, Casio, GeoSystems and others — stole the show.
Zoomer, which is expected to be shipped this fall for between $699 and $899, was designed for people who don’t own a personal computer but are interested in owning a consumer computing device. It runs on GeoSystems’ GEOS operating system and is quite elegant. The basic unit, which weighs about a pound, can connect to DOS computers for information transfer although the device cannot run DOS applications.
AOL built in. Built into the device will be a special version of America Online, the electronic information service, as well as more than 100 applications, including such essentials as a spreadsheet, word processor, daytimer and, of course, an astrology charting application.
An optional keyboard is available. The handwriting recognition in the initial version will recognize printed text only, but the key companies claim recognition of script writing is in development.
According to team members, the Zoomer can take an astonishing 100 hours of constant use before it needs a battery charge — a noteworthy feat if it is true. Skeptics say it can last 100 hours only if nobody touches it once it’s been turned on.
Members from both Palm Computing and Geosystems say they are working with other partners on similar consumer devices. No names were available at press time.
Credibility slipping for Newton. Apple Computer made a lackluster showing during a private press briefing on the current state of its much-touted Newton PDA. Although the device worked, which was not the case when it was demonstrated last month in Japan, the announcement was mostly a repetition of promises already made and the demonstration offered little in the way of new technology for the platform.
The most significant news presented in the briefing was Apple’s new licensing agreements with several major telecommunications companies. According to Gaston Bastiaens, vice president and general manager of Apple’s Personal Interactive Electronics division, U.S. West will work with Apple to “help develop product interfaces for network-based telephone services.”
Similarly, BellSouth has agreed to perform a joint test of a Newton-based display telephone. “The goal is to develop easy-to-use intelligent terminals for telephone services, information transfer, and advanced voice, fax, and electronic messaging,” says Bastiaens. The prototype system exists today and, according to Bastiaens, tests have begun in Orlando, FL. The third partner, Ameritech, has agreed to provide advanced messaging services. Ameritech’s voice messaging customers, for example, will be able to get notices that messages are waiting and be able to read them on a Newton.
In addition to announcing the telecom partnerships, Apple also discussed its entry into the interactive publishing business for Newton applications and titles, as well as CD-ROM. The announcement, while met with little interest at the show, has some interesting ramifications — both positive and negative — on the emerging interactive title market. (For details on Apple’s publishing strategy, see story, p. 29).
Delivery of the Newton into the retail channel will be this fall, according to Bastiaens. The price is still stated to be “well below $1,000.” Bastiaens declined to comment on the Newton’s battery life, though Apple chairman John Sculley figured it to be about eight hours when Newton technology was first announced at Summer CES in 1992. We assume improvements have been made.
Interesting device, wrong price. While the AT&T EO 440 Personal Communicator, which provides fax, electronic mail, cellular phone and personal computing capabilities, will be the only shippable product by the time this article appears in print, its price point — more than $2,000 for a basic unit that cannot do most of the things just mentioned above — left attenders with the feeling they would rather wait for Zoomer, Newton or one of the other PDAs in development.
PHILIPS FMV CARTRIDGE WINS PARAMOUNT DEAL
Heading its competition off at the pass, Philips Interactive Media made its big announcement Wednesday night before the show officially opened. The company, which has been struggling for market share in the consumer channel as well as for respect for its CD-I technology among industry peers and analysts, took the stage Wednesday night with members from Paramount Pictures to announce a multi-year deal that will include the release of more than 50 Paramount-generated movie and entertainment titles for CD-I by Christmas this year. The discs are expected to be priced below $25 apiece.
The Paramount announcement, along with the planned fall release of Philips’ much-touted $250 full-motion video add-on cartridge for its CD-I players, might finally capture the consumer attention the company has fought in vain to garner. (Although Philips claims an installed base of 100,000 units worldwide, most of these players are being used to operate kiosks in business environments.)
Philips, which is paying Paramount a straight licensing fee, will have complete editorial control, selecting the first 50 titles from Paramount’s existing content library as well as from its scheduled new releases. (The CD-I versions of new motion pictures will be simultaneously released with the videotaped versions.) In addition, Philips will have control over marketing, distribution and manufacturing of the Paramount titles.
Despite how attractive Philips is trying to make the deal, there are still some potential drawbacks that might keep consumers away. First, the FMV cartridge, which is not yet available (it was promised for April 1993), is a must-have add-on in order to play the upcoming CD-I releases from Paramount. The add-on puts the system in the $850 price range, and although Hawkins of 3DO claims he has research to the contrary, the jury is still out on whether consumers are willing to pony up close to $1,000 for an interactive player — especially when there is no sign of a single standard in sight.
Also, the Philips add-on cartridge supports the first-generation MPEG standard for compression and can fit only 72 minutes of full-motion video on a standard-size CD. In other words, you will need two discs to see a full-length motion picture. If each disc is $25, does that mean you pay $50 for a movie you could rent for $3? The company did not discuss the possibility of renting the Paramount CD-I titles.
And lastly, Paramount is the only studio supporting the move to CD-I. Trade press reports claimed that no other studio was even considering CD-I as a new distribution medium for movies.
TW GROUP REGAINS CREDIBILITY UNDER HERSHEY
Since Terry Hershey took over as president of Warner New Media six months ago, it is hardly recognizable as the multimedia company founded within Time Warner under Stan Cornyn. The group has changed its name and is now known as the Time Warner Interactive Group. Geoff Holmes, Time Warner’s senior vice president of technology, is now chairman.
Hershey says the name change reflects the group’s effort to reach the entire Time Warner company and it reflects the unit’s broad commitment to interactive media for both the CD-ROM market and the emerging interactive cable industry. “Warner, rather than Time Warner, made no sense,” she says. “We are into interactive. The term ‘new media’ confuses the issue.”
TWIG has also undergone some substantial staffing changes. Hershey has replaced several top executives that remained from Cornyn’s tenure.
Under Hershey’s direction, the group developed a new digital production studio that is housed in TWIG’s Burbank office. She emphasized the studio is not just a lab for research and prototyping; it is where Time Warner will actually produce interactive content.
At CES, the company demonstrated a proprietary cross-platform CD-ROM technology that will allow a single disc to play on multiple computer and consumer devices. The technology will make its commercial debut on a CD sampler of Time Warner titles that will be released in stores later this year.
Hershey, who is working with other business units within Time Warner to create and publish product, says that titles released in 1994 will be representative of the new vision of the Time Warner Interactive Group. Already dismissed by many industry watchers, the group belongs back on the list of interactive publishing houses to watch.
BRUCE DAVIS TO RUN TV GUIDE ON SCREEN
TV Guide On Screen, the News America Publishing Inc. and Liberty Media joint development to create an on-screen TV programming guide, has a new president at the helm. Bruce Davis, former CEO of Mediagenic and Imagic, both successful video software companies, as well as a former member of the Software Publishers Association’s board of directors, was named president of TV Guide On Screen this past May.
Davis, who was making the rounds at CES for the first time in his new position, said he believes TV Guide On Screen’s open architecture software — in this case, the term means it is compatible with every brand of cable converter — guarantees wide acceptance among cable system operators.
A field trial is under way in Denver, in households served by Tele-Communications Inc. of Colorado.
The first deployment of TV Guide On Screen is scheduled for the fall of 1993, using existing analog cable TV converters at several cable operating system locations around the country. According to Davis, the same software will easily adapt to future digital converters in 1994 and beyond.
SEGA DEMOS HOME VR HEADSET
Sega VR, a helmet-like gizmo equipped with stereo headphones that hook up to Sega’s Genesis game system, is the first company to provide a virtual reality headset for the home market. Sega VR places the player in a 360-degree game world with 3D perspective. Sega says at least four VR titles, featuring “shooting, flying, driving and fantasy action” (my, aren’t we surprised by the categories) are in development and should be out this year. According to a Sega spokesperson, the titles will come with ratings, similar to the way movies are today. No prices were made available.
The Sega VR headset, which is still in development and is a little weighty to rest on a person’s head for a prolonged period of time, is expected to be at a trimmer weight of seven ounces for under $200 by Christmas.
Stand and deliver. The list of digital media companies promising product by fall is astounding. We will definitely be watching.
Janice Maloney
VR IS DEAD, LONG LIVE VR
Lots of real stuff happening at the conference
Meckler’s information-packed three-day 4th Annual Virtual Reality Conference held in San Jose last month brought leading entrepreneurs in this fast-growing field together with 52 exhibitors showing the latest virtual reality (VR) hardware and software products. Reflecting the growing interest in VR, attendance almost doubled this year to about 4,000 attenders. Thirteen of the 16 Californian exhibitors were from the San Francisco Bay area, showing that entrepreneurial hearts still beat strongly in Silicon Valley.
SRI International of Menlo Park, CA, was one of four organizations that received a Meckler award at this conference; Tom Piantanida of SRI’s Sensory Science and Technology Center developed a VR system for NASA-Ames Research Center to train “marshallers” — the folks with batons who tell the pilot where to taxi the plane — in how to guide a simulated four-engine jet aircraft.
Other award recipients were Sense8 for its widely used WorldToolKit “world building” software, Polhemus for its Fastrak sensors that almost every VR installation uses to track objects in three dimensions, and Robert Jacobson, Ph.D. of Worldesign for developing a unified theoretical foundation for virtual reality systems.
CLIP ART, CLIP VIDEO — NOW CLIP 3D MODELS
Clip-models were the most prominent kind of digital media products on display in the exhibit hall. Viewpoint Animation Engineering, Inc., of Orem, UT, wants to be the company you call when it’s time to fill out your virtual world with realistic-looking, highly detailed animals and manufactured objects. It has been busy with its 3D digitizers scanning hundreds of different things such as a 35mm camera, a football helmet, an eagle, a Volkswagen bug, a skull, a globe, and so on.
Viewpoint cleans up the scans, segments them into parts so that a rendering program can apply different colors and textures to them, and puts them into formats that about 30 of the most common graphics programs can read. Prices range from $100 to $500 per object, depending on its complexity. Viewpoint can also do custom scanning, and will first model objects in clay if they are too big to scan or impossible to bring to the studio.
That’s Mr. Jack to you. If you want the most realistic human models you can get, the University of Pennsylvania (Philadelphia, PA) is making available Jack, a multimillion-dollar anthropomorphic data set that it developed over many years for NASA and U.S. Army human factors studies. Its default human figure has 71 segments, 70 joints, 136 degrees of freedom and a realistic, 17-vertebra spine.
To simplify control and positioning of such a complexly jointed object, Penn also offers special software that makes it easy to put your virtual “dummies” into vehicles, place them in workstations, make them move naturally, and so on. You can even tell them to obey a variety of postural constraints such as “keep your torso vertical.”
The Jack software, which includes a full set of advanced graphic rendering packages including radiosity, runs on Silicon Graphics Workstations. Contact the university’s Center for Technology Transfer at (215) 898-9585.
AND, OF COURSE, SOME VIRTUAL SEX
No high-technology conference is complete these days without a crowded booth selling pornographic materials. Psychoacoustic entrepreneur Ron Gompertz of San Francisco is now selling 3D binaural recordings of erotic sounds, via his Heydey Records. Gompertz recorded performers through stereo mikes in a KIMAR dummy head equipped with modular ear pinnae — the same model used by leading acoustical research scientists. He then processed the resulting audio data through a Crystal River Convolvotron. As a result, this reporter was able to clearly hear the performers pass from side to side in front of, as well as behind, him.
Normally, such a three-dimensional effect would have required a quad stereo recording and four speakers in fixed locations. But because of improved understanding of psychoacoustics obtained by decades of government-sponsored research on cognitive psychology, the effect can be experienced through ordinary earphones. The same general audio synthesis techniques were being used by exhibitors in other booths to position and move sound sources around in their three-dimensional worlds in real time.
VACTORS ARE BIG AND GETTING BIGGER
VActors (Virtual Actors) are big news these days in TV and Hollywood, thanks to Pasadena, CA-based SimGraphics’ “facial teleoperator master control” (see Vol. 2, No. 9, p. 9). This is an insectoid-looking helmet with a number of thin wire probes that come down from the top and around from the sides to rest their tips against various parts of your face. As you talk, smile, frown, wink and raise your eyebrows, the probes sense the motion of the skin on your face and tell a computer-generated face to move the same way instantly.
One lucrative application for VActors is advertising at trade shows and sports events. SimGraphics also expects VActors to be widely used to reduce costs and speed up production of animated cartoons, commercials and feature films. Less lucrative but certainly more heartwarming, seriously ill children at Loma Linda Hospital responded better to encouragement and instructions from VActors on televisions in their hospital rooms than to parents and hospital staff, improving the outcome of their treatment.
BIG BUCKS FOR NON-MILITARY VR RESEARCH
An estimated $50 million has been spent so far on research and development of nonmilitary VR. Even so, the Investment Perspectives panel held at the conference made it clear that virtual reality is to a large extent barely out of the “garage” phase of the startup process. The first pure VR company to go public, and so far the only, is Division Group in the United Kingdom. Division sells an integrated VR development environment including software, VR devices and Silicon Graphics computers.
Many venture capitalists (VC) are now convinced that potential returns from investments in VR startups may be able to meet their demanding requirements for 25-to-1 or better returns in three to five years. But they are still holding back from a 1980s-style funding/feeding frenzy because they are not sure yet precisely which applications of VR will pay off first.
They are pretty sure that entertainment applications are the lead horse and that the others (science, finance, education, manufacturing, medicine, military) are barely out of the gate. But they are not yet convinced that the lead horse can finish the race. VCs are waiting to see a “killer application” of entertainment VR before they commit.
One notable exception is Shamrock, the Disney family’s VC fund, which recently decided to buy into Virtual World Entertainment (VWE). VWE, founded by Gordon Weissman and Bruce Babcock, runs the highly successful Battletech centers in Chicago and, recently, New Jersey.
Battletech is an example of a “sit-down” location-based entertainment (LBE). In plain words, it’s a game. You get into a pod that looks like a spaceship cockpit, then it closes around you and you are off shooting down bad guys in another 3D world for about twelve minutes. It’s also tied in with 20 Penguin science-fiction novels on the Battletech theme. VWE sold 300,000 $7 Battletech tickets in two years and revenues were climbing when Shamrock came in to add value based on the extensive Disney experience with LBEs in its theme parks around the world.
Andrew Messing, the ex-Shamrock executive who now runs VWE as part of the deal, said Shamrock picked VWE because it met its three main investment criteria: vertical integration from manufacturing to operation of the LBE facilities, in-house software creativity, and ownership of the intellectual property.
Messing emphasized that without creative software developers who can keep the games continually interesting, it could not count on repeat business, which it considers all-important. For example, the 5 percent of Battletech players who are “regulars” (either loners or organized teams) accounted for 60 percent of revenues.
He also noted that writing LBE software required different skills from writing ordinary arcade game software. A new Battletech installation will open this summer in Walnut Creek, CA. Messing has decided to redesign this one like a miniature Disneyland, with four “lands,” each offering a different game scenario. It will also have a central lounge area for socializing after the game, and where the nonplaying spouses and significant others and the kids can wait and talk until the battle is over, enjoying California cuisine and nonalcoholic drinks.
CROSSING SHEEP WITH LEMMINGS
The old Silicon Valley joke is “Cross a sheep with a lemming and you get a venture capitalist.” So, if this Walnut Creek experiment turns out to be the long-awaited killer application of VR, you can bet that other VC firms will fall in rapidly behind Shamrock and do deals as fast as they can write checks with any VR company whose product even remotely resembles Battletech.
Two LBEs — Battletech and Dactyl Nightmare from Dr. Jonathan Waldren’s W Industries (UK) — seem to be tapping into a powerful social phenomenon. This phenomenon is also showing up increasingly on “cyberspace” of the global Internet and on commercial networked multiplayer games on home computers such as the Sierra On-Line System.
Briefly put, people enjoy cooperating with complete strangers in group activities. Competing with them is not as acceptable. (In California, we’ve seen this abandonment of class/race/status distinctions happen spontaneously in more serious, real, common-threat situations whenever we have a big earthquake.)
Messing told of eight wildly mismatched people enjoying each other’s company who would normally have ignored one another if they hadn’t just fought on the same side in a Battletech game — businessman with punker, female grad student with high school nerd, etc. The social excuse provided by the game allowed them to meet afterwards and discuss the battle. The grad student later married the nerd, but VWE doesn’t guarantee that everyone will get the same results.
Available VR hardware and software has so far been inconvenient to use and hasn’t been able to produce a very realistic simulation of reality. The original face-suckers — strap-on goggles with Walkman TV screens inside — distributed primarily by Jaron Lanier’s VPL, Inc. (now in Chapter 11, with French arms manufacturer CSF-Thomson picking up the pieces) are heavy, the pictures they show you aren’t very clear, and what you see looks jerky and doesn’t keep up with your head motions.
At this year’s conference we began to see some improved products that begin to correct these deficiencies. More powerful computers were being shown, such as Silicon Graphics’ Onyx parallel-processing supercomputer that can generate up to nine different images in nine stereo displays simultaneously for $200,000 to $600,000. Images this year were smoother-moving than ever, thanks to new techniques such as predictive tracking of head motion and multiple-resolution object models.
They still ruin your hair. The newer, helmet-style, head-mounted displays (HMDs) from companies such as Tier 1, N-Vision, and Liquid Image were being used in most of the booths in the exhibit hall. They take the weight off the bridge of your nose, but they still ruin your hair and steam up your glasses. In an arcade setting, attendants will have to clean them between customers (sweat, Brylcreme, perfume, cooties). Virtual Images Inc. (Columbus, OH) plans to hand out three-cent disposable plastic sanitary helmet liners to players of their Reality+ games.
A good head-mounted display can cost $10,000, so there was much curiosity about the capabilities of the astoundingly low-cost, $200 3D color helmet display that Sega announced for later this year that will hook up to its Genesis video games (see p. 24).
The lightest, simplest 3D viewing system consisted of an ordinary pair of Polaroid clip-on sunglasses with a simple adhesive retroreflective dot stuck on the bridge. A little box called a DynaSight Sensor (Origin Instruments, Grand Prairie, TX) sitting on top of a display screen equipped with a PLZT polarizer window tracked your head motion and continuously adjusted the image on the screen to show you a 3D color image. Stereographics’ Crystal Eyes eyeglasses and 3DTV’s low-cost version of the same thing were the next heaviest, both containing electronics for viewing 3D images on display screens.
A few nights before the conference, Oliver Stone’s Wild Palms TV miniseries had featured fictional VR eyeglasses that lit up the wearer’s face. Conference attenders saw life imitate art when Anthony Ryder, CEO of RPI, Inc. (San Francisco), took his company’s $9,000, 3D color, eyeglass-sized, head-mounted display out of his suit jacket’s inside pocket and asked for the house lights to be turned down. When he put them on, an eerie blue glow outlined the glasses on his face just as in the TV show.
The RPI display makes use of custom, high-resolution LCD displays less than an inch across, electroluminescent backlights, and optics. RPI hopes to increase today’s barely useful, 200×400-pixel LCD s directly to 1,000×2,000 or better, skipping VGA resolution entirely.
A couple of hours later, David J. Ferichs, founder of Future Vision Technologies, demonstrated an early version of his company’s 3D eyeglass-sized display based on two Private Eye monochromatic displays, hooked up to a proprietary, wearable RISC-based graphics engine. He claimed to have worked closely with RPI on a full-color model of the eyeglasses, but would not say whether that one will use the same display technology as RPI’s device.
Conference attenders were also happy about Xerox PARC’s May 20 announcement of its new active-matrix, liquid-crystal display technology with twice the resolution achieved previously (6 million monochromatic pixels or 2 million color pixels in a 13-inch screen) and 20 times the contrast, thanks to a new 500-volt pixel-driver transistor. That will mean even smaller, lighter, eyeglass-sized, head-mounted displays that show even more realistic-looking images, maybe by next year’s conference.
William T. Park
FROX RESURFACES
Tenacious digital TV company re-enters the market
Sometimes getting too far in front of the curve can be as dangerous as falling behind. Just ask Frox Inc., which introduced a device featuring the now-much-ballyhooed merger of computer and television in December 1991, only to crash and burn amidst reliability problems and disgruntled dealers. By late 1992, a new CEO had pulled the product from the market.
The Frox system uses digital audio and video technology, with a Sparc processor like those used in Sun Microsystems computer workstations, to control elaborate home theater installations (see Vol. 1, No. 2, p. 11). Frox relaunched its $15,500 system at the Consumer Electronics Show in Chicago earlier this month, and while the concept remains the same, the execution is minus a lot of bugs, according to Michael Watts, who replaced Austin Vanchieri as president and chief executive in June 1992.
EARLY SYSTEM FLAWED, DESPITE STELLAR DESIGN
Despite the combined talents of founder Hartmut Esslinger, also founder of the award-winning industrial design firm Frogdesign in Menlo Park, Andy Hertzfield, principal designer of the Macintosh’s system software, and Andreas Bechtolsheim, vice president of technology at Sun, the original Frox system was marked by some serious technical flaws. (All three have since left the company.) Compounding the problem, Frox bypassed the usual alpha and beta-site testing, leaving early customers to cope with the system’s teething pains.
No removable media. “To make it seem more like a television, it did not have a floppy disk or any removable media, on the assumption that you would not need it, and that when you did need to load software you could use a VCR tape,” Watts said. “This caused all kinds of problems.” Frox shipped about 400 systems, and “they did what computers that are unreliable do — they crashed.”
Watts put Frox’s software engineers to work debugging code and adopted a beta-site program with a few dealers and technically simpatico customers. Release 2.0 of the Frox software was shipped in mid-February, still on VCR tape, and has cured most of the reliability problems for existing customers. Release 3.0, which is currently completing alpha tests, will be released on a compact disc — music format CD rather than CD-ROM to avoid compatibility issues — as will all new Frox software, Watts said.
No bugs, just features. “We’ve fixed the remedial problems and are now back to where you’d like to be — adding features,” he said. Among features likely to be added soon are a modem, for plugging into interactive networks, and Dolby Laboratories’ new home version of its digital theater sound-decoding technology.
MORE THAN A SETTOP, IT’S THE SET ITSELF
Actually, the FroxSystem never lacked features, and indeed the system is far more ambitious than the computerized settops now being developed by General Instrument, Intel and Microsoft. The system consists of five main parts: FroxVision, FroxSound, FroxControl, FroxRoute and FroxCast.
Film-like resolution. FroxVision is a digital video processor that achieves film-like resolution by digitizing and enhancing current analog video sources, including broadcast, videodisc and VCR. The result, particularly from a videodisc, is a very high quality picture, one that finally realizes the potential of large projection screens. The advent of digital TV will be easily accommodated, according to Watts, since it will eliminate the need to convert the incoming signal.
FroxSound works directly with the digital outputs of compact disc or digital audio tape players, or converts analog sources, like turntables, into digital signals for processing. The system includes Lucasfilm’s THX circuitry and Dolby Pro-Logic for theater-like surround sound; it also allows the listener to simulate various listening environments, like Avery Fisher Hall. The system can work either with digital speakers, which incorporate their own analog-to-digital converters and amplifiers, or conventional amplifiers and speakers. The latter is a must for audiophile customers, who like to choose their own components.
A Jetsonian remote. But the slickest part of Frox — and no surprise given its parentage — is the user-interface, FroxControl. A Jetsonian remote device called the FroxWand allows one-handed control with a rocking thumb-knob, which manipulates a grasping hand cursor on the screen. In the same fashion as the Apple Macintosh or Microsoft Windows, clicking on icons selects functions. Combined with FroxCast, which broadcasts TV listings and program descriptions over cable and satellite, the system also — finally — allows non-engineers to program their VCRs. FroxRoute completes the system with fiber-optic cabling to deliver audio and video throughout the home.
Initially, Frox manufactured speakers and put its label on various monitors and projection screens made by other manufacturers, but Watts scuttled that approach to concentrate on the core system. Frox now offers a 100-CD disc changer, but in light of multiple offerings of this sort from major consumer electronics companies, it will probably discontinue that as well. For $15,500, which represents a $2,000 price hike, a customer buys FroxVision, FroxSound and FroxControl, but the system will most often be part of a home theater installation costing $40,000 or much more.
CAN THERE BE A FLYING FROX?
Whether the new improved Frox will fly remains to be seen. About half of Frox’s original 120 dealers have left the fold, voluntarily or otherwise, and the remaining ones are very cautious. “The new releases seem to be knocking away at the bugs,” said one dealer who asked not to be identified. “They listened to what we had to say and they went to work on it. But they’ve got a lot of work they need to do fast, and it may just be too late,” he said. “There’s a whole lot of negative karma associated with the word Frox.”
Frox has begun advertising in AudioVisual Interiors, a very slick Architectural Digest-like publication, and a review of the system is forthcoming in The Perfect Vision, an influential videophile quarterly. Frox has already consumed more than $35 million in venture capital from three wealthy European families, but its backers remain committed, Watts said.
“We’re slowly regaining momentum,” Watts said. “Basically, end users don’t know a lot about us so it’s in the dealer channel that the whole drama played out,” he said. “A surprising number of them hung in there, which is a testimony to the concept.”
Larry Fisher
APPLE PIE LAUNCHES PUBLISHING GROUP
New division has strategy but little experience with publishers or content
After several years of sitting on the fence about its interest in entering the new media publishing market, Apple Computer finally announced the launch of its interactive publishing group. The official rollout — sans Apple CEO John Sculley — took place during a press technology update on the Newton personal digital assistant at the Consumer Electronics Show, and lacked the typical fanfare that accompanies even the most modest of Apple’s announcements.
Ken Wirt, marketing director of the Personal Interactive Electronics (PIE) division and the head of PIE’s new publishing group (which has yet to be named), quietly took the stage at the Four Seasons Hotel in Chicago and briefly outlined Apple’s plans to develop, publish and distribute interactive content for both the Newton and CD-ROM-based computer platforms.
The crowd, which seemed disinterested after deciding the event was just another “It’s Apple’s Newton and someday it’s gonna be a real product” announcement, did not even bat an eyelash when Wirt demonstrated two Newton titles currently in development: an electronic travel guide and a Fortune 500 services and information title. (Even Wirt’s promise to give a Newton away free to anyone in the room who could come up with a new, more consumer-oriented name for the PCMCIA cards, which are the credit-card-size disks on which applications will be delivered for the Newton as well as other PDAs, drew little response from the audience.)
Lame launch, sound strategy. While the interactive publishing group’s coming out might have been entirely forgettable, the group and its plans are not. In a more detailed interview with Digital Media, Wirt outlined PIE’s interactive publishing strategy, including the development of an affiliated label program, its plans to develop and sell authoring tools for multiple platforms, including the Newton, and its intention to deliver content — in the near term — over Apple’s online services network as well as on CDs and PDAs.
GROWING THE MARKET FOR CD-ROM, NEWTON
According to Wirt, who formerly worked at NEC as vice president and general manager of its video games division, Apple’s entry into the interactive publishing arena is primarily motivated by a need to “expand the new media market.” Certainly the benefits of this move for Apple are clear: A publishing group within the Silicon Valley-based computer company ensures that there will be content or software for its hardware, including the PIE division’s PowerCD and Newton PDA family of products, as well as for the multimedia group’s CD-ROM-based machines such as the Performa line.
“In the case of the Newton, we really want it to become a recognized standard,” says Wirt, “so we are licensing the hardware out. That means, though, that we are competing with world-class [consumer electronics] manufacturers, and one way to keep our edge is to keep close to the customer by creating an Apple hardware/software synergy.”
Shelf space, marketing muscle. The benefits for the publishing community are not so clear since Apple is unproved in the publishing field. But, according to Wirt, the company is committed to providing smaller title developers a chance to get on the shelf at retail stores such as a Babbages or Circuit City through its affiliated label and co-publishing programs. (To date, the company has signed two publishers who will make their official debut as affiliates at Digital World.)
In addition, PIE plans to use the substantial marketing power of Apple itself to increase awareness in the consumer channel for multimedia and PDA titles and applications. And so it is possible that the formation of the publishing group could be a win-win situation for all parties involved.
For that to occur, however, Apple will need to work out some of the kinks that are materializing as PIE’s publishing plan makes its way from a printed document to reality. Before we take a look at some of the problems upon implementation, let’s look at the actual strategy.
A PUBLISHING FORMULA FOR ‘A LEAD POSITION’
Apple wants “a lead position” in electronic publishing, and, according to Wirt, that translates into the company owning about 25 percent of the interactive market. In order to achieve that goal, PIE plans to deliver a variety of titles — focusing heavily on content that contains memorable characters that can reappear in a sequel or series of titles — on multiple platforms and on multiple media.
The types of titles PIE plans to produce, publish and distribute are different, depending on which platform is being discussed.
Business for the Newton. For the Newton, the group plans to concentrate — at least initially — on the middle management and executive business community. Applications for the PDA will include spreadsheet apps, personal financial management programs and a billing program. The device will also have self-improvement titles, including discs in which actors role-play different business situations (a sales-coach-type program), and entertainment titles that include “airplane games,” such as crossword puzzles, sports titles that offer personalized fitness training or that teach individuals how to play a better game of golf, and movie guides.
PIE’s multimedia CD-ROM titles will primarily target the home and will include family-oriented, education and entertainment titles. Of course, the PIE publishing group plans to deliver reference works for both platforms.
NEWTON TITLES PLANNED FOR A FALL DELIVERY
For those Newton watchers who are still trying to pin Apple down on a delivery date of its PDA, one indicator that it is getting closer is PIE publishing’s announced commitment to place eight Newton titles in the channel by the end of this September.
According to Wirt, that number will increase to about 15 by the end of this year and jump to a whopping 300 Apple-affiliated titles by the end of 1994. (These numbers do not take into account titles developed and distributed by publishers outside of the PIE publishing group.)
Fodor’s goes interactive. One of the first Apple-published Newton titles expected to make its commercial debut this September is Fodor’s Guide to the Top 10 Cities. The title, expected to retail for about $59, is being built in conjunction with Random House, which owns Fodor’s, and RR Donnelley, which provided the mapping system for the title based on its Geosystems technology.
Lining up the digital rights. According to Wirt, Apple is paying each of these companies a royalty. He declined to elaborate on the costs involved for licensing the digital rights or the terms of exclusivity for specific platforms — except to say PIE will be the only publisher doing the title for the Newton.
“Basically, you have to pay for the digital rights,” he says, “and you try to get as many rights as you can. The big publishers give us as little as possible and keep it specific to the platform.”
Fortune’s Guide to American Business, which provides information on Fortune 500 companies as well as Fortune’s Service 500, is also expected to be released in September. The content has been licensed by Apple from Fortune, and is actually being produced by a small multimedia company based in Arizona. (Hopefully someone will correct the spelling of John Sculley’s last name, which appeared without the “e” in a demonstration of this title.)
As for multimedia publishing, Apple says it will ship five CD-ROM titles for the Macintosh platform this year. Two of the titles will actually be created at Discovery, a business unit of PIE, which is based in San Francisco. The Discovery Group is, among other things, working on a title called Wacky Jack (which we have heard some pretty wacky things about) and an interactive game show. Arborescence, the French publisher, is actually creating the other three titles geared primarily toward the educational market. They include one on the alphabet, one on numbers and another that involves learning about geography and ecology by traveling with a character named Peter.
CONSUMERS JUST SAY NO TO ‘ANOTHER BETA’
Perhaps one of the greatest challenges for the PIE publishing group is how to convince consumers to buy into the interactive market when there is not a standard hardware platform — in particular in the CD-ROM-based personal computer market.
“We have done many focus groups and learned clearly that people are not going to make a buying decision unless they are convinced they won’t get left behind in their decision,” says Wirt. “We do these focus groups with ‘early adopters’ and we have found out that they are still angry for buying beta video decks. They are very clear that they are not going to make the same mistake twice.”
ScriptX is long-term answer. According to Wirt, PIE is pinning its hopes for cross-platform delivery of content on ScriptX, Kaleida Labs’ scripting language and multiple delivery platform technology (see Vol. 2, No. 10/11, p. 12).
“We believe in ScriptX,” says Wirt. “Although we are going to initially do some CD titles that run exclusively on the Mac platform, it will be easy to spool out to ScriptX” so that if ScriptX is adopted as a cross-platform standard, publishers can easily port their content onto discs that can be read by any ScriptX-capable devices.
APPLE GAINS EDGE WITH AUTHORING TOOLS
In addition to publishing and distributing content, a large part of PIE’s publishing strategy relies on the division’s ability to provide the authoring tools necessary to create content. Led by PIE’s Duncan Kennedy, the tools group will deliver the Apple Media Kit, a multimedia authoring tool (expected to be released this summer) to content developers who create titles and software applications for multiple platforms, including Newton, Macintosh and the MPC.
In the case of the Newton, Apple will gain an immediate market advantage over its Newton hardware licensees since it will provide Newton developers the only authoring software for the device. To date, there are no tools manufacturers for the Apple PDA — only content publishers.
A royalty for run-time? Apple PIE remains undecided as to whether or not it will charge interactive publishers a royalty on every title sold that was developed with its authoring technology. Apple is not alone in its decision-making process on this particular topic. It is under consideration among many interactive media tool manufacturers today, who have begun to realize that their margin for profit is limited in comparison to the content publishers who are using their technology and selling products to what could be millions of consumers.
“It is a difficult situation,” says Wirt. “You either charge more for the tool upfront, or you charge a royalty. We just haven’t come to any final decisions on this one.” One possible scenario under consideration, which could help the small commercial publishers who are struggling to enter this nascent market, is to waive royalties until a specified number of discs are sold.
DISTRIBUTION IN STORES, BUNDLES AND ONLINE
While Apple is talking to Babbages and Circuit City as well as the more traditional computer stores, it is also planning to distribute content via its AppleLink online service, which today has a 54,000-subscriber base. The company sees it as a major asset and certainly it will appeal to individuals who frequently travel with portable computing devices.
If you were a Newton owner, for instance, and were traveling to San Francisco on business, you could download, for a fee, the San Francisco chapter of the Fodor’s interactive guide. Newton has built-in technology to receive this information from the network, according to Wirt. In fact, Apple Online Services (AOS) today provides some travel information, including hotel guides, maps and suggested scenic routes.
Try before you buy software. In addition to being able to download excerpts of titles such as the travel guide or a group of ten crossword puzzles, PIE is considering enabling AOS subscribers actually to download sample versions of various applications so that they can do a little tire kicking.
In keeping with that concept, the company is also using its hardware bundling strategy to hook consumers on a series of titles by giving them the first one “free” with the hardware. “The difference between [new media] and the music and movie industries is you get to hear the music on the radio or see a trailer of a movie — something you can sample before you buy,” says Wirt. “Today, when you buy software, you buy it. That’s it. But if I have a series, and I bundle one of the titles with the hardware and the consumer likes that title, then he or she knows what to expect from the rest of the series and will possibly buy the other titles.”
THE REALITIES OF IMPLEMENTATION
The implementation of PIE’s publishing strategy in reality has not been quite as elegant as the business model outlined here. What the group is finding is that a sound business strategy on interactive publishing does not automatically make a computer company a content publisher. It takes people who understand the publishing community and how they do business. It takes at least a few people, including some lawyers, who are experts in content.
One of the biggest complaints of some of the publishers in negotiations with PIE so far in fact is the contract, which began as a 15-page, hard-nosed Apple software developer’s contract. It is not so strange considering that the legal counsel for PIE publishing are experts in intellectual property for computer software, not interactive content. According to Wirt, the contract is down to five pages and “our act is coming together on the legal stuff.”
“The reality is, Apple hasn’t been in publishing before,” says one developer who is considering the merits of hitching his wagon to PIE. “And right now the group is not separate enough from Apple Computer for my tastes.”
That is a serious consideration and perhaps as PIE’s publishing group grows it is likely to decide to focus more on aspects of its publishing strategy — such as the distribution and affiliate label program or tools — and keep creative content development outside of Cupertino. Only experience will give the PIE publishing team, all of which are relatively new to actually developing content, a clear understanding of how to proceed.
Mining all your assets. Ironically, Apple has one of the most established interactive media liaisons and recognized electronic content experts in the industry working in house — but not for PIE publishing.
Linda Stone Neumann is the Apple employee most responsible for the wildly successful Apple Publishers Forum that drew 500 editors, writers, publishers and executives from both traditional and interactive publishing houses to a one-day seminar to discuss the business of electronic media (see Vol. 2, No. 5, p. 3). Even though she no longer works for PIE, she is still recognized today as the primary contact at Apple for many publishers interested in the interactive media market, and she is not part of the PIE group responsible for the company’s interactive publishing strategy. Instead, Neumann, who now works in the Office of the Chairman, writes white papers, consults to various groups within Apple and maintains her role as an Apple liaison to the publishing industry.
It is not clear how this division of assets occurred within Apple — answers are vague and varied among the parties involved — but it seems that PIE publishing could benefit from Neumann’s established credibility among individuals in the content community, especially now when the group is attempting to establish itself firmly as a major player in that world.
Janice Maloney
THE HDTV ALLIANCE
One process stops, another starts
Last month’s Federal Communications Commission announcement of a Grand Alliance between the four remaining competitive high-definition television (HDTV) systems for a single, digital system signaled to Advisory Committee Chairman Richard Wiley, who had shepherded the negotiations for such a standard since 1987, that the process is finally concluding. Others, such as Mike Liebhold of Apple’s Advanced Technology Group, believe that this is just the end of the beginning.
Liebhold is probably right. The FCC Advisory Committee was set up when there was only one HDTV proposed standard: the hybrid analog-digital Muse system proposed by NHK and Sony. Even when General Instrument’s fully digital DigiCipher compression system was proposed at the very last minute, the focus of the committee, system proponents and manufacturers was on a standard for traditional broadcast transmission. Those who wished to include other video issues such as the computer and photography industries were not taken very seriously.
These groups were able ultimately to resurrect a subcommittee of the Advisory Committee as a forum to present issues such as the computer industry’s desires to have entire picture frames transmitted sequentially to reduce flicker (called progressive scan) as the preferred transfer mode or to replace NTSC’s and PAL’s oval pixels with square ones, where the dots are arranged in equally spaced rows and columns for easier transmission, manipulation and storage.
As time went on it became clear that the computer industry arguments were technically compelling. The grand alliance agreed to progressive scan and square pixels but allowed interleaving (the present method of sending frames at 30 frames per second) as a transition technology. Technical details such as how to obtain a “prioritized, packetized, data transport structure,” as the FCC press release put it, using such techniques as the SMPTE header/descriptor (see Vol. 2, No. 5, p. 19), or how to integrate whatever comes from the Alliance with regard to compression systems, MPEG-2 international services and requirements standards have all been left for later discussion and decision.
All this is quite important because these discussions are not about an HDTV broadcast standard any longer. They are about how one defines and uses high-bandwidth data streams in an interoperable, scalable and open architecture — whether those data streams come over the air or through coax, fiber-optic or copper cabling.
As John Sculley of Apple pointed out to the National Association of Broadcasting Convention, “in a digital world there’s no distinction between high-definition video and audio, text, graphics or animation — they’re all data types. They can be stored, indexed and interacted with as though they were the same data type.”
EACH BROADCASTER CAN BE ‘A LITTLE FCC’
At a hearing called soon after the FCC announcement by a House Energy subcommittee, Nicholas Negroponte of the MIT Media Lab expanded upon Sculley’s analysis by arguing that each broadcaster could be like a little FCC choosing what to put out over his 6-MHz channel with a potential radius of 100 miles. He or she could send out four compressed NTSC channels. Or send out just one and use the rest of the capacity for high-bandwidth data transfers for commercial use. Or provide interactive entertainment or real high-definition pay-per-view on weekends. It would be up to each individual’s discretion.
John Abel, executive vice president of the National Association of Broadcasters (NAB), agreed emphatically. “We are not discussing HDTV, we are discussing economic use of bandwidth. And the broadcast spectrum has wide bandwidth available now with little cost for use in the National Infrastructure Initiatives (NII), as opposed to the cable and telephone companies who talk about this so much. Broadcasters will have to be freed to offer such new services over their spectrum, but many stand ready to do so soon.”
Why is the broadcast industry making this strategic switch from broadcast-only to sophisticated bandwidth supplier? The old ways are changing and they know it. Cable TV has penetrated 60 percent of the homes in the United States. Local broadcasters are, for the most part, merely broadcasting material they have obtained from the networks or syndicates. Cable operators themselves own a large amount of that material and are obtaining more (Encore and MCA deals, among others), and cable companies are obtaining programming directly from networks (for example, TCI and Fox) without any requirement to pay the local broadcaster for its use.
The broadcast industry is a saturated, slow-growth industry. It must find more valuable uses for its assets. Its major asset, spectrum allocation, could be worth much more if used for data and wireless communications. For non-network stations, the Aspen Institute in the mid-’80s estimated that use of broadcast spectrum for digital data and wireless would generate 10 times as much revenue as traditional broadcast activity.
WHAT MUST BE DONE TO MOVE FORWARD?
If it is indeed the end of the beginning of broadcast TV as we know it — all major participants are agreed that a new, high-bandwidth digital system can be developed and implemented — what more needs to be done? A great deal.
• The compromise allowing interleaving in the short term may mean millions, indeed billions, are spent on an interim and obsolete system. The MIT groups involved in the Grand Alliance noted in a footnote their objection to interleaving.
• Many other technical details need addressing, and equally important to the equation is who addresses them. More than just the present members of the advisory committee, shouldn’t all stakeholders be given the opportunity to participate? Doesn’t this require a new Advisory Committee that can insure a truly independent process?
Apple’s Liebhold was the most intense about this issue before the subcommittee. He argues that such stakeholders as the educational media and computing industries, the medical image communications community, electronic publishing, business image and page graphics organizations, scientific visualization and defense and many others who use these technical applications must be fully heard and their concerns integrated if this digital system is truly to be interoperable and extensible to the widest audience.
• Where is the digital equipment? The broadcast industry wants interlace as an interim because it does not see where the fully digital progressive scan production and transmission equipment will come from. This is a concern. There is such equipment. But as Robert Cohen of the Economic Strategy Institute said, “Such gear as digital cameras exist, but they exist in the black (i.e., within the intelligence community). They must be allowed to come out into the light.”
• MIT’s Negroponte was roundly criticized at the Markey hearing for his emphasis on the need for international standards coordination. Many think this is just a means to slow down the process and allow the Japanese time to catch up. Others think that the open discussions that have been occurring between the digital system proponents and the MPEG-2 standards committees should handle most issues.
But if we are opening our process to more American stakeholders, perhaps we should encourage more openness to the international community as well. The Japanese are not standing still. In February they announced the formation of an Advanced Pictorial Technology Development and Promotion Project whose aim is to research and develop an ultra-sensitive digital TV system that works to 2,000-line definition by the year 2005.
A graceful bow. At the time, this UDTV project was seen as a graceful way for the Japanese to bow out of the present standards process. But given the Grand Alliance and further developments, some discussion with the UDTV group seems appropriate.
This may be the beginning of the end, but the end is a long way off. Testing will not be completed for a year. Products using the agreed-upon digital HDTV system will take more than a year beyond that; it seems reasonable that we’ll wait three to five years before real digital video productions, and HD equipment to view them on, are readily available. In fact, that may even be optimistic. Many companies, most notably the cable and telcos in their interactive TV projects, will be providing digital products using MPEG-2 chips and the like long before that.
Tom Hargadon
TI DOES IT WITH MIRRORS
Novel display device is a good fit for HDTV
Texas Instruments announced a new screen display technology last month that uses an array of microscopic mirrors to form an image. Although the prototypes made so far handle NTSC and PAL displays, TI claims that it will be straightforward to extend the technique to HDTV. Compared to the operation of today’s cathode ray tube displays, micromirrors promise flicker-free operation, better color convergence, more lifelike colors and less visual “noise.”
It is done with mirrors. The core invention is a digital micromirror device (DMD), which is a modified random access memory chip. Like other memory chips, the DMD is laid out as an array of storage cells. But over each cell, suspended a mere two microns above the surface, is a tiny square of reflective aluminum alloy. Because the reflector is so close to the storage cell, it is sensitive to the electric charge in the cell. If a 1 is written to that cell, the reflector twists in a different direction than if a 0 is stored there.
To turn an array of such mirrors into a display, shine a bright light on it. The light will reflect in one direction from all of the 1s and in a different direction from all the 0s. Then place a lens along one of the light paths, enlarging the image to a convenient viewing size. Voilá! The pattern of bits that you write into the RAM becomes a pattern of bright and dark pixels that can be updated at electronic speeds.
Gray scale and color. So far, we have described a monochrome display. To make a color display, it is necessary merely to have red, green and blue light sources firing briefly in sequence. Prior to each color flash, we load the DMD with the desired pattern of bits. If the flashes happen often enough, the observer’s eyes will merge them into a continuous image, exactly as they do for movies and TV images.
We also need to control the intensity of each pixel. This is achieved by varying the time that each pixel is on: a short fraction of the color interval for dim values, larger fractions for higher brightness.
Proof of concept. TI has made research chips that can handle either North American NTSC (640×480-pixel) or European PAL (768×576-pixel) display standards. In one experiment, TI staffers projected an NTSC television image onto a 60-inch screen at a distance of 12 feet. Reportedly, it achieved a 50:1 contrast ratio.
TI representatives told the press that commercial chips are still in the future. They declined to specify a timeline for mass production, and noted that there is still some research to be done to make this technology economical. However, TI noted that it also takes some lead time to design a new display. It promised that, if manufacturers start working on products now, the chips will be ready in time to meet the assembly lines.
Cost is key. Stressing that it was not yet making a product announcement, TI spoke only vaguely about costs for a DMD-based display. A DMD chip has the same basic cost structure as RAM, but due to the additional steps to grow the mirror structures, it is intrinsically about twice as expensive at any given level of production. Nonetheless, TI believes that DMD displays will be able to compete with CRT displays in a couple of years.
TI is explicitly chasing the high-definition TV market. As with other chip technologies, volume is the key to low cost, and low cost is the key to widespread adoption. To bypass a chicken-egg conundrum, TI will hone its manufacturing skills first in areas that are not quite as sensitive to price: aircraft cockpit displays, medical and industrial imaging.
Peter Dyson
PHOTO CD TEAM LEAVES KODAK
Brownstein, McCabe et al. pick up and go to prepress co. AGT
Much to the surprise of Kodak (and almost everyone else), the cream of the management, marketing and technical team that created and launched Kodak’s Photo CD technology has suddenly left Kodak and gone to work for the second largest color prepress company in the world.
The result will almost certainly be a significant acceleration in the adoption of Photo CD technology as a de facto standard for publishing and multimedia applications. Most likely, the “center of gravity” for Photo CD activity will move with the team from Kodak to its new home at Applied Graphics Technology (AGT).
AGT is the primary supplier of electronic prepress services and facilities management to major magazine publishers. Its customers include McGraw-Hill, Time Warner, Newsweek, Conde Nast and U.S. News & World Report, as well as the New York Daily News and several advertising agencies such as Campbell Ewald, Lintas and Saatchi & Saatchi. It was originally a subsidiary of U.S. News and was acquired by Fred Drasner when he acquired the publication.
AGT has formed a division, Imagenet, to “develop and market computer-based digital imaging products for the prepress, graphic arts and multimedia publishing industries, and for other markets where state of the art image storage, manipulation and retrieval is essential,” according to information released at the time of the announcement.
Brownstein at the helm. Scott Brownstein, the chief architect of the Photo CD system at Kodak, will head the division. AGT’s Murray Oles will serve as VP of technical sales and John Hafey as VP of system applications. The rest of the team will include Georgia McCabe (previously worldwide director of commercial CD imaging at Kodak), Surinder Dahiya (previously director of CD authoring and CD imaging in Kodak), and key members of the Photo CD technical development and marketing teams located in both Boulder, CO, and Rochester, NY. The team will continue to operate as it had under Kodak, with Brownstein and McCabe in Rochester and Dahiya and his technical team in Boulder.
Kodak’s Photo CD development team had been a somewhat ad hoc organization that included groups in both Rochester and Boulder. The original objective had been to develop the next generation electronic imaging product for the consumer market. However, it became increasingly clear to members of the team that the most important initial markets would be commercial rather than consumer.
Over time, they were gradually able both to extend the technology and to “open” it to allow others to begin building products around the originally proprietary Kodak specification. We doubt that this has been easy. Many people at Kodak still think that the company’s attention should be focused on promoting Photo CD in consumer markets. Others are worried about losing competitive advantage by making Photo CD specs public.
Still others (especially those who sell film and chemistry to graphic arts markets) are afraid of alienating their customers by promoting a technology that could well destroy the traditional color trade shop business.
However, the Photo CD team was able to get the company to commit to making Photo CD an open standard. The company announced this spring both the “opening” of Photo CD and some important Photo CD software products (see Vol. 2, No. 10/11, p. 26).
By this time, the effort required to operate as a guerrilla team within a large organization must have begun to wear. A number of team members were receptive to the concept of continuing their work in a new, more entrepreneurial environment.
AGT SAW OPPORTUNITY, NOT THREAT
From the beginning, Photo CD has looked like a “natural” for magazines. Several magazines have been experimenting with the technology. They reported at Seybold Seminars in Boston this April that the experiments have been satisfactory and they intend to adopt Photo CD. Others will surely follow. These same magazines are increasingly interested in multimedia products — and in Photo CD as a natural “bridge” from print into multimedia. Clearly, by setting itself up as the premier independent source for Photo CD applications and technology, AGT puts itself in a marvelous market position.
Drasner was remarkably prescient to see Photo CD as an opportunity rather than a threat — and remarkably fortunate to snare all the Kodak employees he needed to pull off his coup.
WHAT ABOUT KODAK?
We do not want to suggest that every competent person who had anything to do with Photo CD has now left Kodak. Of course Kodak will be able to continue its own Photo CD activities. However, we believe that having so many of the key people leave to form an independent organization committed to applying and promoting Photo CD technology should actually be very good for Kodak.
We have always felt that the big win for Kodak was having Photo CD become the de facto standard for digital still images. Now that the key specifications are becoming public, the Photo CD team can probably do more to accomplish this goal for AGT than it could working for Kodak.
WHAT DOES THIS MEAN FOR PHOTO CD?
Our confidence that Photo CD will become pervasive in publishing and multimedia has just gone up. Imagenet should have the right people in the right place with the right backing to drive Photo CD into the publishing market. If we were Kodak, we would help them and encourage them (and everyone else with similar ambitions) to do exactly that.
We hope that whomever Kodak now puts in charge of Photo CD will understand this and will continue the process of “opening up” Photo CD and encouraging everyone to use the technology. If instead it sees the “defection” as a threat and reacts defensively, it could either see effective control of Photo CD as a standard for commercial applications pass to AGT, or it could hold up widespread adoption of Photo CD sufficiently long to leave an opening for alternative digital image formats and standards to take over the market instead.
We are optimistic that rational self-interest will prevail.
Jonathan Seybold
CALIFORNIA PROPOSAL PUTS LEGISLATIVE INFO ONLINE
The online community has rallied around a new bill introduced in the California legislature that will require almost all legislative information to be made available to the public by means of access through a computer modem — including full text of bills, amendments, bill analyses, bill history, bill status, veto messages, daily files of each house of the legislature, each House committee’s schedule, state codes (statutes) and the full California Constitution.
For the first time, citizens, reporters, community and interest groups, unions, corporations, city and county employees could have access to legislation that directly affects them, even while it’s in progress. Like Hawaii’s FYI system, Assembly Bill 1624 offers leadership for those states — and Congress — not yet providing timely, comprehensive, economical online citizen access to the process of their governance.
This California bill was introduced March 4th by State Assembly Member Debra Bowen (D-Torrance). And since then, it has been bounced around several times. Initially it was held up in committee, ostensibly to study the technical feasibility of doing an online service, but the information is already available online — for a fee.
To date, the legislative information has been sold to a few high-priced information distributors for $300,000 to $500,000 per year, according to Jim Warren, a staunch advocate of the bill and the founder of the conferences on Computers, Freedom and Privacy. (It was Warren, who provided Bowen with a 16-page implementation plan for free distribution of the information via the nonprofit, nonproprietary public Internet.) So far, only well-funded lobbyists and special interest groups can afford the high per byte and per minute fees of those few private data distributors that have monopolized online access to these electronic public records. The select group includes Legi-Tech and State Net — two of the bill’s strongest opponents.
Much of the online community has rallied around AB1624, however, and are unwilling to let the bill disappear without a fight. Concerned individuals have been sending information over the Internet about the bill’s progress and encouraging citizens, who are interested in seeing the bill passed, to make their opinions known to their representatives — through faxes, phone calls and letters.
According to Warren, who often writes about public access to information as a columnist for a variety of trade publications, these paper and electronic messages are the only thing that has kept this bill moving forward. In fact, it was shortly after an all-out fax blitz to the office of John Burton (D-San Francisco), the Assembly Rules Committee chair, that the Assembly — after five postponements — reheard the proposed bill. It passed the Assembly Rules Committee 8-0.
Since then, the Assembly Ways & Means Committee chaired by John Vasconsellos (D-Santa Clara) passed the bill 21 to 0. And the full Assembly passed it 72 to 0. But the proposed bill still has to pass the Senate and then must still go back to Burton’s Rules Committee.
Individuals interested in more information on AB1624 can contact Hon. Debra Bowen, State Capitol, Room 3126, Sacramento, CA 95814 or request electronic information on the bill from Jim Warren at jwarren@well.sf.ca.us.
MICROSCOPES FOR HIGH-DENSITY STORAGE
In the near future we may be buying microscopes for our personal computers — not as scientific instruments, but as data storage devices. On May 18, Professor Calvin F. Quate of Stanford University described to the Clara Valley Electron Devices Society of the IEEE recent progress in the use of scanning force microscopes (SFMs) for storing information at very high densities and for measuring surface roughness.
An SFM moves a very small, sharp probe across a surface, keeping it only a few atomic diameters away from contact. It measures the infinitesimal force of attraction or repulsion between the surface and the probe tip created by electric or magnetic fields. Because the tip is only two or three atoms in diameter, the SFM can actually locate the individual atoms and molecules that make up the surface as well as ones that lie on it. Derek Bennett introduced the SFM as a variation of a similar device, the scanning tunneling microscope (STM), which he invented with Heinrich Rohr at IBM’s Zurich laboratory.
Eric Bentzig at Bell Laboratories has used an SFM with a magnetic probe tip to read data recorded as magnetized spots. He created very small spots by illuminating the surface of a magneto-optical material with light sent down a tapering mirror-surfaced plastic rod. The light emerged through an opening smaller than a wavelength of light at the end of the rod, hitting the surface before it could spread out. This equipment was able to store information more than 500 times more compactly than an ordinary computer disc drive — 45 gigabits (45,000,000,000 bits) per square inch.
At that density, a 50-megabyte file would just cover George Washington’s eye on a dollar bill.
Other techniques include sensing the electrical attraction of trapped charges in an insulating surface, denting the surface with the probe tip, and moving individual atoms around on the surface. At IBM’s Almaden Research Lab in San Jose, CA, scientists scratched the word “HEUREKA” on an ordinary audio compact disc — between two of the microscopic pits that encode the audio signal data!
Researchers at IBM, Nippon Telephone & Telegraph (NTT) and other laboratories around the world have even been writing their companies’ names with atoms such as gold and sulfur in letters as small as five atoms high — arguably the world’s smallest type font.
RAE BUILDS A PIM FOR PEOPLE ON THE GO
Rae Technology, a startup specializing in personal information management (PIM) software, has set its sights on becoming known as the PIM developer of choice for computer users who can’t wait for Zoomer or Newton PDAs to hit the market.
Next week the Cupertino, CA-based company, which has focused on developing PIM technology for the emerging PDA and mobile personal computing markets, is expected to ship its first shrink-wrapped product called Rae Assist.
The $199 personal information manager is the first PIM to combine a relational database — Rae Assist is built on a subset of ACI’s 4th Dimension database engine — with Hypercard-like capabilities that enable the user to create unstructured associations, such as object linking within different categories of information.
In addition the application is the first of its kind to include an “agent” or smart assistant that helps users import, find, link and tag information. The smart assistant can connect and disconnect links between data objects either automatically or based on a request from the user.
Initially Rae Assist will be available only for Apple Macintosh, PowerBook and Duo platforms, but, according to David Kleinberg, Rae’s vice president of sales and marketing, the company is interested in developing its proprietary technology for other platforms — both existing computer platforms such as Windows and consumer devices still in development. The Rae Assist architecture underlying the application is platform independent, according to Kleinberg.
Rae Technology was cofounded by a team of experts in database and hypermedia technology, including its chairman, chief operating officer and president, Samir Arora, an ex-Apple employee, who was part of the original 4th Dimension engineering team at Apple and ran the applications tools group responsible for 4D and Hypercard. His proprietary object-oriented Solo technology forms the core of Rae Assist and differentiates the product from other PIMs.
In addition to developing off-the-shelf software, Rae has been building customized corporate information management databases for companies that deal with sales automation, project management and electronic catalog publishing. It will continue to design, develop and install these proprietary databases. Kleinberg says Rae also plans to develop tools that will enable Rae Assist users to “personalize” applications.
SANCTUARY WOODS EXPANDS OPERATIONS
Sanctuary Woods Multimedia Corporation, the Canadian-based interactive media company best known as the publisher of actress Shelley Duvall’s first multimedia title, recently opened a U.S. headquarters and announced plans to expand its interactive publishing operations to include delivery of 21 educational and entertainment titles for the Macintosh, Microsoft MPC and 3DO platforms this year.
The five-year-old company, which has focused primarily on developing customized interactive business applications for corporations such as Northern Telecom and Bell-Northern Research as well as for federal agencies, has been struggling to create a presence in the new media market since 1992 when it launched its first two — and to date only — commercial CD-ROM titles: The Vampire’s Coffin and Shelley Duvall’s It’s a Bird’s Life.
To increase the company’s visibility in the U.S. multimedia publishing market, Sanctuary Woods has named Scott Walchek president and COO of the company. The former director of worldwide product marketing for Macromedia, he will run Sanctuary Woods’ business operations out of the new offices in San Mateo, CA, while title development will continue in the original Victoria, British Columbia, location.
The next six months “will be the greatest opportunity this company has had,” according to Walchek, who says Sanctuary Woods will deliver 10 titles each for the Macintosh and MPC platforms. In addition Sanctuary Woods plans to release It’s a Bird’s Life for the 3DO Interactive Multiplayer when it is shipped. According to Walchek, the company will produce titles for other CD-ROM-based platforms, including Philips’ CD-I and Tandy’s VIS systems.
In order to establish its titles in the U.S. channel, Sanctuary Woods has signed as an affiliate label of Electronic Arts. In addition Walchek has established a brand name identity strategy for the company’s content in the hopes that consumers will begin to recognize their favorite types of titles by category. The company has lined up the rights to and owns the trademarks of the names I-Tales, I-Adventures, I-Movies, I-Games, I-Learn, I-Mysteries, I-Catalog and I-Education.
In addition to creating original content and repurposing material from print, Sanctuary Woods is seeking to acquire other multimedia publishing companies as well as the digital rights to movies, videos and music CDs. According to Walchek, the company just secured the digital rights for all interactive platforms to Once Upon a Forest, a 20th Century Fox feature film to be released in 1994.
INTERNATIONAL NETWORKING CONF.
Aug. 17-20, San Francisco
The Internet Society
(202) 872-4200, fax (202) 872-4318
This third international conference addresses users and potential users of the global computer network called the Internet. University, industry and government representatives from around the world will meet to discuss issues of research and academic networking. More than 35 sessions will be featured over three days with session topics ranging from general to specialized interest.
Planning for networks of the future is a central focus of the conference. A number of practical sessions will discuss network funding, planning, operation and management on regional, national and international levels. Future global policy will be covered as well.
Hot on the agenda will be the Clinton administration’s much discussed plans for a national high-speed information infrastructure, which would bolster the capacity to send sound, graphics and video as well as data over networks in the U.S. The expansion of networks in Africa, North America, Asia Pacific, Latin America, Central and Eastern Europe, and Western Europe will be discussed as well.
Several panels will address issues of network access, including panels on empowering new users, helping users help themselves and the application of global networks in K–12 education.
The latest developments in network technology, such as ATM and routing protocols, and other technical aspects of networking, including multimedia technologies, the next Internet protocol and mobility, will be explored in a number of panels.
Social and security issues will be addressed during panels on computers, freedom and privacy, virtual culture and community, the transformational potential of networked information, and cyber-knowledge and information space.
For the large body of researchers and academics who conduct their business via the Internet, several sessions will discuss technologies for cooperative work, research and development initiatives, and global scientific collaboration. Conference sponsors project an international attendance of 1,000. For more information, contact INET at inet93.stanford.edu, or at the phone numbers above.
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• INTERACTIVE TV, PART II: FRESH START, OR STATUS QUO?
Last month, Part I of our series on interactive TV outlined the four levels of interactive TV. Part II opens by examining the new, yet-unconfirmed Cablesoft alliance between Microsoft, TCI and Time Warner — a teeth-rattling wakeup call if ever there was one — and moves on to blast the mythology of interactive shopping, shows why NTSC must go away, predicts the death of mass media advertising, examines narrowcast advertising, and hails the importance of security and privacy in the land of digital commerce.
But we still didn’t cover it all. Despite our fervent desire to cover all the bases here in Part II, it looks like there will have to be a Part III. Stay tuned.
• HP FINDS WHAT CUSTOMERS WANT
When Hewlett-Packard decided it might want to deliver hardware for the new interactive TV market, it did something almost unheard of in Silicon Valley: it did a real market research survey. The results were both predictable and surprising: Consumers are more sophisticated than we thought.
• ALLIANCE FEVER: A SNAPSHOT IN TIME
Unbelievable as it may seem, we actually sat down and compiled as exhaustive a list as we could muster of the alliances, business agreements and shared financial interests of companies involved in the nascent interactive TV/services industry. We’re aware that attempting 100 percent accuracy on such a list, which seems to change almost minute-to-minute these days, is an exercise in futility. But it seemed eminently worthwhile to capture a moment within the ferment.
Although the bigger question, of course, is the long-term significance of such cooperative arrangements in the face of the new Cablesoft venture, we thought that if nothing else, we’d provide you with a snapshot in time. Someday we’ll all look back on this and laugh.
• I/O
Why make education as mindless as entertainment?
• CHANNELS
Distribution and the art of negotiation.
• NEWS FROM CES
ITV, PDAs, VR, 3DO abound.
• VR DEAD, YOU SAY?
Not at this conference.
• FROX RESURFACES
Digital TV co. re-enters market.
• APPLE LAUNCHES PUBLISHING GROUP
A major new strategy for Newton and CD-ROM titles.
• THE HDTV ALLIANCE
Are we starting or stopping?
• TI DOES IT WITH MIRRORS
New screen display technology from TI is a good fit for HDTV.
• PHOTO CD TEAM LEAVES KODAK
Brownstein, McCabe et al. move to color prepress company AGT.
• BRIEFS
Proposal for CA legislative info online; Microscopes for high-density storage; Rae’s PIM; Sanctuary Woods expands.
• EVENTS
International Networking Conf.
THE INTER-HYPER-MULTI-ATOR
Why make education as mindless as entertainment?
Peggy Weil is an independent author/producer living in Los Angeles. She began working with interactive multimedia at the Architecture Machine Group (today The Media Lab) at M.I.T. in 1980. She created and produced A Silly Noisy House, a CD-ROM for children published by The Voyager Company.
Publishers, worried about missing the multimedia bandwagon, are scrambling for ways to capitalize on their vast holdings by repackaging material for the electronic age. There is a collective search for the alchemist’s “Inter-Hyper-Multi-Ator” — a Rube Goldberg machine that will process existing books, magazines, television programs and movies into electronic gold. This may well occur, but not without serious thought. The opportunities are real, but likely to be squandered on ill-conceived products prized initially for their gimmickry, discarded ultimately as banal.
Consumed by hysteria. The children’s and educational markets are equally consumed by this hysteria. Publishers and authors of educational software need to step back and evaluate the premise as well as the promise of “edutainment.” Merging education with entertainment to provide easy learning may not be desirable. The word (offensive in itself, and an immediate clue to the discerning parent) devalues both entertainment and education as it seeks to improve them. The assumption is that the essential attribute of entertainment is that it is fun and mindless: if we could just make education as mindless as entertainment our nation’s educational problems would be solved.
The attitude is pervasive and is reflected in statements like “… these programs will make learning fun … will make kids forget that they are learning … will trick kids into learning while they are playing a game….”
While the intentions behind such statements are optimistic and well-meaning, they backfire and give our children the message that education is dry, difficult, boring and tolerable only when disguised. This may be the case when applied to that subset of education that demands rote memorization and drills (a large and successful subset of educational software), but it misrepresents the broader scope of education which encourages questions, provides tools for finding the answers to those questions and fosters the ability to find and critically evaluate information. Problem solving and communication skills are intrinsically rewarding; watch a beaming child after she has been allowed to figure out something for herself.
PACKAGING LEARNING AS DISTASTEFUL IS WRONG
Learning isn’t distasteful; why do we insist on packaging it as such? Dean Kamen, an engineer concerned with American education and founder of USFirst, an organization pairing engineers and students, observes that while American high-school students admire and recognize sports heroes and advertising icons, very few can name a single Nobel Prize-winning scientist. If marketing can create an aura around Ronald McDonald, he reasons, why not use equal public relations muscle to push inventors? We need new role models and we need to provide educational experiences that guide children toward their own inventions; even very small discoveries are enormously satisfying. The message should be that learning has value.
Entertainment is similarly misrepresented. While the term “mind-numbing” certainly applies to a lot of entertainment and has lucrative appeal, it is not the whole story. Entertainment also incites, stimulates, angers, comforts and inspires. I’m not just talking about Shakespeare, but about any of the videos that your children were watching last night. While they were sitting there motionless, eyes glued to the screen, something was going on in their minds. When the kids start spontaneously play-acting the parts from the fairy-tale the following morning, they are participating in last night’s media. Storytelling is the bedrock of education.
INTERACTION YOU DO WITH YOUR HANDS
Interaction (in the context of today’s home computers) is something you do with your hands, not with your mind. Interactive is not the opposite of “passive.” Books, television and recorded music are anything but “passive” media; they are engaging and involving. Maybe we could redefine mind-numbing media as passive and mind-involving media as active. Discarding “mind-numbing” as having no place in any considered scheme to improve education, we need to concentrate on what I would like call “active media” — programs not defined by the amount of button-pushing “interaction” they contain, but designed to encourage children to become active participants in the process of learning.
Parental confusion over children’s software is reinforced by the “wonk” mystique surrounding computers. Upscale parents, terrorized that their children are going to grow up to be computer illiterate, are sending children to classes (and computer camps!) to familiarize them with the fundamentals of today’s home computers: the mouse, the screen and the keyboard. Most likely, today’s toddler who has mastered the mouse will not hold any significant computer-related advantage over her friend who spent those hours playing outdoors. In a dozen years, when they are applying to colleges, the mouse may well be extinct.
A LITTLE MULTIMEDIA GOES A LONG WAY
This is not to pan all computer programs for children or discourage their use. It is a call for restraint. A little multimedia goes a long way. Encyclopedic programs are dazzling for the sheer quantity of information, references, cross-references and features. While they make terrific demonstrations, if we expect students and their instructors to stay afloat in this dizzying array of material, it is essential to design a coherent navigational guide. It may not be necessary to use every available feature all of the time. Notably, The Voyager Company has elected not to use voice-over for its celebrated Expanded Books collection. It has chosen to complement the text, not overwhelm it.
In the educational arena, pairing audio with text has unleashed programs where the words are highlighted as the text is read aloud — a sing-along-with-Mitch, or follow-the-bouncing-ball approach to learning to read. The child is cheated out of the chance to sound out or recognize the word for herself. Biting your tongue while a child struggles to sound out a word — now that’s interactive.
Believe it or not, the “Hyper” component of the Inter-Hyper-Multi-Ator doesn’t stand for hype, it refers to a notion of a non-linear or non-sequential network of information. Theaters are testing films with branching story structures and audience participation to determine the outcome. These have already proven to be unsatisfying. A multiple choice mystery takes the “who” out of “whodunit?”
Leaving some things out gives us a chance to fill in the blanks. A non-linear superstructure doesn’t mean the demise of a good story. Leave out the scrolling text in a move toward the oral traditions of storytelling.
Only recently have stories been so homogenized, strictly linear in presentation, uninterrupted (except by commercials) and constrained to the capacity of a video cassette. The oral tradition has always been participatory; the audience interrupted, the dancers provided diversion, and the storyteller had license to digress and modulate the tale for the audience and for the occasion. The Inter-Hyper-Multi-Ator, when properly tuned, could play an important tune: Learning is not a game, it is a quest.
Peggy Weil
INTERACTIVE TV, PART II: FRESH START, OR STATUS QUO?
Now more than ever, be mindful of how you proceed
The first public speculation about Tele-Communications Inc., Time Warner and Microsoft’s joint venture, called Cablesoft, was a nasty wakeup call for those in cable, content or software who thought interactive TV was their chance to break the stranglehold of the status quo.
As we went to press on June 14, no formal announcement had been made about the proposed TCI-TW-Microsoft joint venture to develop a standard interactive TV system, though the companies did confirm they were “talking.” So unless for some reason they’re stopped by the government from proceeding or the deal falls apart, the world’s three largest companies in their respective fields could potentially spearhead the movement of ITV services into millions of American homes.
The numbers. For a bit of perspective, here’s the most recent published industry statistics, courtesy of the National Cable Television Association (NCTA) in Washington, DC: In the U.S. today, 92 million households have televisions. Almost 89 million households have access to cable services, but only about 57 million of them, or 61 percent, actually subscribe. NCTA says TCI and Time Warner together control about 17 million, or roughly a third, of all cable subscribers. The next largest operator is Continental Cablevision, which has less than half the subscriber base of Time Warner Cable.
However, do not make the mistake that we used to make when looking at these percentages. In any other industry, you would say that controlling a third of a market isn’t really all that much. With the cable industry, the salient detail is not that they control a third or so of all cable homes. What’s important about a cable provider, which is the same kind of regulated monopoly as a local phone company, is that it controls 100 percent of its service area.
As one cable watcher put it, “Where they are, they’re it.” You don’t win or lose customers in onesies or twosies. If one cable company provides better service than its neighbor, whole cities or counties of business can be won or lost when cable provider licenses come up for renewal.
Companies like Time Warner and TCI, which are deeply invested in and connected to the programming world in addition to the cable systems they control, are able to keep growing because their size, connections and investments in cable give them influence over entertainment properties they don’t own or control, and their ownership of entertainment properties give them influence over cable systems they don’t own or control.
Even if AT&T doesn’t decide to hop into the action (a longtime rumor), to say that Cablesoft has clout will be the understatement of the decade.
Whatever you say. One of the funniest lines in the New York Times, which broke the story on Sunday, June 13, was an unnamed executive saying the partners didn’t want the alliance to be seen as threatening to other companies. Right! If true, it would be the first time in recorded history that any of these companies didn’t want to be seen as a threat.
In fact, we think you could have sold tickets to any of the meetings between TCI’s John Malone and Microsoft’s Bill Gates — two of the toughest deal makers on the planet — as Cablesoft was being formed. Any executive would have paid big money to watch the masters at work.
A CYNICAL PRE-EMPTIVE MOVE
If it comes to pass, the venture has the potential to accomplish something everyone says they want: a de facto technology standard for the delivery of interactive TV and information services. Unfortunately, it may do so before there is even a system to base a standard on.
We continue to believe (as we stated in last month’s ITV piece) that it is a mistake to allow market clout — such as that yielded by TCI, Time Warner and Microsoft — to set standards for the communications infrastructure of the next century.
Such a pre-emptive move in a new, highly volatile market, without consulting with others who are doing good work in the area (and who are begging all three of these companies to collaborate with them), is a display of brute cynicism. In addition, it is unmindful of history, which has proven over and over that the best ideas are not formed in boardrooms of major corporations, but in the minds of creative entrepreneurs who do not perceive the future in terms of preserving the status quo.
It’s too early to say whether Cablesoft might be good news or bad for developers of interactive programming and services. If the venture develops a truly open architecture — i.e., if licensing the operating system is virtually free or if companies other than Cablesoft can provide it as well, and if there are no hidden upstream costs such as expensive developer tools or tolls for getting programming and services onto the network, then we may see the industry move forward rather quickly. But frankly, the chances of a Cablesoft system meeting those criteria are rather slim.
SATISFACTION IS JUST A PHONE CALL AWAY
The other, equally critical “if” is the quality of the system, and it is a question that will be asked of any ITV architecture. Consumers do not have the patience of business computer users, who have historically forced themselves to put up with flaws and bugs because they couldn’t do their work any other way, and they’ve already shown they aren’t any more fond of cable systems that cost a fortune and don’t deliver much.
So we pity any company working on these systems that attempts to take short cuts through this particular mine field. Consumers do not yet (if ever) need interactive TV. Precious few consumers will put up with the nonsense that computer users tolerate every day, with system crashes, viruses, bad applications software, incompatibilities and more. If they don’t like something, anything about it — the settop box, how the screen looks, its responsiveness to their commands, how reliable the system is and how well it works, the kinds of programming they get — they’ll just call up their local cable company and say, “Get this thing out of my living room.”
LET’S GET ON WITH THE WORK AT HAND
Short term, Cablesoft certainly has the potential to obviate or at least slow the momentum of cooperative ventures developing interactive TV architectures, such as First Cities or Kaleida Labs, or even other Time Warner ventures such as the one just announced with Silicon Graphics to deliver the digital core to its full service network in Orlando.
However, it would be a mistake to treat any of these alliances — Cablesoft included — as anything but very early stage tests. Even John Malone himself can’t make subscribers like a 500-channel interactive cable service, and if they don’t like it, they won’t buy it.
Instead of the industry spinning its wheels spooling out Cablesoft scenarios, it should instead refocus on the various critical issues that must be solved to create a national public network that enables interactive TV — as well as other digital consumer services — to be not only financially viable but of the most utility to the public at large (and we use the word “utility” advisedly).
Since many ITV pilots may undergo some internal changes, we’ll leave them out, even though we promised in Part I that we’d discuss them here. Some of them — Time Warner’s Orlando test and Viacom’s in Castro Valley — will be discussed at this week’s Digital World conference, and we will report them in the next issue. We will continue to explore more issues, such as community access and public policy, over the coming months as the battle lines continue to be redrawn. These subjects are worthy of closer, individual examination.
This month’s installment will focus on the issues — interactive programming, advertising, privacy and security — that are most critical to examine as we move forward even more quickly than we’d imagined into the age of interactive TV.
SHATTERING SOME MYTHS ABOUT INTERACTIVE’S BENEFITS
The concept of interactive TV is almost synonymous with video-on-demand (VOD), interactive games, home shopping and customized advertising. Though VOD and games are fairly straightforward and are likely to be pretty much as popular as people claim they’ll be, home shopping and custom advertising have become part of a mythology about interactive services that is in need of serious examination.
It’s not hard to see why people believe that home shopping via interactive TV is the wave of the future. Unless you dig below the surface, it’s a perfect 1-to-1 map with the existing catalog sales market: instead of spending money designing and printing glossy mailers full of merchandise, stick the merchandise in front of a camera and let the person sell it who designed it, or carved it, or who dug the crystals out of a hillside in Sedona.
With a catalog, we pick up the phone, engage in a transaction with another human being, and merchandise appears at the door. With two-way interactive TV, our transaction is a point and click, and the merchandise appears. It is the ultimate in eliminating the middleman.
Yes, but. There are a large number of qualifiers that we should all be thinking about before we decide that TV-based shopping will provide the revenue base needed to move on to less venal pursuits for interactive home systems such as adult education and news delivery.
Although the catalog-to-TV map looks like a natural, we need to question whether or not the metaphor will be sustained over the long haul. Today’s home shopper is someone who, not surprisingly, spends a lot of time at home with credit cards. As the preponderance of material sold on home shopping channels today is junk, it is safe to assume that there is some sand running through the hourglass in terms of how long Visa et al. can support the compulsive spending habits of the housebound.
However, it is clear from the catalog shopping business — which racks up a whopping $60 billion per year, according to a commonly cited statistic — that there is a big market for the convenience provided by not going to a store to shop. What, then, is the difference between delivering product information via a paper catalog and seeing it on TV?
NTSC, the great equalizer. The answer is “screen resolution.” One of the oddest stories about high-definition TV — yet most obvious when you think about it — is that people love it for nature programs, but hate it for game shows and sitcoms because you can really see the cheesy materials and poor set construction.
We’re accustomed to seeing our illusions presented in NTSC, which turns all texture into blur. With NTSC, the North American standard for broadcast TV transmission, there is no perceivable difference between burlap and linen. It’s the great equalizer. And equally disturbing in the context of home shopping is the problem of NTSC color, which seems impossible to match from minute to minute on the same set, let alone from one to another.
This will not do. Because today’s upscale catalog shoppers can see a very high resolution, high-quality photograph that’s as close a representation to the real item as the seller can make it, they feel less threatened spending $300 for a silk suit they can’t try on. If it’s a bad photo, the seller will be flooded with returns (“It wasn’t anything like the picture”), which is more costly than not selling it in the first place.
Because of TV’s low resolution, this level of detail simply cannot be provided for merchandise ordered from NTSC TV. Unless they’re already familiar with the exact product, TV shoppers today really have to take it on faith that what they order will arrive looking even vaguely like it does on television.
There are good short- and long-term ways to work around this problem, but until something is done about the bad quality of NTSC video, serious shopping via TV — i.e., the kind that generates return customers — will not live up to its promise.
SHOPPING FOR STAPLES HAS A LOT OF POTENTIAL
There are people like me, driven to the wall with work and family pressures, who would kill to find something useful to buy on TV, be it interactive or otherwise.
But the 10-pound box of Tide Unscented, trash bags or toilet paper made from recycled stuff, a nice white Egyptian cotton shirt — in other words, staple products in the lives of professionals who can’t afford live-in help — just aren’t available, or if they are, they aren’t available in the time slots in which we watch TV. Certainly we won’t sit through a half-hour of retail histrionics to get to them, even if we are perversely fascinated with the Caruso Molecular Hairsetter.
And even if we did happen to see and order them, when would the goods be delivered? While we’re at work, so we have to spend Saturday picking them up at the post office or UPS? Would they be delivered to the office? Is that where professionals really want their laundry detergent delivered?
We don’t think so. What we would want is to have our order delivered when we need it to be — say, between 7 and 10 pm — to our homes. If we need to return things, we want someone to come pick them up when it is convenient for us, at no extra charge. If shopping channels are going to make millions and millions of dollars on our need for convenience, then they’re going to have to provide real convenience — by our definition, not theirs.
These points may seem beside the point in a discussion about interactive TV. But if these services — cornerstones for discussion about the financial viability of interactive TV — are to move beyond the housebound to people who have both urgent need for convenience in their lives and enough cash to satisfy it, then these are just some of the questions that have to be addressed before we even get to the interactive stuff. That’s just enabling technology, and the biggest questions about it have to do with privacy and security, which we address on page 6. These services could be money makers now, using the telephone or an online service — both of which use that “other” interactive network.
MASS MEDIA ADVERTISING IS DEAD
Television advertising. Now there’s an unlucky business to be in these days. Who watches ads on TV anymore? Channel surfing was born of ad hatred. Isn’t it odd, then, that advertising executives are often quoted saying that interactive TV is the catalyst that will revitalize this flagging industry?
Truth is that the advent of interactive technology sounds the death knell for mass media advertising. We are not privy to any secret information here. Let’s just look at the facts.
The myth of custom broadcast. One of the most popular misconceptions is that interactive TV will somehow deliver to advertisers, on a silver platter, you. You who will then be thrilled to be barraged with product information that appears to know everything from when you bought your last pregnancy test kit to your preferred flavor of Crystal Light.
They’ll know when you’ve been sleeping. They’ll know when you’re awake. They’ll be able to insert luxury car ads specifically targeted to you, even if you’re watching Studs — not exactly your upscale-type program demographic — because they’ll know that you’re out there, watching.
Fat chance. This may seem like a dream come true for advertisers, but it is a nightmare of vast proportion for real people. Be sure to read the accompanying story about Hewlett-Packard’s interactive TV market research on page 10. The number-one concern that early adopters have about interactive TV is personal privacy. Consumers absolutely will not stand for advertisers knowing who they are. They will require any service provider to prove that their personal information remains private.
Second, let’s just say that maybe for some reason — a kickback from the TV channel, or some other financial incentive — you’ve decided to go ahead and make your TVs (you have two) known on the system. It knows that you’re married and you have three kids — two teenagers (boy and girl) and a 6-year-old.
WHO IS TONIGHT’S ADVERTISING TARGET?
Who should the evening’s advertising menu target, and on which TV? The professional man? The professional woman/mother who does most of the shopping (not a stereotype, just true)? Who is sitting in the room with Mom and/or Dad? The teenagers, who have bigger allowances than their grandparents’ mortgage payment 30 years ago? How about that spoiled rotten baby of the family?
There’s absolutely no way to know unless they’re “logged in,” and considering the level of paranoia out there about personal privacy, that’s not likely. The fact is that interactive TV advertising, even if the “narrowcast” approach above was feasible, will not work.
It ignores the reason that people would choose interactive TV in the first place: control. The idea is to put you in front of the TV and make you feel like you can see, do or be anything you want. If you want to shop, you’ll shop. If you want to watch a movie or play a video game, you want to be left in peace. The last thing you want to see is an ad, especially not one “targeted” for you.
The intelligent agent. But we do need to buy things, and anyone with a busy life, which is most working folk these days, wishes they could hire a really smart person to work for them, someone who understands the value of a dollar, knows what has to be done and does it.
Any Level II (video on demand/multimedia) or Level III (on-demand information services) should be able to do the same thing. If I want to invest in a small camcorder, I should be able to select that product category on my shopping channel and my electronic slave should (and will) be able to search the network and find out what company listed on the network has the best price, features and service policy, deliver the information to me for a “yes” or “no,” and then buy it.
Desperate for customers. Manufacturers are desperate to get good products into the hands of customers and they’ll be the first to admit advertising isn’t pulling them in. An interactive network offers new solutions, but it will require a radical change in the way that both manufacturers and advertisers approach their customers.
A likely solution is the development of shopping areas on the network where manufacturers can rent “space,” so to speak, for online multimedia kiosks that provide detailed information about products. If I want to buy a miniature camcorder, I should be able to get all the product specs, reviews from consumer publications that I trust, and a list of authorized dealers of many brands of camcorder that have stores within five miles of my house. Such kiosks are among the few multimedia applications that has actually been successful outside the research labs.
Incentives to go out. Another variation on the theme would allow immediate online purchase and delivery. Another might give you a rebate for coming to the store instead of buying online — a way to get people into the retail outlets, looking at things they don’t necessarily want or need.
This still does not solve the problem of how you inspire brand loyalty over a network that “shops” for you based solely on price and features, but we have to leave a few topics for advertising executives to chew on in their spare time.
THE DOUBLE BIND: ADVERTISING VS. PROGRAM COST
A more fundamental problem in the long term is how the existing model of advertiser-supported programming is being ground up in the crush of new technology. Television programming has long been supported by mass media advertising, which in turn provided networks with enough revenue to cover TV’s high production costs.
As TV advertising gradually becomes a less potent force in the mass merchandising of products, manufacturers are taking their ad dollars away from TV, thus reducing the amount of money available to networks for program creation. (This has been most noticeable in the downsizing of network news departments, where production values are small and the returns are traditionally high; news just isn’t attractive to advertisers.)
Less money for more programs. So the dilemma is that there is less money available for the creation of TV programming — most of which is still generated by the major broadcast networks and repackaged or sold for retransmission on cable — at the same time that cable is gearing up to provide 500 channels of the stuff.
Assuming that 490 of them are not likely to be pay-per-view movies, how and what will fill all that channel capacity, if the production of programming is not being underwritten by advertising? George Lucas says that he can produce TV programs for one-tenth their former cost using digital media technology, but we don’t think these kinds of savings, which tend to lend themselves both to certain kinds of programs and to Lucasfilm’s particular computer expertise, will be the rule for a few years.
This fundamental discontinuity between channel capacity and capability to support it financially is not being addressed. In fact, at the recent National Cable Show in San Francisco, there seemed to be more niche, narrowcast programming than ever. The Golf Channel. Comedy Central. The Sunshine Network for regional sports. Black Entertainment Television. The Nashville Network. The Military Channel. The Russian-American Broadcasting Co.
NICHE PROGRAMMING AND THE DEATH OF SERENDIPITY
Who pays for this programming? In some ways, it seems that narrowcast could solve some of the problems of demographics — you’d probably have a fairly high rate of response for flannel shirt and army boot ads on the Grunge Channel, for example — but you still wouldn’t change the larger trend away from mass media, toward specialized interests and splintered audiences.
Narrowcasting begs the larger question, of course — the social implications of the death of serendipity in mass media. Those who watch the NeoNazi Channel (just wait, it’ll come) won’t search out, and aren’t likely to stumble across, the New Age Channel. Though it’s rare to change a certain type of person’s mind, occasionally a chance encounter can change for the better the way people respond to others in the world around them.
We’ll miss mass media. With so little tolerance for our fellow citizens remaining, it seems almost ironic that we’ve hated the “blandification” of cultures and lifestyles that has typified mass media for the past 40 years. By the turn of the century, we may actually mourn the passing of mass media’s representation of diverse points of view, even if they were skewed toward the status quo.
Aside from whatever problems we’ll have to iron out technically, a custom interactive network of the scope that’s being planned will indeed fundamentally change the way we live our lives and relate to each other. If the medium is the message, what is the message in a world of niche programming and special interests? How do we make people unlike ourselves care about our wants and needs, and vice versa, if we won’t change our own channel? Sticky questions, no good answers. But what’s hopeful is that it’s all brand new and we’re the ones who’ll get to decide. Let’s keep raising the level of discussion.
Denise Caruso
HEWLETT-PACKARD FINDS WHAT CUSTOMERS REALLY WANT
Market research quantifies the fan club for ITV
Before the grand old Silicon Valley computer company Hewlett-Packard decided that the market for interactive TV hardware was one it would pursue, it did something unusual for a technology company going into a new business: It did some real market research instead of bluffing itself into believing its brilliant business and engineering “intuition” was leading it in the right direction.
UNDERSTANDING A NEW TYPE OF CONSUMER
HP queried more than 4,000 people — the largest sample we’ve heard of yet — from the deep South, New Jersey, the Midwest, Los Angeles and the East Coast about what they’d like to see in an interactive TV system.
“We didn’t understand this type of consumer, so we did tons of market research,” says Laurie Frick of HP. She said part of the process was to find out what was actually happening in people’s lives and how they might be able to use such a system. Another was showing them mockups and prototypes of actual systems in focus groups. In addition, HP sent videotapes and descriptive brochures to their homes.
Starting to size the market. The quality of the survey made HP more comfortable about starting to size the market, as well as providing valuable data on people’s attitudes toward, and barriers about, using an interactive TV system.
As a result, HP came up with a profile of the first interactive TV user that was quite different than you’ve been hearing shouted from many rooftops. Initially, though, it isn’t any different from most of the pyramids you see for the adoption of a new technology. (In other words, thank God for early adopters.)
“Fan clubs” for interactivity. HP calls its innovators the “fan club” for interactivity. “They’re the ones who bought into the concept right away,” says Frick. “They liked all the standard stuff” — i.e., video on demand, interactive shopping services, games, etc. That group, she said, extrapolated out to about 6.5 million households.
“Utilitarian” time savers. The “utilitarians” weren’t of the same enthusiastic bent as fan club members, but liked the practical benefits they heard they’d be able to derive from a full-service TV network. Comparison shopping, the ability to purchase goods and the ability to retrieve all kinds of information from the ITV network held great appeal to this group, which HP estimates is eight million households. They are interested in time savings, but are equally concerned about network privacy and security issues.
“Lukewarms” and “ambivalents.” The second tier of ITV users were called “lukewarms and ambivalents.” Those who required the price to be very low or who loved some features and hated others, fell into these categories.
“TV rejecters” and “laggards.” These either hate TV or don’t buy technology. They would adopt ITV “late or never,” according to Frick.
BARRIERS TO WANTING INTERACTIVE TELEVISION
HP was able to isolate some significant — and perhaps surprising — barriers to the adoption of interactive services.
Personal privacy risks. First, says Frick, was the fear of “Big Brother,” a quite valid fear when the two-way nature of a full-service network allows the TV to become an eye into the living room that sees what movies you watch, what kinds of goods you shop for, whom you play video games with and what kinds of video games you play with them.
“When we showed them the standard applications, the first thing they said was, ‘Oh, someone could track everything I did’,” said Frick. Indeed, “someone” can do that now, too, but it could get worse. (See section on privacy and security, p. 6.)
Hacker crackdown. The second most-voiced concern was security. If the system used the customer’s credit card, people wanted to know how safe the system was, how it had been buttressed against hackers and how the electronic transactions were tracked and executed.
“The Potato Kid.” Frick said another big barrier was parents who said, “My kids already watch too much TV; they’re TV addicts.” Or for themselves: “My God, I’ll never leave the couch!”
Impulse control. The fourth barrier is actually quite compelling, and may turn out to be more of a problem than people think: “I’ll never be able to control my impulses — manage my spending, etc.”
Frick said when this topic was raised, she and her team were astonished by how many people said they “couldn’t trust” their mothers or grandmothers (or whoever happened to be living with them) with the home shopping channels now; what would happen if they could order just by punching a button on the remote?
A control issue. Frick says the underlying theme of all objections to interactive TV had to do with control. “If there was any sense that the TV was controlling them, that was really negative,” she said. “If they control it, it’s okay. If the people building these systems don’t take this into consideration, the whole thing will blow up.”
A DIFFERENT BREED OF CONSUMERS
As we had suspected even while the ITV hype pump was being primed, HP’s extensive survey showed that today’s consumers are much more savvy than they’re thought to be. For example, one of the most anticipated applications for ITV is the ability to do comparison shopping, which will drive the final nail into the coffin of advertising as we know it today (see p. 8).
And they’re smarter about obsolescence than industry would like them to be. Not only are they perfectly clear that hardware is worthless without applications, but they are quite discerning about where value resides in such a system. The example Frick gives is a question common to her early adopters. They ask, and for good reason, “Who will update the online restaurant guides when their menus change?”
And they will pay. HP’s survey was surprising in another way. Not only will word of mouth be sufficient propulsion to spread the adoption of ITV services, but based on its sample, HP is happy to report that consumers will be willing to pay for them, too.
“We don’t know whether to believe it or not, but people said they’d pay $18 to $22 per month for transactions — not just entertainment, but information lookups and shopping transactions,” said Frick.
POWER TO THE PEOPLE A DRIVING MARKET FORCE
It’s clear to HP, after conducting this survey, that a system designed to meet consumer needs will make those consumers much more powerful, and that is the attraction. If they don’t get what Frick calls “the wow” from such a system, they won’t buy in. Period.
“For example, Philips’ CD-I is for the mass market, but it missed the innovators,” Frick says. “The innovator looks at CD-I and says, ‘What’s amazing? What’s the wow?’”
She claims HP’s survey found that the wow for early adopters is access to information, the ability to control and personalize what comes through the TV set into the living room. They are savvy about computers and about getting what they want, when and where they want it. The race is on to see who will deliver it to them first.
Denise Caruso
SECURITY AND PRIVACY IN A DIGITAL WORLD
Nearly every benefit you hear about interactive TV and services in some way involves the capability to “pay for it over the network.” Home shopping. Home banking. Home movie rental.
Call it “pay-per-do.” When anything you buy over the network is tied to a transaction of some sort — let’s call it “pay-per-do” — what it means is that at some point in the process, you’ll have to send over a network (cable, fiber, copper, wireless) some piece of sensitive financial data.
Beyond financial transactions, two-way TV means that whoever is on the other end of the wire — Big Brother, perhaps, and all his nosy, felonious little cousins — can see you, too. The programs you watch, the product information you seek out, the movies you download from that certain section of the online video store — all is potentially valuable data to someone, whether it’s a direct marketer, a blackmailer or a bill collector.
A SCI-FI SCENARIO IF EVER THERE WAS ONE
The potential of such scenarios hasn’t been lost on the science fiction writers, those chroniclers of our technological nightmares.
One of the consistently amusing vignettes running through Pat Cadigan’s excellent cyberpunk novel Synners involves the GridLid in the Los Angeles of the future, a computer network built into cars designed to keep traffic flowing around jammed areas. Riddled with viruses, it becomes an enormous playground for hackers and digital pranksters, absolutely never works as intended, and traffic is worse than ever.
Cadigan’s novel paints a pretty bleak picture of what can happen when people rely too heavily on unprotected commercial networks, and the seeds for her particular disaster scenario can be seen nearly anywhere you look today.
Are we nuts? So what are we, crazy that we’re talking about interactive TV, which at its apex will be a global, high-speed computer network that we’re setting up to be the pinnacle of human reliance on technology?
There are solutions to this problem, but naturally they are not simple or even straightforward. As the national security agencies feel threatened by technologies, they try to roll legislation into place that may not necessarily serve the greater good (see “The FBI wants Dumb Networks,” Vol. 1, No. 11, p. 7).
If you’ve been keeping up with your reading about the Clipper chip, you know that the Clinton administration is embroiled up to its earlobes in controversy on the subject even as you read this.
ENCRYPTION IS THE ONLY SURE PROTECTION
The only way to protect the individual privacy of people using a network, and to provide security for the information and intellectual property that travels over a network is via some type of data encryption.
Computer-based encryption is an arcane art whereby a message is transformed via mathematics into a pattern of gibberish that can only be translated if you have the correct key.
DES and public key. There are only a couple of widely used encryption schemes. The best known today, called DES, belongs to the federal government, and it requires that both you and I have the same key to unlock the message. The sticky problem is finding a secure way to get the key to you if you’re in a different place than me, which is likely if I need to send you a message rather than just whisper in your ear.
Another method of encryption that’s gaining popularity as “the net” reaches toward ubiquity is called public key encryption. A process patented by RSA Data Security in Redwood City, CA, public key solves the key security problem by creating a system based on two keys per person, one public and one private.
Allows for many levels. Public key allows for a number of levels of security and privacy. Here’s how it works in a nutshell: If I simply want to send you a private message, I encrypt my message to you with your public key (public keys can be published in a directory just like a phone number without compromising security), and you decrypt it with your private key.
Now since handwriting analysis is a useless art in electronic data exchange, public key can also provide a way of authenticating that I was the person who sent you that message. To do that, I encrypt my message to you with my private key, and you decrypt with my public key.
Protection against alteration. A bonus benefit to authentication is that if any of the data had been altered, even one bit, your key would have been unable to decode it.
It’s also possible, if I want our message to be both secret and authenticated, to use both of our keys to encrypt and decrypt the message.
This is particularly helpful to owners of intellectual property who don’t want movies, music or photographs being lifted off the network, altered (or not) and resold. It can help assure them that at least for their leg of the journey, the information is being delivered only to the person who paid for it.
Furthermore (and this is an added benefit), using encryption regularly for information sent over a digital network is an excellent way to inoculate system software, applications (and the network itself, if used widely) against viruses.
If I want to sell and distribute software over the network — which is expected to become big business — especially application software that has the ability to manipulate data, it’s important for you and important for my continuing business that I don’t unwittingly send you an infected product.
Public key plus DES. Because public key uses more computer power than DES, companies such as pay-per-view cable providers are using combination systems to perform what’s called “key management.” Instead of encrypting the entire movie, for example, the cable operator simply uses public key to encrypt the DES key that will allow you to “unlock” the channel and view the movies you paid for.
The extra authentication step isn’t necessary because your key is built into your cable decoder box, or into a “smart card” provided to you by the cable company.
Digital cash goes one step beyond. Some encryption schemes go even further to protect personal information. Called digital cash, they are an electronic means of paying for goods and services over a network; but unlike today’s credit cards, there is no personal identification tied to the transaction.
Companies like A-Squared Systems in Oakland, CA, and researchers such as David Chaum at the Center for Math and Computer Science at the University of Netherlands in Amsterdam are working on digital cash systems that will make it absolutely none of anyone’s business who you are and where your money is coming from.
HOW DO YOU MAKE SURE IT’S NONE OF THEIR BUSINESS?
Solutions such as encryption will have to be adopted if we are indeed to conduct commerce over the network. But now that we’ve solved the security problem, what about the broader one of privacy? How do we handle the potential abuses of personal information that are ripe for the picking in a two-way interactive network deeply connected into the workings of your home?
As we’ve mentioned elsewhere in these pages, Hewlett-Packard’s consumer research shows that people are very concerned about their privacy as a two-way network is deployed.
Magnifies the present. A two-way, high-capacity network certainly increases the potential for abuse; but really, it’s only a magnification of the problems we have now. And many of those problems are based simply on the fact that the United States has a very powerful direct-marketing lobby that screams bloody murder every time citizens ask for more direct control over what is done with their personal information.
Just say no. Other countries, most notably the European Community and Canada, have very strong privacy laws — Canada even has an appointed office that acts as liaison in cases where people think their privacy is being compromised — that require companies to contact you personally if they intend to sell your name to another firm. They have to tell you who the firm is, what they want to do with the information, and specifically which information they are releasing. If you say no, they can’t release it. Period.
This of course doesn’t sit well with advertisers, but as we point out in the main story, the two-way network obviates advertising as we know it anyhow. There has to be a different solution. If we want an intrusive technology like interactive TV to really reach its potential, the U.S. may need to consider a more proactive stance on personal privacy.
Denise Caruso
ALLIANCE FEVER: A SNAPSHOT IN TIME
Here’s as exhaustive a list as we could muster of the alliances, business agreements and shared financial interests of companies involved in the nascent interactive TV/interactive services industry. All things considered, this list is probably already out of date.
The more important question is what significance do any of these cooperative arrangements have in a world where Cablesoft exists? As TCI chairman John Malone said in a recent magazine interview, “When you’re driving plate tectonics, you’re going to squeeze people’s tails.” We bet the people on this list wish it was only their tails getting squeezed. We predict that in the next six months, many of these alliances will be materially altered as a result of Cablesoft, even though it will be years before a full-service network is actually operational.
THE 3DO COMPANY WITH…
• MCA/Matsushita, Kleiner Perkins Caufield & Byers, Electronic Arts and Time Warner: Strategic partners.
• AT&T: AT&T is a hardware licensee of 3DO Interactive Multiplayer. AT&T plans to manufacture and market a network version of the player. AT&T is also an equity partner is 3DO.
• Sanyo: Sanyo is a hardware licensee for the 3DO Interactive Multiplayer.
• Over 300 software companies have signed licensing agreements to develop software for the 3DO Interactive Multiplayer.
ACTV INC. WITH…
• Washington Post: To provide interactive services for television, called ACTV Interactive.
AMERICA ONLINE, INC. WITH…
• Paul Allen: Allen owns 24.9 percent of America Online (AOL).
• Sprint: Sprint has a warrant to purchase 450,000 shares of AOL, around 7 percent.
• Tribune Company: Tribune owns approx. 10 percent of AOL.
• Apple Computer: Licensing agreement to use AOL technology for its future online services, including for use with Newton devices. Apple has a warrant to purchase about 5.8 million shares, approx. 8 percent, of AOL.
• Tandy and Casio: AOL to provide a version of AOL for Zoomer.
AMERITECH WITH…
• Apple Computer: To provide advanced messaging services for Apple’s Newton devices.
• Cardinal Communications and BroadBand Technologies: Ameritech subsidiary Indiana Bell, Cardinal and BroadBand Technologies to test a fiber distribution system for video and voice over fiber-optic, coaxial and twisted-pair lines.
• IT Network: To create electronic Yellow Pages.
• Dun & Bradstreet Information Services: To market business information and advice offered over the telephone to small businesses.
• Audio Services Inc.: To provide information, product ordering, polling and ordering services to telephone customers.
• Wisconsin Health Information Network (WHIN): Ameritech has an interest in WHIN, a company that operates an automated health care information service.
APPLE COMPUTER WITH…
• First Cities: See First Cities.
• General Magic: See General Magic.
• Ameritech: See Ameritech.
• BellSouth: To test banking and other information services with an Apple Newton prototype.
• US West: To explore screen-based telephony, identification and communication services for Apple’s Newton devices.
• Kaleida Labs: Formed by IBM and Apple to develop a cross-platform scripting language for multimedia.
• Toshiba: To develop multimedia personal digital assistants (separate from Newton development).
• Public Broadcasting Service: Project “Media Fusion” to test networked multimedia, including video, voice and text, in schools.
• America Online: See America Online.
• Sharp: To develop and manufacture Newton personal digital assistants.
• Motorola: Motorola has a licensing agreement to manufacture and market a handheld device based on Apple’s Newton technology.
• Siemens-ROLM: To develop NotePhone, a combination of Siemens-ROLM telephony and Newton technology that will provide access to telephone and fax features.
• Cirrus Logic: Cirrus to develop and supply Newton-compatible chipsets for use by licensees of the Newton operating system and by Apple itself for Newton devices.
• Kyushu Matsushita Electric: To explore the opportunity to include KME-provided technology in future Newton-family products. KME has also licensed the Newton operating system.
• LSI Logic: LSI is manufacturing an application specific integrated circuit (ASIC) chip for Newton devices.
• GEC-Plessey: Licensed the ARM chip at the heart of the Newton.
• VLSI Corp.: Licensed the ARM chip.
AT&T WITH…
• Compression Labs: To develop a settop box to deliver movies and other video services to the television via phone lines.
• Viacom International: To provide advanced technology (i.e., ATM switches) for a test of interactive consumer video services via Viacom’s two-way cable system in Castro Valley, CA.
• StarSight: To provide an on-screen programming guide for the AT&T/Viacom Castro Valley trial.
• TCI: Letter of intent to order subscriber (settop) boxes from AT&T.
• US West and TCI: Viewer-Controlled Cable Television (VCTV) venture to test customer demand for interactive television services in Englewood, CO.
• General Instrument: GI customized settop boxes per specifications from AT&T Bell Labs for the Englewood, CO, trial.
• General Magic: Equity partner AT&T is building an enhanced network service based on General Magic’s Telescript communications language. See General Magic.
• 3DO: See 3DO
• Go Corp.: To develop underlying technology, based on AT&T’s Hobbit family of microprocessors, for personal communications devices, including EO appliances.
• Sega and PF Magic: To launch a low-cost platform, called the Edge 16, to make video game play with multiple users possible over regular phone lines. Also, AT&T is an investor in PF Magic.
• Time Warner Cable: AT&T to supply ATM switch for video delivery at Florida site.
• EO: To develop personal digital assistants. AT&T is a major investor. See EO.
• Sierra Network: Letter of intent to become a strategic partner in Sierra Network.
• AT&T Bell Laboratories, BellSouth and Appalachian University: To test an ISDN driven distance learning network for voice, image, data and other services.
• Bell Atlantic: To supply video dial tone (asymmetrical digital subscriber line, or ADSL) technology for a Bell Atlantic test of video over twisted-pair copper lines. Also, to test voice, video and data transmissions using ADSL technology in the Union City, NJ, school system.
• Southwestern Bell: To research “The Intelligent Home” of the future, which includes a prototype ISDN Personal Video System from AT&T Networks Systems.
• GTE: To supply GTE with ATM switching technology for a video and data services trial in the Dallas-Ft. Worth area.
• US West: To trial a distance learning network based on AT&T ATM technology. This test is part of a long term project called Communications Programs for Advanced Switching Services (COMPASS).
• Comstream Corp. and News Datacom (subsidiary of News Corp.): To provide companies with compression, transmission and network access control technology for video-on-demand services.
• Zenith Electronics Corp.: To develop video compression technology, primarily for HDTV.
• Mead Data Central, Inc. (a subsidiary of Mead Corp.): AT&T Easylink Services and Mead have alliances for providing information services, such as Nexis and Lexis online services, to AT&T messaging customers.
• Experimental University Network (XUNET): AT&T Bell Labs, National Center for Supercomputing Applications, Sandia National Laboratory and seven research universities to research a coast-to-coast ATM-based network, co-sponsored by the National Science Foundation.
• McCaw Cellular Communications, Inc.: AT&T to invest $3.8 billion for a 33 percent stake in McCaw.
BELL ATLANTIC CORP. WITH…
• FutureVision of America Corp.: Bell Atlantic to install an advanced fiber optic network in Dover Township, NJ, using technology from BroadBand Technologies, which will enable information services and video on demand.
• Loudon Cablevision: To test transmission of video signals and voice over an advanced telephone network (fiber to the curb, or FTTC) in Loudon County, VA.
• IBM: To supply video server technology and customized software to Bell Atlantic for test trial of video on demand over copper telephone wires in Loudon County, VA.
• AT&T: See AT&T.
• Northern Telecom: To employ prototype video-on-demand ADSL technology from Northern Telecom in Loudon County, VA, test.
• Westell: Bell Atlantic to employ prototype video on demand (asymmetrical digital subscriber line, or ADSL) technology from Westell in Loudon County, VA, test.
• Compression Labs: Supplying settop boxes in Loudon County, VA, trial.
• Philips: To test electronic Yellow Pages on CD-I in Loudon County, VA.
• Sammons Communications, Inc.: To install an advanced fiber-optic network in Morris County, NJ, using technology from BroadBand Technologies, which will enable information services and video on demand. Sammons is leasing space on this system.
• Columbia/TriStar, MCA/Universal, Disney, MGM/UA, MTM, Paramount, Touchstone, 20th Century Fox, Warner Bros., NBC, National Geographic: To supply content for video-on-demand trial in Loudon County, VA.
BELL COMMUNICATIONS RESEARCH (BELLCORE) WITH…
• Northern Telecom (Bell Northern Research): To test video dial tone technologies.
• First Cities: See First Cities.
BELLSOUTH TELECOMMUNICATIONS, INC. WITH…
• Apple Computer: See Apple.
• U.S. Order: To develop ScanFone, a device combining a telephone with a bar code reader, a dedicated computer, a modem and a credit card magnetic stripe reader.
• IBM: To study high-speed networking technologies for voice, video and text transmission.
• Dow Jones: To explore and implement new information services, Personal Info Clips and Interactive Advertising Service, for cellular phone customers. Also, to develop an interactive advertising service called The Reader Service Line for newspaper readers.
• The Palm Beach Post: To provide information services at three-digit phone numbers.
• Cooperative Healthcare Networks, Inc.: Bell South owns CHN, a company that operates an automated health care information service.
• AT&T Bell Laboratories and Appalachian University: To test an ISDN-driven distance learning network for voice, image, data and other services.
• Cox Enterprises: To develop and market electronic information services based on newspaper classifieds and Yellow Pages advertising.
CABLEVISION SYSTEMS CORP. WITH…
• R.H. Macy & Co., Don Hewitt and Tom Leahy: To start a cable TV channel, called TV Macy’s, in the fall of 1994 devoted to selling merchandise from Macy’s and Bullock’s stores.
• Interactive Network: Cablevision is a strategic investor.
• Digital Equipment Corp.: To develop an advanced fiber-optic network in New York using DEC’s Digital Channel technology.
CASIO COMPUTER CO. WITH…
• Tandy Corp.: To develop a personal information appliance, called Zoomer. See Tandy.
CINCINNATI BELL WITH…
• R.R. Donnelley: To research electronic Yellow Pages.
COMCAST WITH…
• Amcell: Cellular phone service supplier owned by Comcast.
• Metromedia Co.: Cellular telephone service supplier acquired by Comcast for $1.1 billion.
• Fleet Call, Inc.: 5 percent owned by Comcast.
• QVC: 11.8 percent common shares in QVC.
• Eastern TeleLogic Corp.: 51 percent of telecommunications company owned by Comcast.
• Turner Broadcasting: Minority investor ($5 million).
• Viewer’s Choice: Investor.
COMPRESSION LABS WITH…
• Bell Atlantic: See Bell Atlantic.
• AT&T: See AT&T.
COMSAT WITH…
• First Cities: First Cities member.
• Comsat’s On Command subsidiary has video-on-demand service agreements with Hilton, Fairmont, Marriott, Westin, Ritz-Carlton and ANA hotels, Holiday Inns and the Boca Raton Resort & Club.
COX ENTERPRISES, INC. WITH…
• Teleport: A fiber-optic company and alternative telephone service provider owned by Cox and TCI.
• Southwestern Bell: Cox Cable owns 25 percent of Southwestern Bell’s cable and telco business in UK.
• Discovery Communications: Cox Cable owns 24.6 percent of The Discovery Channel.
• BellSouth: See BellSouth.
DISCOVERY COMMUNICATIONS WITH…
• TCI: TCI has a 49 percent interest in Discovery. Discovery to develop video-on-demand service provisionally called Your Choice TV.
• Cox: See Cox.
• GTE ImagiTrek: To test interactive television using Philips’s CD-I networked to television sets to add a layer of interactive information to Discovery Channel shows.
• World Book Encyclopedia: To provide information on CD-I for GTE ImagiTrek and Discovery.
• Archive New Media: To supply photos and images on CD-I for GTE ImagiTrek and Discovery.
• Geosphere: To provide global images on CD-I for interactive programming on Discovery Channel.
EO, INC. WITH…
• Kleiner Perkins Caufield & Byer, Matsushita, Olivetti and Marubeni: Partners.
• General Magic: EO has license to develop General Magic’s Telescript technology for Go Corp.’s PenPoint operating system in EO personal communications.
• AT&T: See AT&T.
• Go Corp.: To incorporate the PenPoint operating system from Go Corp. into EO personal communicators.
FIRST CITIES WITH…
• Apple Computer, Bell Communications Research (Bellcore), Bieber-Taki Associates, Comsat Video Enterprises, Corning, Eastman Kodak, Kaleida Labs, Microelectronics and Computer Technology Corp. (MCC), Philips Electronics North America Corp., Southwestern Bell Technology Resources, Sutter Bay Associates, Tandem, and US West: To test and develop a multimedia services network for consumers.
GENERAL INSTRUMENT CORP. WITH…
• Microsoft and Intel: To develop settop boxes.
• TCI: GI to provide TCI with 1 million settop boxes for digital cable services.
• Newhouse Broadcasting: Newhouse to purchase settop boxes from GI.
• Sammons Communications: To test video on demand in Waterbury, CT, using GI settop boxes.
• TV Answer: To develop settop boxes compatible with TV Answer service.
GENERAL MAGIC WITH…
• Apple Computer, AT&T, Sony, Motorola, Matsushita and Philips Consumer Electronics: Equity partners to build personal digital assistant with interactive network technology.
• Mead and News Corp.: To provide news and other information for the General Magic device.
• EO: See EO.
GM HUGHES ELECTRONICS WITH…
• National Rural Telecommunication Cooperative (NRTC): To create packages of programming services for DirecTV, Inc., a subsidiary of GM Hughes Electronics, direct-broadcast satellite service.
• Thomson Consumer Electronics (RCA subsidiary): Thomson to manufacture and market DirecTV receivers, and to develop compression technology.
• The Disney Channel, Paramount and Sony Pictures Entertainment (Columbia TriStar International Television): Signed a service agreements with Hughes and NRTC.
• News Datacom: News Datacom is developing a conditional access and encryption system for DirecTV.
• Digital Equipment Corp.: DEC is operating the national billing center for DirecTV.
GTE CORP. WITH…
• Apollo CableVision: To test interactive video and services at the test bed for interactive video and services in Cerritos, CA with a service called GTE Main Street. The Cerritos test includes true video on demand, a 30 channel pay-per-view system and a full-motion video phone system.
• Daniels Cablevision: To offer interactive video and services in Carlsbad, CA, with a service called GTE Main Street.
• Continental Cable: To offer interactive video and services in Newton, MA, with a service called GTE Main Street.
• AT&T Network Systems: Testing AT&T Network Systems switching equipment in test bed for a full-service interactive network in Cerritos, CA.
• Fujikura: Fujikura to supply fiber optic splicing equipment for Cerritos test.
• Sumitomo Electric Fiber Optics Co.: Sumitomo to supply fiber optic equipment to develop a mass fusion fiber optic splicer which splices 12 fiber cables simultaneously.
• American Lightwave Systems: GTE is using American Lightwave’s switching equipment in Cerritos, CA.
• BroadBand Technologies: GTE is using BroadBand Technologies’ technology to develop a delivery platform for interactive video.
• Discovery Communications: See Discovery.
• World Book Encyclopedia: See Discovery.
• Archive New Media: See Discovery.
• Geosphere: See Discovery.
• Interactive Network: To provide interactive content for GTE Main Street.
• NTN Communications: NTN to provide interactive games and entertainment for GTE Main Street.
• AT&T Network Systems: See AT&T.
• NEC: NEC to supply GTE with ATM switch for a video and data services trial to begin in early 1994 in the Dallas-Ft. Worth area.
HEWLETT-PACKARD WITH…
• TV Answer: Hewlett-Packard Interactive TV Appliance Group plans to sell an add-on box for the TV Answer system.
HOME SHOPPING NETWORK, INC. WITH…
• R.H. Macy & Co.: HSN to provide fulfillment and customer service functions for TV Macy’s, a shopping network to be launched by R.H. Macy & Co., Cablevision Systems, Don Hewitt and John Leahy.
• Liberty Media: Liberty owns 70 percent of HSN.
IBM CORP. WITH…
• Rogers Communications: To study information services over cable and telephone wires.
• ICTV and New Century Communications: IBM to supply digital video server technology for tests of the ICTV and NCC interactive television system called the Interactive Television Solution.
• Digital Domain: James Cameron, Stan Winston and Scott Ross establish a digital production studio with IBM.
• Blockbuster Entertainment Corp.: To distribute digital entertainment to retail stores via a network.
• Prodigy: IBM and Sears are owners of this online service.
• Pacific Bell and Northern Telecom: To research interactive services.
• NBC and NuMedia Corp.: To develop and test market a multimedia news delivery service, called NBC Desktop News, to send customized text, graphics and video to PC users.
• Bell Atlantic: See Bell Atlantic.
• BellSouth: See BellSouth.
• Kaleida Labs: See Apple.
• MCI and Merritt Corp.: To develop the high-speed backbone for NSFNet and the Internet.
ICTV WITH…
• New Century Communications (NCC) and IBM: See IBM
INTERACTIVE NETWORK WITH…
• TCI: To market and distribute IN programming to TCI cable subscribers. TCI owns 22 percent of IN.
• National Broadcasting Co., Gannett Co. Inc., Cablevision Systems, A.C. Nielsen: Strategic investors.
• NTN Communications: IN licenses interactive content from NTN.
• GTE: See GTE.
IT NETWORK WITH…
• Cableshare, Inc.: IT Network owns 52 percent of Cableshare, a company that has developed a patented interactive television technology utilizing the cable television and telephone networks. IT Network holds a license for unlimited use of Cableshare technology.
• Sammons Communications: To test interactive television services, including video on demand, home shopping, multimedia information services and games, in Denton, TX.
• Booth Communications: To test an interactive television network service, called Teacher’s Assistance Program (TAP), with teachers, students and parents of Midvale Elementary School.
• Wunderman Cato Johnson Worldwide: To develop interactive advertising, incorporating images, sound and text.
• Foote, Cone & Belding: To develop interactive advertising, incorporating images, sound and text.
• Freedom Newspapers: To develop, market and sell an interactive television classified service over IT Network’s Interactive Channel.
• Ameritech: See Ameritech.
KALEIDA LABS, INC. WITH…
• Apple and IBM: See Apple.
• Hitachi, Toshiba, Mitsubishi, Creative Technologies: To build hardware products incorporating ScriptX interoperability software by Kaleida.
• Scientific Atlanta and Motorola: To develop open-architecture terminals, servers and networks incorporating Kaleida scripting technology and Motorola’s microprocessor technology based on the PowerPC architecture.
• United Video Satellite Group: To use Kaleida ScriptX technology to develop a multimedia graphical user interface for digital settop boxes.
KBLCOM WITH…
• Zenith Electronics: To supply settop converters for Star Response, a two-way cable system for information delivery, polling and advertising developed by KBLCOM in San Antonio, TX, and for Rogers Interactive Systems, a two-way cable system in Portland, OR. KBLCOM has developed the interactive software for these Zenith systems.
• FBRCOM: A fiber company owned by KBLCOM that handles high-speed multiplexing telephone lines for AT&T and MCI in San Antonio, TX.
• StarSight: Investor.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music services.
LIBERTY MEDIA CORP. WITH…
• Encore Media Corp.: Liberty owns 90 percent of Encore, a mini pay cable channel.
• TCI and Encore: To create a new pay-cable network, with Universal films as its cornerstone.
• TCI: Owns approximately 5 percent of Liberty. Liberty is a TCI spinoff company.
• News America Publishing: To produce an electronic program guide called TV Guide On Screen with Liberty affiliates XPress Information Services, Ltd., and Star Net, Inc.
• QVC: With TCI, Liberty owns 23.5 percent of QVC.
• Home Shopping Network: See HSN.
• Scientific Atlanta: Scientific Atlanta to supply Star Net with equipment for digital advertising insertion capability.
MICHAEL MILKEN WITH…
• Michael Jackson: To start the Education Entertainment Network, an interactive education channel.
MICROELECTRONICS AND COMPUTER TECHNOLOGY CORP. (MCC) WITH…
• First Cities: See First Cities.
• Sprint: To provide network support services for the Enterprise Integration Network (EINet).
MICROSOFT CORP. WITH…
• Intel and General Instrument: To build settop boxes.
• TCI and Time Warner: Joint venture called Cablesoft to develop software for high-capacity interactive cable system software.
MOTOROLA CORP. WITH…
• Kaleida and Scientific Atlanta: See Kaleida.
• General Magic: See General Magic.
• Apple Computer: See Apple.
NEWHOUSE BROADCASTING WITH…
• General Instrument: See General Instrument.
• Time Warner: Vision Cable Communications (a division of Newhouse Communications) and Time Warner to form company called Charlotte AxS L.P. to build a fiber-optic network that would provide telephone service.
NEWS AMERICA PUBLISHING INC. WITH…
• Liberty Media Corp.: See Liberty Media.
• Zenith, GI and Scientific Atlanta: Zenith, GI and Scientific Atlanta settop boxes will receive TV Guide On Screen. TV Guide On Screen is based on an open architecture, with software for the guide distributed at the headend.
• TCI: A field trial of TV Guide On Screen is underway in the Denver area in households served by TCI.
NORTHERN TELECOM WITH…
• Bellcore: See Bell Communications Research.
• IBM and Pacific Bell: See IBM
• Bell Atlantic: See Bell Atlantic.
• Amati Communications: To develop discrete microtone technology (DMT) — an ADSL technology — for video-on-demand services.
• Bank of Boston: To test banking services via a screen-based telephone.
NTN COMMUNICATIONS WITH…
• GTE Main Street: See GTE.
• GE: NTN provides interactive games and entertainment to GE’s GEnie, a PC-based online service.
• Interactive Network: See Interactive Network.
• TV Answer: NTN provides interactive games and entertainment to TV Answer.
• Sierra Network: NTN provides interactive games and entertainment to SN.
• LodgeNET Entertainment Systems: NTN and LodgeNET provide interactive games and entertainment to hotels.
NYNEX CORP. WITH…
• Liberty Cable Television: New York Telephone, a Nynex subsidiary, and Liberty Cable to test video dial tone in New York City.
• Philips: To develop and test a system that integrates text and voice information services, including home banking, electronic mail and electronic White Pages, using visual-display telephone.
• Dow Jones & Co., Inc.: To develop and test a video news service to include video programming and other services over the Nynex telephone network.
• Newsday, Inc. (a Times Mirror Co.): To test audio information services among Nynex telephone subscribers in Long Island, NY.
ORACLE WITH…
• US West: To develop a multimedia information server.
PACIFIC TELESIS GROUP, INC. WITH…
• Northern Telecom, IBM: See IBM.
• KRON (Chronicle Broadcasting): To develop community services, such as traffic updates, by employing Pacific Bell’s network to transmit news data to remote display screens in the San Francisco Bay area.
• Dow Jones News Service: To provide information services to telephone customers.
PHILIPS ELECTRONICS NORTH AMERICA CORP. WITH…
• First Cities: See First Cities.
• GTE Corp.: See GTE Corp.
• Capital Cities/ABC Video Productions: To develop CD-I titles.
• Paramount Inc.: Paramount will distribute its full-length movies on CD-I.
• Whittle Communications: Philips Electronics owns 25 percent of Whittle.
• Nynex Corp.: See Nynex.
• Blockbuster Entertainment: Philips owns a percentage of Blockbuster Entertainment. See IBM.
• Propaganda Films: Philips P.O.V., a division of Philips Interactive Media of America, and Propaganda to produce an interactive film for CD-I.
PRODIGY CORP. WITH…
• IBM and Sears: See IBM.
• Sierra Network: Prodigy signed a letter of intent to link Sierra Network and Prodigy online services.
PUBLIC BROADCASTING SERVICE (PBS) WITH…
• StarSight: Investor. PBS to insert StarSight information in vertical blanking intervals (VBI) for all PBS broadcasts.
• TV Answer: PBS to use TV Answer technology for interactive broadcast.
• New Learning Project: PBS is working with a number of multimedia producers nationwide to develop interactive network systems.
• Apple Computer: See Apple.
QVC NETWORK WITH…
• TCI and Liberty Media: See Liberty Media.
• Comcast: See Comcast.
• Time Warner : 5.8 percent of common shares in QVC.
• Individual shareholders own 47.7 percent.
• British Sky Broadcasting: To develop electronic retailing program services in Europe (excluding Spain and Portugal), similar to the QVC shopping channel in the U.S. BSkyB is half owned by News Corp.
• Grupo Televisa S.A. de C.V.: To develop electronic retailing program services, similar to the U.S. QVC service, in Mexico, Spain and Latin America.
RADIO TELECOM AND TECHNOLOGY WITH…
• OKI Electric of Japan: to build hardware for interactive TV systems.
R.H. MACY & CO. WITH…
• Cablevision, Don Hewitt and Thomas F. Leahy: See Cablevision.
• Home Shopping Network: See Home Shopping Network.
ROCHESTER TELEPHONE CORP. WITH…
• USA Video Corp.: To test market true video and information services on-demand in Rochester, NY.
• New Richmond Cable Co., Inc.: A cable co. owned by St. Croix Telephone, a subsidiary of Rochester Tel, in WI.
• Mid-South Cablevision Co., Inc.: A cable co. affiliate of Mid-South Telephone, a wholly owned Rochester Tel company, in Mississippi.
• Thorntown Telephone Co.: Thorntown, a wholly owned subsidiary of Rochester Tel, owns and operates a cable company in Indiana.
ROGERS COMMUNICATIONS, INC. WITH…
• IBM Corp.: See IBM.
• Canadian Home Shopping Network: Rogers owns 94.5 percent of CHSN.
R.R. DONNELLEY WITH…
• Cincinnati Bell: See Cincinnati Bell.
SAMMONS COMMUNICATIONS, INC. WITH…
• Bell Atlantic: See Bell Atlantic.
• IT Network: See IT Network.
• General Instrument: See General Instrument.
• Scientific Atlanta: To supply Sammons with settop boxes.
SCIENTIFIC ATLANTA WITH…
• Kaleida Labs and Motorola: See Kaleida.
• Time Warner and Toshiba: Scientific Atlanta and Toshiba to provide fiber-optic transmission gear, subscriber equipment and integrators for Time Warner’s full-service network in Orlando.
• TCI: To order additional settop compressed digital terminals and related equipment from Scientific Atlanta.
• United Video Satellite Group, Zenith Cable Products and Pioneer New Media Technologies: To create a full-service platform for the delivery of interactive video, audio and data services.
• Viacom: To purchase Scientific Atlanta compression technology.
• StarNet (Liberty Media affiliate): See Liberty Media.
• Sky Connect: Scientific Atlanta to supply equipment for digital advertising insertion capability.
• Digital Music Express : Investor in DBS-delivered digital music service.
• News America Publishing Inc. and Liberty Media, StarSight and Prevue Networks: Scientific Atlanta to develop cable converters compatible with these various electronic program guides.
• Sammons: See Sammons.
SEGA WITH…
• TCI and Time Warner: To launch the Sega Channel, an interactive video game channel.
• AT&T and PF Magic: See AT&T.
SIERRA NETWORK WITH…
• Sierra On-Line: Sierra Network is a wholly owned subsidiary of Sierra On-Line.
• AT&T: See AT&T.
• Prodigy: See Prodigy.
SILICON GRAPHICS, INC. WITH…
• Industrial Light & Magic: See ILM.
• Time Warner: To develop technology for a full-service interactive network in Orlando, FL, based on SGI’s MIPS microprocessor architecture.
SKYPIX CORP. WITH…
• Sky King Investment Corp.: Sky King was an original investor in SkyPix Joint Venture L.P. to develop a direct broadcast satellite home entertainment system. SkyPix has filed Chapter 11 bankruptcy in a Seattle, WA, court.
• OI, Inc.: Former strategic partner.
• The Calafia Group: Former strategic partner.
• Richard Owens Investment Corp.: Former strategic partner.
SONY CORP. WITH…
• General Magic: See General Magic.
• United Video Satellite Group and Mark Goodson Productions: To launch an all-game-show channel, with interactive capabilities to be added.
SOUTHWESTERN BELL WITH…
• Hauser Communications: Southwestern Bell to purchase two cable systems from Hauser for $650 million.
• First Cities: See First Cities.
• Cox Communications: See Cox.
STARSIGHT TELECAST, INC. (FORMERLY INSIGHT TELECAST) WITH…
• AT&T and Viacom: See AT&T.
• Zenith: To build StarSight electronic program guide technology into Zenith TV sets.
• Scientific Atlanta: See Scientific Atlanta.
• Mitsubishi: To build StarSight electronic program guide and one-touch VCR recording capability into Mitsubishi TV sets and VCRs.
• Tribune Co., Times Mirror Cable Television, Providence Journal Co., KBLCOM, Spelling Entertainment, Sumitomo and TV Data Technologies: Strategic partners.
• PBS: See PBS.
• Viacom: To provide an on-screen programing guide for Castro Valley system. Viacom owns 23 percent of StarSight.
TANDY CORP. WITH…
• Casio Computer Co.: See Casio.
• Intuit: Intuit is to provide Pocket Quicken, a personal finance application, for Zoomer.
• GeoWorks: GeoWorks to provide the GEOS operating system for Zoomer.
• Palm Computing: Palm to provide applications such as a personal information manager, reference programs and calculations programs as well as the PalmPrint handwriting recognition software for Zoomer.
• America Online: AOL to provide a version of AOL for Zoomer.
TELE-COMMUNICATIONS, INC. (TCI) WITH…
• Microsoft and Time Warner: See Microsoft.
• Time Warner: To develop industry standards in hardware and software for high-capacity interactive cable systems.
• US West and AT&T: See AT&T.
• General Instrument: See General Instrument.
• Scientific Atlanta: See Scientific Atlanta.
• Sega and Time Warner: See Sega.
• Request Television: A pay-per-view satellite network partly owned by TCI.
• Turner Broadcasting Co., Guest Cinema: Investor.
• Discovery Communications: See Discovery.
• Liberty Media Corp.: See Liberty.
• Interactive Network: See Interactive Network.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music service.
• Carolco: To distribute first-run movies from Carolco in a pay-per-view window.
• News Corp.: To create a cable channel for TCI with both Fox shows and original programming.
• Encore Media: See Liberty Media.
• Teleport: See Cox.
TIME WARNER WITH…
• U.S. Satellite Broadcasting: Service agreement for Time Warner properties, including HBO and Cinemax.
• TCI: See Tele-Communications.
• TCI and Microsoft: See Microsoft.
• US West: To provide interactive television services, initially in Orlando, FL, then in suburbs of Wekiva, Lake Brantley, Sweetwater and Spring Valley by early next year. Also, US West purchased 25.5 percent interest in Time Warner Entertainment for $2.5 billion.
• Scientific Atlanta and Toshiba: See Scientific Atlanta.
• Toshiba: Owns 6 percent stake in Time Warner Entertainment (TWE).
• 3DO: See 3DO.
• AT&T: See AT&T.
• Sega and TCI: See Sega.
• Itochu (formerly C. Itoh): Owns 6 percent of TWE.
• MetroComm: Time Warner purchased 50 percent of this Ohio-based fiber-optic competitive access telephone network.
• QVC: See QVC.
• Vision Cable Communications (a division of Newhouse Communications): See Newhouse.
• Silicon Graphics: See Silicon Graphics.
• Whittle Communications: Time Warner owns 37 percent of Whittle.
• Various network channels investments, including Comedy Central.
TV ANSWER WITH…
• Hewlett-Packard: See HP.
• Phoneworks: To supply TV Answer reception service for transactions.
• Public Broadcasting Service: To air interactive programming.
• NTN Communications: See NTN.
• General Instrument: See General Instrument.
• More than 50 service providers, including financial services, food and groceries, and direct marketers.
U.S. Satellite Broadcasting with…
• Hughes: USSB bought five transponders from Hughes at a cost of $100 million.
• Viacom International: Service agreement for Viacom properties, including Nickelodeon, MTV, VH-1, Showtime, Movie Channel and Flix.
• Time Warner: See Time Warner.
UNITED VIDEO SATELLITE GROUP WITH…
• Scientific Atlanta, Zenith Cable Products, and Pioneer New Media Technologies: See Scientific Atlanta.
• Kaleida Labs: See Kaleida.
• Sony Pictures Entertainment and Mark Goodson Productions: See Sony.
• Trakker Interactive Services, Inc.: Trakker, an interactive delivery service employing FM subcarrier, is an affiliate of United Video.
• Prevue Networks: Prevue, developer of an electronic program guide, is an affiliate of United Video.
US WEST WITH…
• Time Warner: See Time Warner.
• Oracle: See Oracle.
• TCI and AT&T: See AT&T.
• First Cities: See First Cities.
• Apple Computer: See Apple.
• France Telecom: To test an electronic directory in Minneapolis-St.Paul, MN, and to explore the development of information services worldwide.
• Spectradyne: To test an interactive travel information service for hotels based on Philips’ CD-I.
• Fujitsu Network Switching of America, Inc.: Fujitsu is providing switching technology to the Communications Programs for Advanced Switched Services (COMPASS) series of tests for video and other applications conducted by US West.
• Siemens-Stromberg-Carlson: Siemens-Stromberg-Carlson is providing switching technology to the COMPASS series of tests.
VIACOM INTERNATIONAL WITH…
• AT&T: See AT&T.
• Scientific Atlanta: See Scientific Atlanta.
• StarSight: See StarSight.
• Digital Music Express: Investor in direct broadcast satellite-delivered digital music service.
GROUPE VIDéOTRON WITH…
• Zenith Electronics: Zenith to supply settop converter box for interactive programming.
WHITTLE COMMUNICATIONS WITH…
• Time Warner: See Time Warner.
• Associated Newspaper Holdings PLC: Owns 24.6 percent.
• Philips Electronics: See Philips.
• Christopher Whittle: Owns 8.5 percent.
• Limited partners: Own 4.9 percent.
ZENITH ELECTRONICS CORP. WITH…
• Groupe Vidéotron: Zenith to supply settop converter box for interactive programming.
• United Video Satellite Group, Scientific Atlanta and Pioneer New Media Technologies: See Scientific Atlanta.
• StarSight, Prevue Networks Inc., News America Publishing Inc. and Liberty Media: Zenith to develop cable converters capable of receiving electronic guides by Prevue, StarSight, News America and Liberty.
Compiled by Amy Johns
DISTRIBUTION AND THE ART OF NEGOTIATION
The finer points of distribution and retail for new media
Pricing for the majority of new media titles ranges between $39 and $99. The retail channel is skeptical, if not uninterested, in dedicating valuable shelf space to new media titles. This is slowly changing, and the software stores are stocking more and more product.
The retailer. A key factor in the development of this market is the attitude of the retailer. He is the access to the primary customer. He will take no risk. He demands, and receives, 100 percent return privilege on all products — thus passing the risk back to the distributors of new media (sometimes two tiers of them) who ultimately pass it back to the developer/publisher. (For more on this, see “Choosing the Best New Media Distributor,” Vol. 2, No. 9, p. 7.)
The food chain. There are many tiers of distribution between the developer, who may self-publish or take his title to a publisher, and the consumer. The developer/publisher will take his product to a new media distributor. The major players include Electronic Arts, Compton’s New Media, Brøderbund and Time Warner Interactive, formerly Warner New Media.
The new media distributor then takes the product into the larger software distributors, the top tier of distribution.
These top-tier distributors include Baker & Taylor Software (formerly known as SoftKat), Ingram-Micro and Merisel. These larger mass-market distributors then move the product into retail, beginning with software-only stores and computer superstores. Later they will move product into the video, audio and bookstore channels.
While selling “up” to the top tier, the new media distributors also sell “around” them, placing the product directly into retail chains, to gain shelf space and to leverage more margin. Major players in the retail market currently include only high-tech stores such as Egghead, Comp USA, Babbages and Software Etc.
Little attention from the retailers. Retailers then assign shelf space for the titles, based on the number of titles they agree to try. This agreement is generally arrived at by a deal that includes 100 percent return and stock-balancing privileges against the floppy-based software carried by that distributor, and some serious marketing dollars from the distributor for the promotion of the CD titles.
At this time, there is generally a single set of shelves, perhaps four shelves by three feet each, dedicated to new media titles. Some leading stores, like Egghead in New York, stock three times this amount. The titles are rarely segmented between Mac and DOS, and some titles publish both platforms on a single disc. There is no retail clarity for the positioning or selling of these products.
In retail outlets that focus on Sega and Nintendo games, new media titles receive secondary or tertiary shelf space positioning. There is rarely a demonstration unit available for the viewing of a title. This is because the market is in its infancy, and because retailers will not give over the four square feet of space required for a kiosk without a financial commitment for the leasing of that space by the publisher or platform vendor.
To date, demo units for new media in retail are rare except in superstores. The first experiments are beginning now by platform developers. The notable exception is Tandy, which is the producer, distributor and retailer of its own product line and affiliated titles.
The retailers’ lack of commitment to stocking, marketing and merchandising titles means that the publishers and distributors who are developing this market for their titles must create demand by extensive marketing and “pull-through” programs, to “pull” the customer into the store to buy the product.
A costly proposition with profit built in. These many tiers of distribution cost money, but they function successfully and create a profit because the cost of goods produced is so low (about $1 to press a disc in quantity, and another $1 to package it) in comparison to the amount of data contained on the disc.
With these costs of goods in mind, and the knowledge that top-selling entertainment titles may sell 30,000 to 50,000 units a year, mostly through retail and mail-order channels, and that all other categories of successful titles sell 5,000 to 20,000 a year, and the price averages $39 to $69 per title, we can put together a market projection and a plan.
The plan shows that the market is still emerging. Once compelling titles of quality are broadly available, and the price of the hardware and the titles falls even further, the market will grow rapidly. The cost of goods will stay constant, or will fall, and the profit will appear more substantial as the volume of sales grows.
A publishing deal. The new media distributors, who are also publishers, are the pioneers taking the risk to create the market, and they are gathering titles through their own publishing divisions and through their Affiliated Labels divisions.
A developer may bring a title in finished programming form to any of these new media distributors and negotiate a deal for the distributor to publish and distribute it. This means that the developer provides a “one-up,” also known as a “gold master” (language borrowed from the record industry), to the new media publisher/distributor.
As the publisher and distributor, then, Electronic Arts or Brøderbund or the others position, market, press, package, merchandise and put into distribution the developer’s title. For this publishing deal, the developer will generally receive about 10 cents of the purchase price in the form of a royalty payment.
This publishing model is appropriate for small technology businesses that are more focused on programming and development than they are on business development and management. If developers have not created and do not wish to create the business infrastructure to produce, market and sell their product, they should bring the title to a publisher and return to their computers to develop the next one.
At some point soon the conflict of interest inherent in being both a distributor and a publisher, as are Electronic Arts, Brøderbund and others, may become problematic, as the distributor can offer preferential exposure to its own published products. These questions are only now beginning to be raised.
A distribution deal. If the developer is a savvy businessperson as well as a new media artist, he should press, package and produce the title, and commit resources and attention to its marketing and selling. This involves the development of an entire business infrastructure that is separate from the development team.
When a developer/publisher brings a finished, packaged title to a new media distributor, negotiations begin with the distributor’s Affiliated Labels division.
Signing an Affiliated Labels agreement with a new media distributor generally means negotiating for two Christmas buying seasons and the subsequent three months until March 31. Sometimes the distributor asks for exclusivity for three Christmas seasons. The deal is exclusive for that distributor into retail. The publisher may leverage mail-order and direct-marketing channels and other channels than retail.
This allows the distributor to launch the product the first year at Christmas, the key buying season, and to carry the product through its initial life cycle to the second season. This term of the contract is rarely negotiable, although one competent developer has succeeded in renegotiating every year in March.
THE SNAKE PIT OF CONTRACT LANGUAGE
The initial contract language usually specifies exclusivity for the title and mentions nothing about platforms, thereby covering all CD-ROM hardware. This language must be negotiated out.
Generally the distributor insists on both Macintosh and MPC product exclusivity as a minimal condition, even if only one platform is ready or planned. It is wise to specify that the publisher retains the distribution rights to all other platforms (list them), transmission over cable and satellite downlinks, and any other platform and media now known or yet to be developed. This is generally not a problem since the distributor is only interested in retail distribution at this time.
The new media distributor (Brøderbund, Electronic Arts, etc.) receives a 70 percent profit margin (a 70 percent discount from suggested retail list price) on the product — that is, the publisher is offered 30 cents on the dollar. Sometimes, rarely, this margin is negotiated to 65 percent or 68 percent.
When the new media distributor passes the product up to Baker and Taylor/SoftKat, Ingram-Micro and/or Merisel, they’re offered 50 to 60 percentage points. When the product is passed directly to retailers (usually the large chains), they’re offered 40 to 50 points. The new media distributor maintains a business on this 10- to 20-point differential, and from the profits of development and participation in cooperative marketing programs with publishers.
More deal points. Notice that if the distributor has 100 percent return privileges (and at this time he always does), the publisher is essentially signing a consignment deal with up-front purchases. The distributor buys a volume of product and stores it in a warehouse. As it sells through, the publisher gets monthly sales reports and a check for the per-unit amount agreed upon in the contract.
Suppose that amount has started with 30 cents on the dollar to the publisher. The publisher then contributes more cents to the distributor’s fund in the form of co-op advertising funds and reserves for defective products and returns. The level of these funds is agreed upon during the contract negotiation, and expressed as a percentage off the invoice to the publisher, and is deducted from the payment sent to the publisher from the distributor.
Co-op funds are generally 5 percent of the invoice amount to the publisher; a “reserves” fund can be 10 to 15 percent, again calculated off the invoice amount. If we apply the 5 percent co-op and the 10 percent reserve fund to the 30 cents on the dollar (the publisher’s gross invoice amount from the distributor), we are left with 25.5 cents on the dollar for production, packaging and marketing of the product.
So the publisher gets 30 cents less 1.5 cents for co-op less 4.5 cents for reserves, or 25.5 cents per unit. To participate in co-op programs beyond this 5 percent fund, the publisher pays more into the fund (usually in product). If returns exceed the reserve fund, the publisher is responsible for the difference. If the product flops, it can all be returned to the publisher, who is liable for any monies advanced by the distributor for the initial pressing and packaging of the title. The reserve fund is reviewed every six months, and adjusted at that time based on sales and returns figures.
The implications. Although all this may be fair business dealings, it is not clearly spelled out in the contract, especially if read by the uninitiated.
The contract (usually) says the distributor will advance $X to the publisher for a certain volume of units, and will pay $Y to the publisher as they sell through, less returns.
It never mentions that this advance should be listed as a liability on the publisher’s balance sheet (which may hinder finding new investment capital for the next product) or that it is due back, rather like an interest-free loan, if the product never sells through. This is assumed in the language of “advance.”
Again, as we borrow language and concepts from other industries, certain assumptions are carried in the language, and the agreement is often not clear. It is not the distributor’s responsibility to advise the publisher on business decisions, but it is wise for the publisher to understand all this.
The publisher must also handle how these agreements affect cash flow, especially during a first product launch. Suppose the publisher accepts an advance of $50,000 for the company’s first title, and uses the money to publish and package the product and deliver it to the distributor. If it is early in the buying season, the publisher may sell enough product to recoup his advance and begin to see revenue coming in.
If the product is launched during a slower season, it may take several more months to see revenue. In the slow seasons (anytime other than September–March), the distributor is unlikely to stock more than a thousand units at a time. So if the product is released in a slow season, advance money will be quite limited.
Marketing programs. The distributor gains a great deal of profit from his cooperative (co-op) advertising programs. These include offering the publishers shared booth space at trade shows, shared advertising space in leading trade journals, participation in direct-mail campaigns, launch announcements and so on. During the initial launch of the product, many of these promotions are offered without charge, to sweeten the contract and to announce the new product for the benefit of both the distributor and the publisher.
After launch, co-op advertising is the most straightforward form of marketing available to the publisher, and most have a charge attached to them. This charge is expressed in dollars but exchanged in product. Actual money rarely changes hands.
But this is not nearly enough. The publisher is responsible for the marketing of the product, and extensive market development is required to gain the attention of the buying public. This is achieved by aggressive promotions such as 3-for-2 sales or “software bundles” of two or three titles at a reduced price, driven through retail and mail-order channels, generally using programs handled by the distributor.
Other promotions include “guerrilla marketing” tactics such as co-marketing with similar but noncompeting products, sharing customer lists, direct mail and so on.
Joanna Tamer
MORE VIRTUAL PRODUCTS THAN REALITY AT CES
Showgoers glimpse a world full of ITV, PDAs, VR and 3DO
The motto of this Summer CES show should have been “You can’t touch this.” So much of what was hot in Chicago was not real — that is to say, the show-stopping “products” exist primarily in development labs today, and are taken out on rare occasions only to whet the appetites of potential consumers.
Slick demos and promises abounded on the floor and in the conference rooms of Chicago’s McCormick Center, and grabby showgoers enthusiastic about acquiring new toys were often gently reminded that they could look, but they better not touch — and forget about buying, at least for right now. The only thing missing was the Oz-like reminder to “please ignore the man behind the curtain.”
3DO GOES HOLLYWOOD, PANASONIC GETS REAL
Undoubtedly the greatest showman in Chicago was Trip Hawkins, president and CEO of 3DO and the star of CES. He gave his 3DO pitch on Thursday morning to a standing-room-only crowd. The company’s press conference to unveil some of the 91 titles in development for the Interactive Multiplayer, and to announce hardware licensing agreements with AT&T and Sanyo, spilled out of two large banquet rooms. (The stock jumped almost $5 a share after Hawkins’s press conference. The IPO has already garnered $48.5 million for the startup.)
Hollywood producers, not known for excessive amounts of patience, stood in line to watch the 3DO demo, and at the Panasonic booth there was a line of people that doubled back and forth on itself, just like the rides at Disneyland — all waiting to get up close and personal with the FZ31 REAL, the company’s 3DO Multiplayer that is expected to be shipped in October.
No 3DO naysayers could be found outside of the press room, where rumors of disgruntled title developers and sticky negotiations regarding silicon and player manufacturing came home to roost among the skeptics. The crowds were besotted, and there was no evidence of dissatisfaction among the third-party developers that shared the booth with 3DO. Companies including Crystal Dynamics, which plans to develop interactive game software exclusively for 3DO, were positively dewy-eyed at being part of the entourage.
During the press conference Hawkins announced plans to enter into the coin-operated game market, with both Atari Games and American Laser Games planning to deliver coin-operated 3DO games by the end of the year. He also stated that the custom graphics chips from Matsushita were “far along,” although he did not elaborate.
Hawkins outlined his full-motion video strategy, which includes support for SuperMac Technology’s Cinepak software-only codec and MPEG-1 when the first Multiplayers are shipped. (The MPEG-1 compression scheme is the same C-Cube-based cartridge that Philips Interactive Media will sell as an add-on to its CD-I players this fall.) Eventually, he says, the Interactive Multiplayer will support the higher quality MPEG-2 compression standard.
According to Hawkins, the 3DO strategy is on track, with the time line as follows: In 1993 the standalone consumer Multiplayer will arrive, with about 20 titles available by Christmas. In 1994, we will see an Interactive Multiplayer with built-in support for MPEG-2 and an analog TV tuner. By 1996, Hawkins says we will see the arrival of a networked system as well as starting price points for the Multiplayer below $200.
Perhaps the most telling statement Hawkins made during his time in the limelight was that backward compatibility is not a prerequisite to success when introducing a new technology platform to the consumer. It is a concept not easily understood by the computer industry, where many of the players, including Microsoft, are struggling to be all-inclusive as they deliver their first consumer devices.
TANDY’S ZOOMER STEALS THE SHOW
Three different types of personal digital assistants (PDA) and communicators were on display at CES, but the Zoomer — a hand-held PDA developed through a joint venture among Tandy, Casio, GeoSystems and others — stole the show.
Zoomer, which is expected to be shipped this fall for between $699 and $899, was designed for people who don’t own a personal computer but are interested in owning a consumer computing device. It runs on GeoSystems’ GEOS operating system and is quite elegant. The basic unit, which weighs about a pound, can connect to DOS computers for information transfer although the device cannot run DOS applications.
AOL built in. Built into the device will be a special version of America Online, the electronic information service, as well as more than 100 applications, including such essentials as a spreadsheet, word processor, daytimer and, of course, an astrology charting application.
An optional keyboard is available. The handwriting recognition in the initial version will recognize printed text only, but the key companies claim recognition of script writing is in development.
According to team members, the Zoomer can take an astonishing 100 hours of constant use before it needs a battery charge — a noteworthy feat if it is true. Skeptics say it can last 100 hours only if nobody touches it once it’s been turned on.
Members from both Palm Computing and Geosystems say they are working with other partners on similar consumer devices. No names were available at press time.
Credibility slipping for Newton. Apple Computer made a lackluster showing during a private press briefing on the current state of its much-touted Newton PDA. Although the device worked, which was not the case when it was demonstrated last month in Japan, the announcement was mostly a repetition of promises already made and the demonstration offered little in the way of new technology for the platform.
The most significant news presented in the briefing was Apple’s new licensing agreements with several major telecommunications companies. According to Gaston Bastiaens, vice president and general manager of Apple’s Personal Interactive Electronics division, U.S. West will work with Apple to “help develop product interfaces for network-based telephone services.”
Similarly, BellSouth has agreed to perform a joint test of a Newton-based display telephone. “The goal is to develop easy-to-use intelligent terminals for telephone services, information transfer, and advanced voice, fax, and electronic messaging,” says Bastiaens. The prototype system exists today and, according to Bastiaens, tests have begun in Orlando, FL. The third partner, Ameritech, has agreed to provide advanced messaging services. Ameritech’s voice messaging customers, for example, will be able to get notices that messages are waiting and be able to read them on a Newton.
In addition to announcing the telecom partnerships, Apple also discussed its entry into the interactive publishing business for Newton applications and titles, as well as CD-ROM. The announcement, while met with little interest at the show, has some interesting ramifications — both positive and negative — on the emerging interactive title market. (For details on Apple’s publishing strategy, see story, p. 29).
Delivery of the Newton into the retail channel will be this fall, according to Bastiaens. The price is still stated to be “well below $1,000.” Bastiaens declined to comment on the Newton’s battery life, though Apple chairman John Sculley figured it to be about eight hours when Newton technology was first announced at Summer CES in 1992. We assume improvements have been made.
Interesting device, wrong price. While the AT&T EO 440 Personal Communicator, which provides fax, electronic mail, cellular phone and personal computing capabilities, will be the only shippable product by the time this article appears in print, its price point — more than $2,000 for a basic unit that cannot do most of the things just mentioned above — left attenders with the feeling they would rather wait for Zoomer, Newton or one of the other PDAs in development.
PHILIPS FMV CARTRIDGE WINS PARAMOUNT DEAL
Heading its competition off at the pass, Philips Interactive Media made its big announcement Wednesday night before the show officially opened. The company, which has been struggling for market share in the consumer channel as well as for respect for its CD-I technology among industry peers and analysts, took the stage Wednesday night with members from Paramount Pictures to announce a multi-year deal that will include the release of more than 50 Paramount-generated movie and entertainment titles for CD-I by Christmas this year. The discs are expected to be priced below $25 apiece.
The Paramount announcement, along with the planned fall release of Philips’ much-touted $250 full-motion video add-on cartridge for its CD-I players, might finally capture the consumer attention the company has fought in vain to garner. (Although Philips claims an installed base of 100,000 units worldwide, most of these players are being used to operate kiosks in business environments.)
Philips, which is paying Paramount a straight licensing fee, will have complete editorial control, selecting the first 50 titles from Paramount’s existing content library as well as from its scheduled new releases. (The CD-I versions of new motion pictures will be simultaneously released with the videotaped versions.) In addition, Philips will have control over marketing, distribution and manufacturing of the Paramount titles.
Despite how attractive Philips is trying to make the deal, there are still some potential drawbacks that might keep consumers away. First, the FMV cartridge, which is not yet available (it was promised for April 1993), is a must-have add-on in order to play the upcoming CD-I releases from Paramount. The add-on puts the system in the $850 price range, and although Hawkins of 3DO claims he has research to the contrary, the jury is still out on whether consumers are willing to pony up close to $1,000 for an interactive player — especially when there is no sign of a single standard in sight.
Also, the Philips add-on cartridge supports the first-generation MPEG standard for compression and can fit only 72 minutes of full-motion video on a standard-size CD. In other words, you will need two discs to see a full-length motion picture. If each disc is $25, does that mean you pay $50 for a movie you could rent for $3? The company did not discuss the possibility of renting the Paramount CD-I titles.
And lastly, Paramount is the only studio supporting the move to CD-I. Trade press reports claimed that no other studio was even considering CD-I as a new distribution medium for movies.
TW GROUP REGAINS CREDIBILITY UNDER HERSHEY
Since Terry Hershey took over as president of Warner New Media six months ago, it is hardly recognizable as the multimedia company founded within Time Warner under Stan Cornyn. The group has changed its name and is now known as the Time Warner Interactive Group. Geoff Holmes, Time Warner’s senior vice president of technology, is now chairman.
Hershey says the name change reflects the group’s effort to reach the entire Time Warner company and it reflects the unit’s broad commitment to interactive media for both the CD-ROM market and the emerging interactive cable industry. “Warner, rather than Time Warner, made no sense,” she says. “We are into interactive. The term ‘new media’ confuses the issue.”
TWIG has also undergone some substantial staffing changes. Hershey has replaced several top executives that remained from Cornyn’s tenure.
Under Hershey’s direction, the group developed a new digital production studio that is housed in TWIG’s Burbank office. She emphasized the studio is not just a lab for research and prototyping; it is where Time Warner will actually produce interactive content.
At CES, the company demonstrated a proprietary cross-platform CD-ROM technology that will allow a single disc to play on multiple computer and consumer devices. The technology will make its commercial debut on a CD sampler of Time Warner titles that will be released in stores later this year.
Hershey, who is working with other business units within Time Warner to create and publish product, says that titles released in 1994 will be representative of the new vision of the Time Warner Interactive Group. Already dismissed by many industry watchers, the group belongs back on the list of interactive publishing houses to watch.
BRUCE DAVIS TO RUN TV GUIDE ON SCREEN
TV Guide On Screen, the News America Publishing Inc. and Liberty Media joint development to create an on-screen TV programming guide, has a new president at the helm. Bruce Davis, former CEO of Mediagenic and Imagic, both successful video software companies, as well as a former member of the Software Publishers Association’s board of directors, was named president of TV Guide On Screen this past May.
Davis, who was making the rounds at CES for the first time in his new position, said he believes TV Guide On Screen’s open architecture software — in this case, the term means it is compatible with every brand of cable converter — guarantees wide acceptance among cable system operators.
A field trial is under way in Denver, in households served by Tele-Communications Inc. of Colorado.
The first deployment of TV Guide On Screen is scheduled for the fall of 1993, using existing analog cable TV converters at several cable operating system locations around the country. According to Davis, the same software will easily adapt to future digital converters in 1994 and beyond.
SEGA DEMOS HOME VR HEADSET
Sega VR, a helmet-like gizmo equipped with stereo headphones that hook up to Sega’s Genesis game system, is the first company to provide a virtual reality headset for the home market. Sega VR places the player in a 360-degree game world with 3D perspective. Sega says at least four VR titles, featuring “shooting, flying, driving and fantasy action” (my, aren’t we surprised by the categories) are in development and should be out this year. According to a Sega spokesperson, the titles will come with ratings, similar to the way movies are today. No prices were made available.
The Sega VR headset, which is still in development and is a little weighty to rest on a person’s head for a prolonged period of time, is expected to be at a trimmer weight of seven ounces for under $200 by Christmas.
Stand and deliver. The list of digital media companies promising product by fall is astounding. We will definitely be watching.
Janice Maloney
VR IS DEAD, LONG LIVE VR
Lots of real stuff happening at the conference
Meckler’s information-packed three-day 4th Annual Virtual Reality Conference held in San Jose last month brought leading entrepreneurs in this fast-growing field together with 52 exhibitors showing the latest virtual reality (VR) hardware and software products. Reflecting the growing interest in VR, attendance almost doubled this year to about 4,000 attenders. Thirteen of the 16 Californian exhibitors were from the San Francisco Bay area, showing that entrepreneurial hearts still beat strongly in Silicon Valley.
SRI International of Menlo Park, CA, was one of four organizations that received a Meckler award at this conference; Tom Piantanida of SRI’s Sensory Science and Technology Center developed a VR system for NASA-Ames Research Center to train “marshallers” — the folks with batons who tell the pilot where to taxi the plane — in how to guide a simulated four-engine jet aircraft.
Other award recipients were Sense8 for its widely used WorldToolKit “world building” software, Polhemus for its Fastrak sensors that almost every VR installation uses to track objects in three dimensions, and Robert Jacobson, Ph.D. of Worldesign for developing a unified theoretical foundation for virtual reality systems.
CLIP ART, CLIP VIDEO — NOW CLIP 3D MODELS
Clip-models were the most prominent kind of digital media products on display in the exhibit hall. Viewpoint Animation Engineering, Inc., of Orem, UT, wants to be the company you call when it’s time to fill out your virtual world with realistic-looking, highly detailed animals and manufactured objects. It has been busy with its 3D digitizers scanning hundreds of different things such as a 35mm camera, a football helmet, an eagle, a Volkswagen bug, a skull, a globe, and so on.
Viewpoint cleans up the scans, segments them into parts so that a rendering program can apply different colors and textures to them, and puts them into formats that about 30 of the most common graphics programs can read. Prices range from $100 to $500 per object, depending on its complexity. Viewpoint can also do custom scanning, and will first model objects in clay if they are too big to scan or impossible to bring to the studio.
That’s Mr. Jack to you. If you want the most realistic human models you can get, the University of Pennsylvania (Philadelphia, PA) is making available Jack, a multimillion-dollar anthropomorphic data set that it developed over many years for NASA and U.S. Army human factors studies. Its default human figure has 71 segments, 70 joints, 136 degrees of freedom and a realistic, 17-vertebra spine.
To simplify control and positioning of such a complexly jointed object, Penn also offers special software that makes it easy to put your virtual “dummies” into vehicles, place them in workstations, make them move naturally, and so on. You can even tell them to obey a variety of postural constraints such as “keep your torso vertical.”
The Jack software, which includes a full set of advanced graphic rendering packages including radiosity, runs on Silicon Graphics Workstations. Contact the university’s Center for Technology Transfer at (215) 898-9585.
AND, OF COURSE, SOME VIRTUAL SEX
No high-technology conference is complete these days without a crowded booth selling pornographic materials. Psychoacoustic entrepreneur Ron Gompertz of San Francisco is now selling 3D binaural recordings of erotic sounds, via his Heydey Records. Gompertz recorded performers through stereo mikes in a KIMAR dummy head equipped with modular ear pinnae — the same model used by leading acoustical research scientists. He then processed the resulting audio data through a Crystal River Convolvotron. As a result, this reporter was able to clearly hear the performers pass from side to side in front of, as well as behind, him.
Normally, such a three-dimensional effect would have required a quad stereo recording and four speakers in fixed locations. But because of improved understanding of psychoacoustics obtained by decades of government-sponsored research on cognitive psychology, the effect can be experienced through ordinary earphones. The same general audio synthesis techniques were being used by exhibitors in other booths to position and move sound sources around in their three-dimensional worlds in real time.
VACTORS ARE BIG AND GETTING BIGGER
VActors (Virtual Actors) are big news these days in TV and Hollywood, thanks to Pasadena, CA-based SimGraphics’ “facial teleoperator master control” (see Vol. 2, No. 9, p. 9). This is an insectoid-looking helmet with a number of thin wire probes that come down from the top and around from the sides to rest their tips against various parts of your face. As you talk, smile, frown, wink and raise your eyebrows, the probes sense the motion of the skin on your face and tell a computer-generated face to move the same way instantly.
One lucrative application for VActors is advertising at trade shows and sports events. SimGraphics also expects VActors to be widely used to reduce costs and speed up production of animated cartoons, commercials and feature films. Less lucrative but certainly more heartwarming, seriously ill children at Loma Linda Hospital responded better to encouragement and instructions from VActors on televisions in their hospital rooms than to parents and hospital staff, improving the outcome of their treatment.
BIG BUCKS FOR NON-MILITARY VR RESEARCH
An estimated $50 million has been spent so far on research and development of nonmilitary VR. Even so, the Investment Perspectives panel held at the conference made it clear that virtual reality is to a large extent barely out of the “garage” phase of the startup process. The first pure VR company to go public, and so far the only, is Division Group in the United Kingdom. Division sells an integrated VR development environment including software, VR devices and Silicon Graphics computers.
Many venture capitalists (VC) are now convinced that potential returns from investments in VR startups may be able to meet their demanding requirements for 25-to-1 or better returns in three to five years. But they are still holding back from a 1980s-style funding/feeding frenzy because they are not sure yet precisely which applications of VR will pay off first.
They are pretty sure that entertainment applications are the lead horse and that the others (science, finance, education, manufacturing, medicine, military) are barely out of the gate. But they are not yet convinced that the lead horse can finish the race. VCs are waiting to see a “killer application” of entertainment VR before they commit.
One notable exception is Shamrock, the Disney family’s VC fund, which recently decided to buy into Virtual World Entertainment (VWE). VWE, founded by Gordon Weissman and Bruce Babcock, runs the highly successful Battletech centers in Chicago and, recently, New Jersey.
Battletech is an example of a “sit-down” location-based entertainment (LBE). In plain words, it’s a game. You get into a pod that looks like a spaceship cockpit, then it closes around you and you are off shooting down bad guys in another 3D world for about twelve minutes. It’s also tied in with 20 Penguin science-fiction novels on the Battletech theme. VWE sold 300,000 $7 Battletech tickets in two years and revenues were climbing when Shamrock came in to add value based on the extensive Disney experience with LBEs in its theme parks around the world.
Andrew Messing, the ex-Shamrock executive who now runs VWE as part of the deal, said Shamrock picked VWE because it met its three main investment criteria: vertical integration from manufacturing to operation of the LBE facilities, in-house software creativity, and ownership of the intellectual property.
Messing emphasized that without creative software developers who can keep the games continually interesting, it could not count on repeat business, which it considers all-important. For example, the 5 percent of Battletech players who are “regulars” (either loners or organized teams) accounted for 60 percent of revenues.
He also noted that writing LBE software required different skills from writing ordinary arcade game software. A new Battletech installation will open this summer in Walnut Creek, CA. Messing has decided to redesign this one like a miniature Disneyland, with four “lands,” each offering a different game scenario. It will also have a central lounge area for socializing after the game, and where the nonplaying spouses and significant others and the kids can wait and talk until the battle is over, enjoying California cuisine and nonalcoholic drinks.
CROSSING SHEEP WITH LEMMINGS
The old Silicon Valley joke is “Cross a sheep with a lemming and you get a venture capitalist.” So, if this Walnut Creek experiment turns out to be the long-awaited killer application of VR, you can bet that other VC firms will fall in rapidly behind Shamrock and do deals as fast as they can write checks with any VR company whose product even remotely resembles Battletech.
Two LBEs — Battletech and Dactyl Nightmare from Dr. Jonathan Waldren’s W Industries (UK) — seem to be tapping into a powerful social phenomenon. This phenomenon is also showing up increasingly on “cyberspace” of the global Internet and on commercial networked multiplayer games on home computers such as the Sierra On-Line System.
Briefly put, people enjoy cooperating with complete strangers in group activities. Competing with them is not as acceptable. (In California, we’ve seen this abandonment of class/race/status distinctions happen spontaneously in more serious, real, common-threat situations whenever we have a big earthquake.)
Messing told of eight wildly mismatched people enjoying each other’s company who would normally have ignored one another if they hadn’t just fought on the same side in a Battletech game — businessman with punker, female grad student with high school nerd, etc. The social excuse provided by the game allowed them to meet afterwards and discuss the battle. The grad student later married the nerd, but VWE doesn’t guarantee that everyone will get the same results.
Available VR hardware and software has so far been inconvenient to use and hasn’t been able to produce a very realistic simulation of reality. The original face-suckers — strap-on goggles with Walkman TV screens inside — distributed primarily by Jaron Lanier’s VPL, Inc. (now in Chapter 11, with French arms manufacturer CSF-Thomson picking up the pieces) are heavy, the pictures they show you aren’t very clear, and what you see looks jerky and doesn’t keep up with your head motions.
At this year’s conference we began to see some improved products that begin to correct these deficiencies. More powerful computers were being shown, such as Silicon Graphics’ Onyx parallel-processing supercomputer that can generate up to nine different images in nine stereo displays simultaneously for $200,000 to $600,000. Images this year were smoother-moving than ever, thanks to new techniques such as predictive tracking of head motion and multiple-resolution object models.
They still ruin your hair. The newer, helmet-style, head-mounted displays (HMDs) from companies such as Tier 1, N-Vision, and Liquid Image were being used in most of the booths in the exhibit hall. They take the weight off the bridge of your nose, but they still ruin your hair and steam up your glasses. In an arcade setting, attendants will have to clean them between customers (sweat, Brylcreme, perfume, cooties). Virtual Images Inc. (Columbus, OH) plans to hand out three-cent disposable plastic sanitary helmet liners to players of their Reality+ games.
A good head-mounted display can cost $10,000, so there was much curiosity about the capabilities of the astoundingly low-cost, $200 3D color helmet display that Sega announced for later this year that will hook up to its Genesis video games (see p. 24).
The lightest, simplest 3D viewing system consisted of an ordinary pair of Polaroid clip-on sunglasses with a simple adhesive retroreflective dot stuck on the bridge. A little box called a DynaSight Sensor (Origin Instruments, Grand Prairie, TX) sitting on top of a display screen equipped with a PLZT polarizer window tracked your head motion and continuously adjusted the image on the screen to show you a 3D color image. Stereographics’ Crystal Eyes eyeglasses and 3DTV’s low-cost version of the same thing were the next heaviest, both containing electronics for viewing 3D images on display screens.
A few nights before the conference, Oliver Stone’s Wild Palms TV miniseries had featured fictional VR eyeglasses that lit up the wearer’s face. Conference attenders saw life imitate art when Anthony Ryder, CEO of RPI, Inc. (San Francisco), took his company’s $9,000, 3D color, eyeglass-sized, head-mounted display out of his suit jacket’s inside pocket and asked for the house lights to be turned down. When he put them on, an eerie blue glow outlined the glasses on his face just as in the TV show.
The RPI display makes use of custom, high-resolution LCD displays less than an inch across, electroluminescent backlights, and optics. RPI hopes to increase today’s barely useful, 200×400-pixel LCD s directly to 1,000×2,000 or better, skipping VGA resolution entirely.
A couple of hours later, David J. Ferichs, founder of Future Vision Technologies, demonstrated an early version of his company’s 3D eyeglass-sized display based on two Private Eye monochromatic displays, hooked up to a proprietary, wearable RISC-based graphics engine. He claimed to have worked closely with RPI on a full-color model of the eyeglasses, but would not say whether that one will use the same display technology as RPI’s device.
Conference attenders were also happy about Xerox PARC’s May 20 announcement of its new active-matrix, liquid-crystal display technology with twice the resolution achieved previously (6 million monochromatic pixels or 2 million color pixels in a 13-inch screen) and 20 times the contrast, thanks to a new 500-volt pixel-driver transistor. That will mean even smaller, lighter, eyeglass-sized, head-mounted displays that show even more realistic-looking images, maybe by next year’s conference.
William T. Park
FROX RESURFACES
Tenacious digital TV company re-enters the market
Sometimes getting too far in front of the curve can be as dangerous as falling behind. Just ask Frox Inc., which introduced a device featuring the now-much-ballyhooed merger of computer and television in December 1991, only to crash and burn amidst reliability problems and disgruntled dealers. By late 1992, a new CEO had pulled the product from the market.
The Frox system uses digital audio and video technology, with a Sparc processor like those used in Sun Microsystems computer workstations, to control elaborate home theater installations (see Vol. 1, No. 2, p. 11). Frox relaunched its $15,500 system at the Consumer Electronics Show in Chicago earlier this month, and while the concept remains the same, the execution is minus a lot of bugs, according to Michael Watts, who replaced Austin Vanchieri as president and chief executive in June 1992.
EARLY SYSTEM FLAWED, DESPITE STELLAR DESIGN
Despite the combined talents of founder Hartmut Esslinger, also founder of the award-winning industrial design firm Frogdesign in Menlo Park, Andy Hertzfield, principal designer of the Macintosh’s system software, and Andreas Bechtolsheim, vice president of technology at Sun, the original Frox system was marked by some serious technical flaws. (All three have since left the company.) Compounding the problem, Frox bypassed the usual alpha and beta-site testing, leaving early customers to cope with the system’s teething pains.
No removable media. “To make it seem more like a television, it did not have a floppy disk or any removable media, on the assumption that you would not need it, and that when you did need to load software you could use a VCR tape,” Watts said. “This caused all kinds of problems.” Frox shipped about 400 systems, and “they did what computers that are unreliable do — they crashed.”
Watts put Frox’s software engineers to work debugging code and adopted a beta-site program with a few dealers and technically simpatico customers. Release 2.0 of the Frox software was shipped in mid-February, still on VCR tape, and has cured most of the reliability problems for existing customers. Release 3.0, which is currently completing alpha tests, will be released on a compact disc — music format CD rather than CD-ROM to avoid compatibility issues — as will all new Frox software, Watts said.
No bugs, just features. “We’ve fixed the remedial problems and are now back to where you’d like to be — adding features,” he said. Among features likely to be added soon are a modem, for plugging into interactive networks, and Dolby Laboratories’ new home version of its digital theater sound-decoding technology.
MORE THAN A SETTOP, IT’S THE SET ITSELF
Actually, the FroxSystem never lacked features, and indeed the system is far more ambitious than the computerized settops now being developed by General Instrument, Intel and Microsoft. The system consists of five main parts: FroxVision, FroxSound, FroxControl, FroxRoute and FroxCast.
Film-like resolution. FroxVision is a digital video processor that achieves film-like resolution by digitizing and enhancing current analog video sources, including broadcast, videodisc and VCR. The result, particularly from a videodisc, is a very high quality picture, one that finally realizes the potential of large projection screens. The advent of digital TV will be easily accommodated, according to Watts, since it will eliminate the need to convert the incoming signal.
FroxSound works directly with the digital outputs of compact disc or digital audio tape players, or converts analog sources, like turntables, into digital signals for processing. The system includes Lucasfilm’s THX circuitry and Dolby Pro-Logic for theater-like surround sound; it also allows the listener to simulate various listening environments, like Avery Fisher Hall. The system can work either with digital speakers, which incorporate their own analog-to-digital converters and amplifiers, or conventional amplifiers and speakers. The latter is a must for audiophile customers, who like to choose their own components.
A Jetsonian remote. But the slickest part of Frox — and no surprise given its parentage — is the user-interface, FroxControl. A Jetsonian remote device called the FroxWand allows one-handed control with a rocking thumb-knob, which manipulates a grasping hand cursor on the screen. In the same fashion as the Apple Macintosh or Microsoft Windows, clicking on icons selects functions. Combined with FroxCast, which broadcasts TV listings and program descriptions over cable and satellite, the system also — finally — allows non-engineers to program their VCRs. FroxRoute completes the system with fiber-optic cabling to deliver audio and video throughout the home.
Initially, Frox manufactured speakers and put its label on various monitors and projection screens made by other manufacturers, but Watts scuttled that approach to concentrate on the core system. Frox now offers a 100-CD disc changer, but in light of multiple offerings of this sort from major consumer electronics companies, it will probably discontinue that as well. For $15,500, which represents a $2,000 price hike, a customer buys FroxVision, FroxSound and FroxControl, but the system will most often be part of a home theater installation costing $40,000 or much more.
CAN THERE BE A FLYING FROX?
Whether the new improved Frox will fly remains to be seen. About half of Frox’s original 120 dealers have left the fold, voluntarily or otherwise, and the remaining ones are very cautious. “The new releases seem to be knocking away at the bugs,” said one dealer who asked not to be identified. “They listened to what we had to say and they went to work on it. But they’ve got a lot of work they need to do fast, and it may just be too late,” he said. “There’s a whole lot of negative karma associated with the word Frox.”
Frox has begun advertising in AudioVisual Interiors, a very slick Architectural Digest-like publication, and a review of the system is forthcoming in The Perfect Vision, an influential videophile quarterly. Frox has already consumed more than $35 million in venture capital from three wealthy European families, but its backers remain committed, Watts said.
“We’re slowly regaining momentum,” Watts said. “Basically, end users don’t know a lot about us so it’s in the dealer channel that the whole drama played out,” he said. “A surprising number of them hung in there, which is a testimony to the concept.”
Larry Fisher
APPLE PIE LAUNCHES PUBLISHING GROUP
New division has strategy but little experience with publishers or content
After several years of sitting on the fence about its interest in entering the new media publishing market, Apple Computer finally announced the launch of its interactive publishing group. The official rollout — sans Apple CEO John Sculley — took place during a press technology update on the Newton personal digital assistant at the Consumer Electronics Show, and lacked the typical fanfare that accompanies even the most modest of Apple’s announcements.
Ken Wirt, marketing director of the Personal Interactive Electronics (PIE) division and the head of PIE’s new publishing group (which has yet to be named), quietly took the stage at the Four Seasons Hotel in Chicago and briefly outlined Apple’s plans to develop, publish and distribute interactive content for both the Newton and CD-ROM-based computer platforms.
The crowd, which seemed disinterested after deciding the event was just another “It’s Apple’s Newton and someday it’s gonna be a real product” announcement, did not even bat an eyelash when Wirt demonstrated two Newton titles currently in development: an electronic travel guide and a Fortune 500 services and information title. (Even Wirt’s promise to give a Newton away free to anyone in the room who could come up with a new, more consumer-oriented name for the PCMCIA cards, which are the credit-card-size disks on which applications will be delivered for the Newton as well as other PDAs, drew little response from the audience.)
Lame launch, sound strategy. While the interactive publishing group’s coming out might have been entirely forgettable, the group and its plans are not. In a more detailed interview with Digital Media, Wirt outlined PIE’s interactive publishing strategy, including the development of an affiliated label program, its plans to develop and sell authoring tools for multiple platforms, including the Newton, and its intention to deliver content — in the near term — over Apple’s online services network as well as on CDs and PDAs.
GROWING THE MARKET FOR CD-ROM, NEWTON
According to Wirt, who formerly worked at NEC as vice president and general manager of its video games division, Apple’s entry into the interactive publishing arena is primarily motivated by a need to “expand the new media market.” Certainly the benefits of this move for Apple are clear: A publishing group within the Silicon Valley-based computer company ensures that there will be content or software for its hardware, including the PIE division’s PowerCD and Newton PDA family of products, as well as for the multimedia group’s CD-ROM-based machines such as the Performa line.
“In the case of the Newton, we really want it to become a recognized standard,” says Wirt, “so we are licensing the hardware out. That means, though, that we are competing with world-class [consumer electronics] manufacturers, and one way to keep our edge is to keep close to the customer by creating an Apple hardware/software synergy.”
Shelf space, marketing muscle. The benefits for the publishing community are not so clear since Apple is unproved in the publishing field. But, according to Wirt, the company is committed to providing smaller title developers a chance to get on the shelf at retail stores such as a Babbages or Circuit City through its affiliated label and co-publishing programs. (To date, the company has signed two publishers who will make their official debut as affiliates at Digital World.)
In addition, PIE plans to use the substantial marketing power of Apple itself to increase awareness in the consumer channel for multimedia and PDA titles and applications. And so it is possible that the formation of the publishing group could be a win-win situation for all parties involved.
For that to occur, however, Apple will need to work out some of the kinks that are materializing as PIE’s publishing plan makes its way from a printed document to reality. Before we take a look at some of the problems upon implementation, let’s look at the actual strategy.
A PUBLISHING FORMULA FOR ‘A LEAD POSITION’
Apple wants “a lead position” in electronic publishing, and, according to Wirt, that translates into the company owning about 25 percent of the interactive market. In order to achieve that goal, PIE plans to deliver a variety of titles — focusing heavily on content that contains memorable characters that can reappear in a sequel or series of titles — on multiple platforms and on multiple media.
The types of titles PIE plans to produce, publish and distribute are different, depending on which platform is being discussed.
Business for the Newton. For the Newton, the group plans to concentrate — at least initially — on the middle management and executive business community. Applications for the PDA will include spreadsheet apps, personal financial management programs and a billing program. The device will also have self-improvement titles, including discs in which actors role-play different business situations (a sales-coach-type program), and entertainment titles that include “airplane games,” such as crossword puzzles, sports titles that offer personalized fitness training or that teach individuals how to play a better game of golf, and movie guides.
PIE’s multimedia CD-ROM titles will primarily target the home and will include family-oriented, education and entertainment titles. Of course, the PIE publishing group plans to deliver reference works for both platforms.
NEWTON TITLES PLANNED FOR A FALL DELIVERY
For those Newton watchers who are still trying to pin Apple down on a delivery date of its PDA, one indicator that it is getting closer is PIE publishing’s announced commitment to place eight Newton titles in the channel by the end of this September.
According to Wirt, that number will increase to about 15 by the end of this year and jump to a whopping 300 Apple-affiliated titles by the end of 1994. (These numbers do not take into account titles developed and distributed by publishers outside of the PIE publishing group.)
Fodor’s goes interactive. One of the first Apple-published Newton titles expected to make its commercial debut this September is Fodor’s Guide to the Top 10 Cities. The title, expected to retail for about $59, is being built in conjunction with Random House, which owns Fodor’s, and RR Donnelley, which provided the mapping system for the title based on its Geosystems technology.
Lining up the digital rights. According to Wirt, Apple is paying each of these companies a royalty. He declined to elaborate on the costs involved for licensing the digital rights or the terms of exclusivity for specific platforms — except to say PIE will be the only publisher doing the title for the Newton.
“Basically, you have to pay for the digital rights,” he says, “and you try to get as many rights as you can. The big publishers give us as little as possible and keep it specific to the platform.”
Fortune’s Guide to American Business, which provides information on Fortune 500 companies as well as Fortune’s Service 500, is also expected to be released in September. The content has been licensed by Apple from Fortune, and is actually being produced by a small multimedia company based in Arizona. (Hopefully someone will correct the spelling of John Sculley’s last name, which appeared without the “e” in a demonstration of this title.)
As for multimedia publishing, Apple says it will ship five CD-ROM titles for the Macintosh platform this year. Two of the titles will actually be created at Discovery, a business unit of PIE, which is based in San Francisco. The Discovery Group is, among other things, working on a title called Wacky Jack (which we have heard some pretty wacky things about) and an interactive game show. Arborescence, the French publisher, is actually creating the other three titles geared primarily toward the educational market. They include one on the alphabet, one on numbers and another that involves learning about geography and ecology by traveling with a character named Peter.
CONSUMERS JUST SAY NO TO ‘ANOTHER BETA’
Perhaps one of the greatest challenges for the PIE publishing group is how to convince consumers to buy into the interactive market when there is not a standard hardware platform — in particular in the CD-ROM-based personal computer market.
“We have done many focus groups and learned clearly that people are not going to make a buying decision unless they are convinced they won’t get left behind in their decision,” says Wirt. “We do these focus groups with ‘early adopters’ and we have found out that they are still angry for buying beta video decks. They are very clear that they are not going to make the same mistake twice.”
ScriptX is long-term answer. According to Wirt, PIE is pinning its hopes for cross-platform delivery of content on ScriptX, Kaleida Labs’ scripting language and multiple delivery platform technology (see Vol. 2, No. 10/11, p. 12).
“We believe in ScriptX,” says Wirt. “Although we are going to initially do some CD titles that run exclusively on the Mac platform, it will be easy to spool out to ScriptX” so that if ScriptX is adopted as a cross-platform standard, publishers can easily port their content onto discs that can be read by any ScriptX-capable devices.
APPLE GAINS EDGE WITH AUTHORING TOOLS
In addition to publishing and distributing content, a large part of PIE’s publishing strategy relies on the division’s ability to provide the authoring tools necessary to create content. Led by PIE’s Duncan Kennedy, the tools group will deliver the Apple Media Kit, a multimedia authoring tool (expected to be released this summer) to content developers who create titles and software applications for multiple platforms, including Newton, Macintosh and the MPC.
In the case of the Newton, Apple will gain an immediate market advantage over its Newton hardware licensees since it will provide Newton developers the only authoring software for the device. To date, there are no tools manufacturers for the Apple PDA — only content publishers.
A royalty for run-time? Apple PIE remains undecided as to whether or not it will charge interactive publishers a royalty on every title sold that was developed with its authoring technology. Apple is not alone in its decision-making process on this particular topic. It is under consideration among many interactive media tool manufacturers today, who have begun to realize that their margin for profit is limited in comparison to the content publishers who are using their technology and selling products to what could be millions of consumers.
“It is a difficult situation,” says Wirt. “You either charge more for the tool upfront, or you charge a royalty. We just haven’t come to any final decisions on this one.” One possible scenario under consideration, which could help the small commercial publishers who are struggling to enter this nascent market, is to waive royalties until a specified number of discs are sold.
DISTRIBUTION IN STORES, BUNDLES AND ONLINE
While Apple is talking to Babbages and Circuit City as well as the more traditional computer stores, it is also planning to distribute content via its AppleLink online service, which today has a 54,000-subscriber base. The company sees it as a major asset and certainly it will appeal to individuals who frequently travel with portable computing devices.
If you were a Newton owner, for instance, and were traveling to San Francisco on business, you could download, for a fee, the San Francisco chapter of the Fodor’s interactive guide. Newton has built-in technology to receive this information from the network, according to Wirt. In fact, Apple Online Services (AOS) today provides some travel information, including hotel guides, maps and suggested scenic routes.
Try before you buy software. In addition to being able to download excerpts of titles such as the travel guide or a group of ten crossword puzzles, PIE is considering enabling AOS subscribers actually to download sample versions of various applications so that they can do a little tire kicking.
In keeping with that concept, the company is also using its hardware bundling strategy to hook consumers on a series of titles by giving them the first one “free” with the hardware. “The difference between [new media] and the music and movie industries is you get to hear the music on the radio or see a trailer of a movie — something you can sample before you buy,” says Wirt. “Today, when you buy software, you buy it. That’s it. But if I have a series, and I bundle one of the titles with the hardware and the consumer likes that title, then he or she knows what to expect from the rest of the series and will possibly buy the other titles.”
THE REALITIES OF IMPLEMENTATION
The implementation of PIE’s publishing strategy in reality has not been quite as elegant as the business model outlined here. What the group is finding is that a sound business strategy on interactive publishing does not automatically make a computer company a content publisher. It takes people who understand the publishing community and how they do business. It takes at least a few people, including some lawyers, who are experts in content.
One of the biggest complaints of some of the publishers in negotiations with PIE so far in fact is the contract, which began as a 15-page, hard-nosed Apple software developer’s contract. It is not so strange considering that the legal counsel for PIE publishing are experts in intellectual property for computer software, not interactive content. According to Wirt, the contract is down to five pages and “our act is coming together on the legal stuff.”
“The reality is, Apple hasn’t been in publishing before,” says one developer who is considering the merits of hitching his wagon to PIE. “And right now the group is not separate enough from Apple Computer for my tastes.”
That is a serious consideration and perhaps as PIE’s publishing group grows it is likely to decide to focus more on aspects of its publishing strategy — such as the distribution and affiliate label program or tools — and keep creative content development outside of Cupertino. Only experience will give the PIE publishing team, all of which are relatively new to actually developing content, a clear understanding of how to proceed.
Mining all your assets. Ironically, Apple has one of the most established interactive media liaisons and recognized electronic content experts in the industry working in house — but not for PIE publishing.
Linda Stone Neumann is the Apple employee most responsible for the wildly successful Apple Publishers Forum that drew 500 editors, writers, publishers and executives from both traditional and interactive publishing houses to a one-day seminar to discuss the business of electronic media (see Vol. 2, No. 5, p. 3). Even though she no longer works for PIE, she is still recognized today as the primary contact at Apple for many publishers interested in the interactive media market, and she is not part of the PIE group responsible for the company’s interactive publishing strategy. Instead, Neumann, who now works in the Office of the Chairman, writes white papers, consults to various groups within Apple and maintains her role as an Apple liaison to the publishing industry.
It is not clear how this division of assets occurred within Apple — answers are vague and varied among the parties involved — but it seems that PIE publishing could benefit from Neumann’s established credibility among individuals in the content community, especially now when the group is attempting to establish itself firmly as a major player in that world.
Janice Maloney
THE HDTV ALLIANCE
One process stops, another starts
Last month’s Federal Communications Commission announcement of a Grand Alliance between the four remaining competitive high-definition television (HDTV) systems for a single, digital system signaled to Advisory Committee Chairman Richard Wiley, who had shepherded the negotiations for such a standard since 1987, that the process is finally concluding. Others, such as Mike Liebhold of Apple’s Advanced Technology Group, believe that this is just the end of the beginning.
Liebhold is probably right. The FCC Advisory Committee was set up when there was only one HDTV proposed standard: the hybrid analog-digital Muse system proposed by NHK and Sony. Even when General Instrument’s fully digital DigiCipher compression system was proposed at the very last minute, the focus of the committee, system proponents and manufacturers was on a standard for traditional broadcast transmission. Those who wished to include other video issues such as the computer and photography industries were not taken very seriously.
These groups were able ultimately to resurrect a subcommittee of the Advisory Committee as a forum to present issues such as the computer industry’s desires to have entire picture frames transmitted sequentially to reduce flicker (called progressive scan) as the preferred transfer mode or to replace NTSC’s and PAL’s oval pixels with square ones, where the dots are arranged in equally spaced rows and columns for easier transmission, manipulation and storage.
As time went on it became clear that the computer industry arguments were technically compelling. The grand alliance agreed to progressive scan and square pixels but allowed interleaving (the present method of sending frames at 30 frames per second) as a transition technology. Technical details such as how to obtain a “prioritized, packetized, data transport structure,” as the FCC press release put it, using such techniques as the SMPTE header/descriptor (see Vol. 2, No. 5, p. 19), or how to integrate whatever comes from the Alliance with regard to compression systems, MPEG-2 international services and requirements standards have all been left for later discussion and decision.
All this is quite important because these discussions are not about an HDTV broadcast standard any longer. They are about how one defines and uses high-bandwidth data streams in an interoperable, scalable and open architecture — whether those data streams come over the air or through coax, fiber-optic or copper cabling.
As John Sculley of Apple pointed out to the National Association of Broadcasting Convention, “in a digital world there’s no distinction between high-definition video and audio, text, graphics or animation — they’re all data types. They can be stored, indexed and interacted with as though they were the same data type.”
EACH BROADCASTER CAN BE ‘A LITTLE FCC’
At a hearing called soon after the FCC announcement by a House Energy subcommittee, Nicholas Negroponte of the MIT Media Lab expanded upon Sculley’s analysis by arguing that each broadcaster could be like a little FCC choosing what to put out over his 6-MHz channel with a potential radius of 100 miles. He or she could send out four compressed NTSC channels. Or send out just one and use the rest of the capacity for high-bandwidth data transfers for commercial use. Or provide interactive entertainment or real high-definition pay-per-view on weekends. It would be up to each individual’s discretion.
John Abel, executive vice president of the National Association of Broadcasters (NAB), agreed emphatically. “We are not discussing HDTV, we are discussing economic use of bandwidth. And the broadcast spectrum has wide bandwidth available now with little cost for use in the National Infrastructure Initiatives (NII), as opposed to the cable and telephone companies who talk about this so much. Broadcasters will have to be freed to offer such new services over their spectrum, but many stand ready to do so soon.”
Why is the broadcast industry making this strategic switch from broadcast-only to sophisticated bandwidth supplier? The old ways are changing and they know it. Cable TV has penetrated 60 percent of the homes in the United States. Local broadcasters are, for the most part, merely broadcasting material they have obtained from the networks or syndicates. Cable operators themselves own a large amount of that material and are obtaining more (Encore and MCA deals, among others), and cable companies are obtaining programming directly from networks (for example, TCI and Fox) without any requirement to pay the local broadcaster for its use.
The broadcast industry is a saturated, slow-growth industry. It must find more valuable uses for its assets. Its major asset, spectrum allocation, could be worth much more if used for data and wireless communications. For non-network stations, the Aspen Institute in the mid-’80s estimated that use of broadcast spectrum for digital data and wireless would generate 10 times as much revenue as traditional broadcast activity.
WHAT MUST BE DONE TO MOVE FORWARD?
If it is indeed the end of the beginning of broadcast TV as we know it — all major participants are agreed that a new, high-bandwidth digital system can be developed and implemented — what more needs to be done? A great deal.
• The compromise allowing interleaving in the short term may mean millions, indeed billions, are spent on an interim and obsolete system. The MIT groups involved in the Grand Alliance noted in a footnote their objection to interleaving.
• Many other technical details need addressing, and equally important to the equation is who addresses them. More than just the present members of the advisory committee, shouldn’t all stakeholders be given the opportunity to participate? Doesn’t this require a new Advisory Committee that can insure a truly independent process?
Apple’s Liebhold was the most intense about this issue before the subcommittee. He argues that such stakeholders as the educational media and computing industries, the medical image communications community, electronic publishing, business image and page graphics organizations, scientific visualization and defense and many others who use these technical applications must be fully heard and their concerns integrated if this digital system is truly to be interoperable and extensible to the widest audience.
• Where is the digital equipment? The broadcast industry wants interlace as an interim because it does not see where the fully digital progressive scan production and transmission equipment will come from. This is a concern. There is such equipment. But as Robert Cohen of the Economic Strategy Institute said, “Such gear as digital cameras exist, but they exist in the black (i.e., within the intelligence community). They must be allowed to come out into the light.”
• MIT’s Negroponte was roundly criticized at the Markey hearing for his emphasis on the need for international standards coordination. Many think this is just a means to slow down the process and allow the Japanese time to catch up. Others think that the open discussions that have been occurring between the digital system proponents and the MPEG-2 standards committees should handle most issues.
But if we are opening our process to more American stakeholders, perhaps we should encourage more openness to the international community as well. The Japanese are not standing still. In February they announced the formation of an Advanced Pictorial Technology Development and Promotion Project whose aim is to research and develop an ultra-sensitive digital TV system that works to 2,000-line definition by the year 2005.
A graceful bow. At the time, this UDTV project was seen as a graceful way for the Japanese to bow out of the present standards process. But given the Grand Alliance and further developments, some discussion with the UDTV group seems appropriate.
This may be the beginning of the end, but the end is a long way off. Testing will not be completed for a year. Products using the agreed-upon digital HDTV system will take more than a year beyond that; it seems reasonable that we’ll wait three to five years before real digital video productions, and HD equipment to view them on, are readily available. In fact, that may even be optimistic. Many companies, most notably the cable and telcos in their interactive TV projects, will be providing digital products using MPEG-2 chips and the like long before that.
Tom Hargadon
TI DOES IT WITH MIRRORS
Novel display device is a good fit for HDTV
Texas Instruments announced a new screen display technology last month that uses an array of microscopic mirrors to form an image. Although the prototypes made so far handle NTSC and PAL displays, TI claims that it will be straightforward to extend the technique to HDTV. Compared to the operation of today’s cathode ray tube displays, micromirrors promise flicker-free operation, better color convergence, more lifelike colors and less visual “noise.”
It is done with mirrors. The core invention is a digital micromirror device (DMD), which is a modified random access memory chip. Like other memory chips, the DMD is laid out as an array of storage cells. But over each cell, suspended a mere two microns above the surface, is a tiny square of reflective aluminum alloy. Because the reflector is so close to the storage cell, it is sensitive to the electric charge in the cell. If a 1 is written to that cell, the reflector twists in a different direction than if a 0 is stored there.
To turn an array of such mirrors into a display, shine a bright light on it. The light will reflect in one direction from all of the 1s and in a different direction from all the 0s. Then place a lens along one of the light paths, enlarging the image to a convenient viewing size. Voilá! The pattern of bits that you write into the RAM becomes a pattern of bright and dark pixels that can be updated at electronic speeds.
Gray scale and color. So far, we have described a monochrome display. To make a color display, it is necessary merely to have red, green and blue light sources firing briefly in sequence. Prior to each color flash, we load the DMD with the desired pattern of bits. If the flashes happen often enough, the observer’s eyes will merge them into a continuous image, exactly as they do for movies and TV images.
We also need to control the intensity of each pixel. This is achieved by varying the time that each pixel is on: a short fraction of the color interval for dim values, larger fractions for higher brightness.
Proof of concept. TI has made research chips that can handle either North American NTSC (640×480-pixel) or European PAL (768×576-pixel) display standards. In one experiment, TI staffers projected an NTSC television image onto a 60-inch screen at a distance of 12 feet. Reportedly, it achieved a 50:1 contrast ratio.
TI representatives told the press that commercial chips are still in the future. They declined to specify a timeline for mass production, and noted that there is still some research to be done to make this technology economical. However, TI noted that it also takes some lead time to design a new display. It promised that, if manufacturers start working on products now, the chips will be ready in time to meet the assembly lines.
Cost is key. Stressing that it was not yet making a product announcement, TI spoke only vaguely about costs for a DMD-based display. A DMD chip has the same basic cost structure as RAM, but due to the additional steps to grow the mirror structures, it is intrinsically about twice as expensive at any given level of production. Nonetheless, TI believes that DMD displays will be able to compete with CRT displays in a couple of years.
TI is explicitly chasing the high-definition TV market. As with other chip technologies, volume is the key to low cost, and low cost is the key to widespread adoption. To bypass a chicken-egg conundrum, TI will hone its manufacturing skills first in areas that are not quite as sensitive to price: aircraft cockpit displays, medical and industrial imaging.
Peter Dyson
PHOTO CD TEAM LEAVES KODAK
Brownstein, McCabe et al. pick up and go to prepress co. AGT
Much to the surprise of Kodak (and almost everyone else), the cream of the management, marketing and technical team that created and launched Kodak’s Photo CD technology has suddenly left Kodak and gone to work for the second largest color prepress company in the world.
The result will almost certainly be a significant acceleration in the adoption of Photo CD technology as a de facto standard for publishing and multimedia applications. Most likely, the “center of gravity” for Photo CD activity will move with the team from Kodak to its new home at Applied Graphics Technology (AGT).
AGT is the primary supplier of electronic prepress services and facilities management to major magazine publishers. Its customers include McGraw-Hill, Time Warner, Newsweek, Conde Nast and U.S. News & World Report, as well as the New York Daily News and several advertising agencies such as Campbell Ewald, Lintas and Saatchi & Saatchi. It was originally a subsidiary of U.S. News and was acquired by Fred Drasner when he acquired the publication.
AGT has formed a division, Imagenet, to “develop and market computer-based digital imaging products for the prepress, graphic arts and multimedia publishing industries, and for other markets where state of the art image storage, manipulation and retrieval is essential,” according to information released at the time of the announcement.
Brownstein at the helm. Scott Brownstein, the chief architect of the Photo CD system at Kodak, will head the division. AGT’s Murray Oles will serve as VP of technical sales and John Hafey as VP of system applications. The rest of the team will include Georgia McCabe (previously worldwide director of commercial CD imaging at Kodak), Surinder Dahiya (previously director of CD authoring and CD imaging in Kodak), and key members of the Photo CD technical development and marketing teams located in both Boulder, CO, and Rochester, NY. The team will continue to operate as it had under Kodak, with Brownstein and McCabe in Rochester and Dahiya and his technical team in Boulder.
Kodak’s Photo CD development team had been a somewhat ad hoc organization that included groups in both Rochester and Boulder. The original objective had been to develop the next generation electronic imaging product for the consumer market. However, it became increasingly clear to members of the team that the most important initial markets would be commercial rather than consumer.
Over time, they were gradually able both to extend the technology and to “open” it to allow others to begin building products around the originally proprietary Kodak specification. We doubt that this has been easy. Many people at Kodak still think that the company’s attention should be focused on promoting Photo CD in consumer markets. Others are worried about losing competitive advantage by making Photo CD specs public.
Still others (especially those who sell film and chemistry to graphic arts markets) are afraid of alienating their customers by promoting a technology that could well destroy the traditional color trade shop business.
However, the Photo CD team was able to get the company to commit to making Photo CD an open standard. The company announced this spring both the “opening” of Photo CD and some important Photo CD software products (see Vol. 2, No. 10/11, p. 26).
By this time, the effort required to operate as a guerrilla team within a large organization must have begun to wear. A number of team members were receptive to the concept of continuing their work in a new, more entrepreneurial environment.
AGT SAW OPPORTUNITY, NOT THREAT
From the beginning, Photo CD has looked like a “natural” for magazines. Several magazines have been experimenting with the technology. They reported at Seybold Seminars in Boston this April that the experiments have been satisfactory and they intend to adopt Photo CD. Others will surely follow. These same magazines are increasingly interested in multimedia products — and in Photo CD as a natural “bridge” from print into multimedia. Clearly, by setting itself up as the premier independent source for Photo CD applications and technology, AGT puts itself in a marvelous market position.
Drasner was remarkably prescient to see Photo CD as an opportunity rather than a threat — and remarkably fortunate to snare all the Kodak employees he needed to pull off his coup.
WHAT ABOUT KODAK?
We do not want to suggest that every competent person who had anything to do with Photo CD has now left Kodak. Of course Kodak will be able to continue its own Photo CD activities. However, we believe that having so many of the key people leave to form an independent organization committed to applying and promoting Photo CD technology should actually be very good for Kodak.
We have always felt that the big win for Kodak was having Photo CD become the de facto standard for digital still images. Now that the key specifications are becoming public, the Photo CD team can probably do more to accomplish this goal for AGT than it could working for Kodak.
WHAT DOES THIS MEAN FOR PHOTO CD?
Our confidence that Photo CD will become pervasive in publishing and multimedia has just gone up. Imagenet should have the right people in the right place with the right backing to drive Photo CD into the publishing market. If we were Kodak, we would help them and encourage them (and everyone else with similar ambitions) to do exactly that.
We hope that whomever Kodak now puts in charge of Photo CD will understand this and will continue the process of “opening up” Photo CD and encouraging everyone to use the technology. If instead it sees the “defection” as a threat and reacts defensively, it could either see effective control of Photo CD as a standard for commercial applications pass to AGT, or it could hold up widespread adoption of Photo CD sufficiently long to leave an opening for alternative digital image formats and standards to take over the market instead.
We are optimistic that rational self-interest will prevail.
Jonathan Seybold
CALIFORNIA PROPOSAL PUTS LEGISLATIVE INFO ONLINE
The online community has rallied around a new bill introduced in the California legislature that will require almost all legislative information to be made available to the public by means of access through a computer modem — including full text of bills, amendments, bill analyses, bill history, bill status, veto messages, daily files of each house of the legislature, each House committee’s schedule, state codes (statutes) and the full California Constitution.
For the first time, citizens, reporters, community and interest groups, unions, corporations, city and county employees could have access to legislation that directly affects them, even while it’s in progress. Like Hawaii’s FYI system, Assembly Bill 1624 offers leadership for those states — and Congress — not yet providing timely, comprehensive, economical online citizen access to the process of their governance.
This California bill was introduced March 4th by State Assembly Member Debra Bowen (D-Torrance). And since then, it has been bounced around several times. Initially it was held up in committee, ostensibly to study the technical feasibility of doing an online service, but the information is already available online — for a fee.
To date, the legislative information has been sold to a few high-priced information distributors for $300,000 to $500,000 per year, according to Jim Warren, a staunch advocate of the bill and the founder of the conferences on Computers, Freedom and Privacy. (It was Warren, who provided Bowen with a 16-page implementation plan for free distribution of the information via the nonprofit, nonproprietary public Internet.) So far, only well-funded lobbyists and special interest groups can afford the high per byte and per minute fees of those few private data distributors that have monopolized online access to these electronic public records. The select group includes Legi-Tech and State Net — two of the bill’s strongest opponents.
Much of the online community has rallied around AB1624, however, and are unwilling to let the bill disappear without a fight. Concerned individuals have been sending information over the Internet about the bill’s progress and encouraging citizens, who are interested in seeing the bill passed, to make their opinions known to their representatives — through faxes, phone calls and letters.
According to Warren, who often writes about public access to information as a columnist for a variety of trade publications, these paper and electronic messages are the only thing that has kept this bill moving forward. In fact, it was shortly after an all-out fax blitz to the office of John Burton (D-San Francisco), the Assembly Rules Committee chair, that the Assembly — after five postponements — reheard the proposed bill. It passed the Assembly Rules Committee 8-0.
Since then, the Assembly Ways & Means Committee chaired by John Vasconsellos (D-Santa Clara) passed the bill 21 to 0. And the full Assembly passed it 72 to 0. But the proposed bill still has to pass the Senate and then must still go back to Burton’s Rules Committee.
Individuals interested in more information on AB1624 can contact Hon. Debra Bowen, State Capitol, Room 3126, Sacramento, CA 95814 or request electronic information on the bill from Jim Warren at jwarren@well.sf.ca.us.
MICROSCOPES FOR HIGH-DENSITY STORAGE
In the near future we may be buying microscopes for our personal computers — not as scientific instruments, but as data storage devices. On May 18, Professor Calvin F. Quate of Stanford University described to the Clara Valley Electron Devices Society of the IEEE recent progress in the use of scanning force microscopes (SFMs) for storing information at very high densities and for measuring surface roughness.
An SFM moves a very small, sharp probe across a surface, keeping it only a few atomic diameters away from contact. It measures the infinitesimal force of attraction or repulsion between the surface and the probe tip created by electric or magnetic fields. Because the tip is only two or three atoms in diameter, the SFM can actually locate the individual atoms and molecules that make up the surface as well as ones that lie on it. Derek Bennett introduced the SFM as a variation of a similar device, the scanning tunneling microscope (STM), which he invented with Heinrich Rohr at IBM’s Zurich laboratory.
Eric Bentzig at Bell Laboratories has used an SFM with a magnetic probe tip to read data recorded as magnetized spots. He created very small spots by illuminating the surface of a magneto-optical material with light sent down a tapering mirror-surfaced plastic rod. The light emerged through an opening smaller than a wavelength of light at the end of the rod, hitting the surface before it could spread out. This equipment was able to store information more than 500 times more compactly than an ordinary computer disc drive — 45 gigabits (45,000,000,000 bits) per square inch.
At that density, a 50-megabyte file would just cover George Washington’s eye on a dollar bill.
Other techniques include sensing the electrical attraction of trapped charges in an insulating surface, denting the surface with the probe tip, and moving individual atoms around on the surface. At IBM’s Almaden Research Lab in San Jose, CA, scientists scratched the word “HEUREKA” on an ordinary audio compact disc — between two of the microscopic pits that encode the audio signal data!
Researchers at IBM, Nippon Telephone & Telegraph (NTT) and other laboratories around the world have even been writing their companies’ names with atoms such as gold and sulfur in letters as small as five atoms high — arguably the world’s smallest type font.
RAE BUILDS A PIM FOR PEOPLE ON THE GO
Rae Technology, a startup specializing in personal information management (PIM) software, has set its sights on becoming known as the PIM developer of choice for computer users who can’t wait for Zoomer or Newton PDAs to hit the market.
Next week the Cupertino, CA-based company, which has focused on developing PIM technology for the emerging PDA and mobile personal computing markets, is expected to ship its first shrink-wrapped product called Rae Assist.
The $199 personal information manager is the first PIM to combine a relational database — Rae Assist is built on a subset of ACI’s 4th Dimension database engine — with Hypercard-like capabilities that enable the user to create unstructured associations, such as object linking within different categories of information.
In addition the application is the first of its kind to include an “agent” or smart assistant that helps users import, find, link and tag information. The smart assistant can connect and disconnect links between data objects either automatically or based on a request from the user.
Initially Rae Assist will be available only for Apple Macintosh, PowerBook and Duo platforms, but, according to David Kleinberg, Rae’s vice president of sales and marketing, the company is interested in developing its proprietary technology for other platforms — both existing computer platforms such as Windows and consumer devices still in development. The Rae Assist architecture underlying the application is platform independent, according to Kleinberg.
Rae Technology was cofounded by a team of experts in database and hypermedia technology, including its chairman, chief operating officer and president, Samir Arora, an ex-Apple employee, who was part of the original 4th Dimension engineering team at Apple and ran the applications tools group responsible for 4D and Hypercard. His proprietary object-oriented Solo technology forms the core of Rae Assist and differentiates the product from other PIMs.
In addition to developing off-the-shelf software, Rae has been building customized corporate information management databases for companies that deal with sales automation, project management and electronic catalog publishing. It will continue to design, develop and install these proprietary databases. Kleinberg says Rae also plans to develop tools that will enable Rae Assist users to “personalize” applications.
SANCTUARY WOODS EXPANDS OPERATIONS
Sanctuary Woods Multimedia Corporation, the Canadian-based interactive media company best known as the publisher of actress Shelley Duvall’s first multimedia title, recently opened a U.S. headquarters and announced plans to expand its interactive publishing operations to include delivery of 21 educational and entertainment titles for the Macintosh, Microsoft MPC and 3DO platforms this year.
The five-year-old company, which has focused primarily on developing customized interactive business applications for corporations such as Northern Telecom and Bell-Northern Research as well as for federal agencies, has been struggling to create a presence in the new media market since 1992 when it launched its first two — and to date only — commercial CD-ROM titles: The Vampire’s Coffin and Shelley Duvall’s It’s a Bird’s Life.
To increase the company’s visibility in the U.S. multimedia publishing market, Sanctuary Woods has named Scott Walchek president and COO of the company. The former director of worldwide product marketing for Macromedia, he will run Sanctuary Woods’ business operations out of the new offices in San Mateo, CA, while title development will continue in the original Victoria, British Columbia, location.
The next six months “will be the greatest opportunity this company has had,” according to Walchek, who says Sanctuary Woods will deliver 10 titles each for the Macintosh and MPC platforms. In addition Sanctuary Woods plans to release It’s a Bird’s Life for the 3DO Interactive Multiplayer when it is shipped. According to Walchek, the company will produce titles for other CD-ROM-based platforms, including Philips’ CD-I and Tandy’s VIS systems.
In order to establish its titles in the U.S. channel, Sanctuary Woods has signed as an affiliate label of Electronic Arts. In addition Walchek has established a brand name identity strategy for the company’s content in the hopes that consumers will begin to recognize their favorite types of titles by category. The company has lined up the rights to and owns the trademarks of the names I-Tales, I-Adventures, I-Movies, I-Games, I-Learn, I-Mysteries, I-Catalog and I-Education.
In addition to creating original content and repurposing material from print, Sanctuary Woods is seeking to acquire other multimedia publishing companies as well as the digital rights to movies, videos and music CDs. According to Walchek, the company just secured the digital rights for all interactive platforms to Once Upon a Forest, a 20th Century Fox feature film to be released in 1994.
INTERNATIONAL NETWORKING CONF.
Aug. 17-20, San Francisco
The Internet Society
(202) 872-4200, fax (202) 872-4318
This third international conference addresses users and potential users of the global computer network called the Internet. University, industry and government representatives from around the world will meet to discuss issues of research and academic networking. More than 35 sessions will be featured over three days with session topics ranging from general to specialized interest.
Planning for networks of the future is a central focus of the conference. A number of practical sessions will discuss network funding, planning, operation and management on regional, national and international levels. Future global policy will be covered as well.
Hot on the agenda will be the Clinton administration’s much discussed plans for a national high-speed information infrastructure, which would bolster the capacity to send sound, graphics and video as well as data over networks in the U.S. The expansion of networks in Africa, North America, Asia Pacific, Latin America, Central and Eastern Europe, and Western Europe will be discussed as well.
Several panels will address issues of network access, including panels on empowering new users, helping users help themselves and the application of global networks in K–12 education.
The latest developments in network technology, such as ATM and routing protocols, and other technical aspects of networking, including multimedia technologies, the next Internet protocol and mobility, will be explored in a number of panels.
Social and security issues will be addressed during panels on computers, freedom and privacy, virtual culture and community, the transformational potential of networked information, and cyber-knowledge and information space.
For the large body of researchers and academics who conduct their business via the Internet, several sessions will discuss technologies for cooperative work, research and development initiatives, and global scientific collaboration. Conference sponsors project an international attendance of 1,000. For more information, contact INET at inet93.stanford.edu, or at the phone numbers above.
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