NEWS CORP. BUYS DELPHI INTERNET SERVICES

The Internet, long the domain of researchers, scientists and academics, may soon be host to a new segment of the population — the consumer. One week after Continental Cablevision’s agreement with Performance Systems International to provide access to the Internet via its cable network (see stories, pp. 3 and 17), Rupert Murdoch’s News Corp. announced its intention to acquire Delphi Internet Services, the nation’s fifth largest computer service providing full access to the Internet. The acquisition marks the first time a media company has taken over an online service.

News Corp. says it plans to distribute electronic newspapers and possibly even reference materials, maps and travel guides over the Internet. In the long term, News Corp. says it might use the service as a delivery system for interactive television.

An early project will be to place an electronic version of TV Guide magazine online. Other potential projects include an editor’s forum where subscribers and editors would engage in online dialogs.

The subscriber base for 12-year-old Delphi is fewer than 100,000; however, News Corp. hopes to grow this base with consumer-oriented offerings and the lure of access to the vast banks of information that are available via the Internet.

Delphi’s specialty is simplified access to the Internet, which is notoriously difficult to navigate. A text-driven screen presents catalogs of Internet databases, and other menus are intended to make it easier to locate information available on the Internet. In addition, more than 300 Delphi experts are accessible online to answer questions about where special-interest groups and information can be found.

Russell Williams, VP and general manager of Delphi, claims the company is working on a friendlier graphical user interface that should be deployed in the next six to eight months.

The acquisition is expected to be finalized by the end of September at which time Delphi will be integrated into the News Technology Group — one of two technology groups founded by News Corp. in 1992 to exploit new media opportunities and the company’s growing information and entertainment databases and libraries. Management at Delphi is expected to remain the same and the company will retain its offices in Cambridge, MA.

The News Technology Group, which is headed by Stanley Honey, was founded to consolidate previously independent activities within News Corp. engaged in developing new media technologies. The Technology Group includes Etak, Inc., a leading provider of electronic road maps, and News Datacomm, which handles media access control and encryption for satellite and cable operations. New Electronic Data, the other technology group at News Corp. headed by John Evans, provides electronic versions of the company’s worldwide databases and is developing electronic newspapers. The Technology Group and NED work in collaboration.

News Corp.’s extensive media holdings include newspapers, the Fox television network, book publisher HarperCollins, B Sky B, a satellite television service in Britain, and Star TV, an Asian satellite television service.

NINTENDO/SGI ‘PROJECT REALITY’ IS FAR FROM REAL

Nintendo of America, the Redmond, WA-based video game giant, and Mountain View, CA-based Silicon Graphics Inc., makers of high-end visual computing workstations, recently announced a joint development deal to produce “a next-generation video game player” for Nintendo, code-named Project Reality.

The game machine, which may be either cartridge or CD-ROM based, will be built around SGI’s 64-bit MIPS RISC microprocessor technology, making it capable of delivering photo-realistic 3D images at unprecedented speeds for game machines — and, for that matter, for many personal computers. It is expected to be priced at less than $250. Howard Lincoln, senior vice president of Nintendo, said the player will be released into the home market “with both video games and software products.”

Now, if all of that sounds too good to be true, that’s because it is — at least for now. The first product to be based on the Project Reality technology is not expected to hit the market until late in 1994. It will be a coin-operated video game machine. The home player will not be available until Christmas 1995 — at which time all bets will be off on what can be considered a fast and inexpensive player.

Certainly, Nintendo’s known competitors, Sega and 3DO, are not going to stand idly by during the next year and a half. Already both companies are developing machines that surpass Nintendo’s existing Game Boy, NES and Super NES 16-bit system.

The real big news of this announcement was not the “next-generation systems,” but the deal itself, which took more than nine months to finalize and marks the first time in Nintendo’s history that it has entered into an agreement with a U.S. company.

The hope of the game giant, of course, which has been suffering from eroding marketshare, is that the alliance will provide it with computer graphics technology that will effectively quash its competition. For Silicon Graphics the deal means entrée into the much-sought-after consumer market.

Perhaps the most interesting aspect of the exclusive alliance is that Silicon Graphics will be collecting royalties from Nintendo, not only on the Project Reality hardware but on the software as well. (Pricing information was not disclosed.)

According to Jim Clark, chairman of Silicon Graphics, Nintendo will not be the only recipient of SGI’s advanced microprocessor chip sets (despite an exclusivity deal with Nintendo). Some of the Project Reality technology will find its way into the settop boxes SGI plans to build for the Time Warner interactive cable TV trial in Orlando, FL, as well. (Again, no additional details were available.)

MANUFACTURERS TO SET DIGITAL VCR SPECIFICATIONS

In late September, a group of ten VCR manufacturers will meet in Tokyo to establish hardware and software specifications for consumer digital VCRs. The manufacturers — Hitachi, Sanyo, Sony, Philips Electronics, Matsushita, Mitsubishi, Sharp, Thomson, Toshiba and JVC — hope to identify a common set of specifications that will be embraced as an industry standard for digital VCRs.

VCR manufacturers, motivated by a desire to avoid format wars like the Beta-VHS conflict in the 1980s, have been discussing setting basic standards for more than a year. Earlier agreements between Sony and Matsushita and between Philips and Thomson led to the development of the technical conference, as sponsors are calling the meeting. In an effort to draw further support from the industry, the conference is open to interested parties.

The specifications will ensure that these VCRs will not only be compatible with existing television sets, and able to record the current video formats (NTSC, PAL and SECAM), but will also work with the upcoming HDTV formats, according to the group of manufacturers. Jukka Hamalainen, director of Matsushita’s Applied Research Laboratory, says that it is too early to determine whether digital VCRs will be compatible with digital settop boxes because the companies don’t know what settop boxes will be like. He says this issue will be addressed at the technical conference and more will be known afterwards.

In addition to settop box compatibility, the manufacturers plan to discuss basic specifications, such as video sampling frequencies, tape run speed, video bit rate reduction and video signal recording. Because digital VCRs will be capable of making near-perfect copies from an original source, copyright protection will be a critical issue for discussion.

The tape format will be about half the size of VHS tapes and will record up to 4½ hours on each tape. Unlike discs, the tape format is linear and will not allow for random jumps to specific points in recordings. A camcorder for the format will be developed as well.

Manufacturers have yet to determine the functions to be incorporated into digital VCRs. According to Hamalainen, the biggest factor in this decision is consumer demand. “It’s not a technical question at all,” he says. “It’s a question of what the market wants.”

The manufacturers participating in the conference say the specifications they agree upon will be submitted to the International Electrotechnical Commission, an international standards setting body, for approval. Manufacturers will decide individually whether or not they wish to adopt the specifications.

CONSUMER ELECTRONICS COMPANIES SUPPORT VIDEO CD FORMAT

Matsushita, Philips, Sony and Victor Company of Japan (JVC) recently announced that they have established basic specifications for a CD format that would store and play digital movies. The new format, called Video CD, will store 74 minutes of MPEG-1-quality video on a 5-inch disc.

The proposed Video CD standard is a slightly modified version of Karaoke CD, which was introduced by Philips and JVC in October 1992. The Video CD format will be maintained by Philips, according to Robert Soderbery, director of consumer marketing at C-Cube Microsystems, a company supporting Video CD.

Video CDs will be playback-only discs that will run on Video CD players, computers equipped with CD-ROM drives and MPEG decoders, and audio CD players (with digital data output) that have an add-on Video CD adapter. The discs will not be interactive, but users will be able to jump to marked sections in the CDs. Players will also incorporate functions such as fast forward, rewind and slow motion. Video CD will be compatible with NTSC, SECAM and PAL broadcast standards.

Video CD-only players will be available in the first half of 1994 for less than $300, according to Soderbery. No companies have yet committed to manufacturing these players.

Video CD will be backwards compatible with CD-I, meaning all CD-I players equipped with the FMV digital video cartridge add-ons will play Video CDs, and full-motion CD-I discs will play in Video CD players. In addition, Video CDs will also play in Commodore’s Amiga CD32, a next-generation CDTV-type player introduced in the U.S. this month, and possibly the 3DO Multiplayer. (A spokesperson for 3DO says 3DO favors the format in concept, but a decision will come only after the company reviews the proposed modifications from Philips.)

In this early stage of development, Paramount is the only film company to announce publicly support for the proposed format. By terms of a June agreement between Paramount and Philips, a select number of films from the movie studio will be released for digital video CD-I (which will play in Video CD players). Nine Paramount films as well as four digital music videos from Polygram will be available for CD-I in October, according to Philips.

Eventually, the companies supporting Video CD hope to distribute the format in retail and rental stores such as Blockbuster Video and Tower Video, where the Video CDs would go head to head with VHS tapes and laser discs.

Video CDs are expected to cost less than VHS tapes or laser discs, according to Soderbery. While VHS tapes cost $3.50 to manufacture and sell for around $20 and laser discs sell for around $35, Video CDs will cost less than 75 cents to manufacture and will sell for less than $20, he says.

A deciding factor in whether or not consumers will be wooed to the new format may be the quality it delivers. Video CD relies on an MPEG-1 compression algorithm. MPEG boasts higher resolution capabilities than VHS tape (352 lines of horizontal resolution for MPEG vs. 240 for VHS). However, encoding and compressing digital video is still an inexact science and the quality of video that MPEG compression techniques produce is not consistent. For still-frame applications, Video CD will support higher resolutions of up to 704 lines of horizontal resolution, according to Soderbery.

By contrast, the audio quality on Video CD is high. Audio is compressed 6:1 by an algorithm similar to Philips’s DCC audio compression algorithm and is CD quality, according to Soderbery.

Despite Video CD’s less-than-perfect presentation of digital video, the companies hope that as the first digital format for placing movies on disc, Video CD will be adopted by the industry as a base standard and that future technological advances can be incorporated into the format.

In addition to support by the above-mentioned companies, E-Motion (now a fully owned subsidiary of Sigma Designs), Goldstar and Samsung have announced their intent to support the standard.

INTERACTIVE NETWORK PLANS TO EXPAND NATIONWIDE

Mountain View, CA-based Interactive Network, Inc., is embarking on a nationwide rollout of its interactive system that the company says will allow television viewers to play along with sports and game shows in real time. The 20-hour-a-day entertainment service is expected to be available in Chicago this fall, with additional metropolitan markets expected to be added in the spring and fall of 1994.

IN, whose investors include TeleCommunications, Inc. (17 percent), NBC (11 percent), Gannett (9.1 percent), Cablevision/Rainbow (3 percent) and A.C. Nielson (1 percent), has been operating in Sacramento for more than two years and in the San Francisco Bay Area for more than a year.

The IN system is based on a handheld, wireless unit that does not attach to the television, or necessarily to telephone lines. Robert Brown, VP of engineering at IN, describes the processing unit as similar to a laptop microcomputer with an encryption processor built in “to thwart hackers.”

The unit features a small LCD screen that displays scores and other data. Eight buttons along the side of the screen control most of the action and navigation. The device also comes with a built-in keyboard, which is stored underneath the unit and can be pulled out, for entering data.

Program information is sent to homes via an unused portion of the radio bands of FM stations. The service will also broadcast information on the vertical blanking interval (VBI) of a PBS station for those who live in areas where radio signals are weak. For this type of broadcast, VBI equipment is also required.

IN offers primarily entertainment-based fare. For instance, viewers can join in on a game of Jeopardy!, try to solve a mystery on Murder, She Wrote, participate in an opinion poll on 60 Minutes, or predict the action in a live baseball game. IN runs on average 10 television-based programs and more than 100 other IN games and services from 7 a.m. to 2 p.m. every day.

The IN system relies on software with more than a million lines of patented code and a team of about 20 programmers, or “data jockeys,” as IN refers to them. The data jockeys watch events and shows as they are broadcast and enter information as the action progresses. They work with specially designed software that sends out packetized data to players. Typically two programmers are required to coordinate responses for a live show.

The hand-held device necessary to operate the system, plus six months’ free service, costs $299. Basic service is $15 a month. For an additional $10 monthly fee, players can compete with other subscribers for prizes, such as trips to national sporting events. To do so requires that players hook up the unit to phones lines after the game is over. Scores are downloaded in a 30-second local phone call. They are processed at IN’s central facility and then broadcast to participating players.

IN isn’t offering consumers anywhere near the sophisticated level of interactivity promised by large media companies such as Time Warner or Viacom. Nor is the initial cost of $299 a small investment for such a limited system. But the company claims there is a real demand for its brand of interactive television. In California, the company says its 3,000-plus subscribers give the service a 92 percent satisfaction rating.

IN says its business isn’t limited to what it is delivering in the way of interactivity today. The company says it’s talking to cable companies about integrating IN capabilities into digital settop boxes.

“We plan to be there when settop boxes come out,” says Brown. “By adding a card with our security, we can come into that box for a very small incremental fee.”

DISCOVERY TO FIELD TEST YOUR CHOICE TV IN EIGHT U.S. CITIES

Yet another entrant in the growing interactive television arena, Your Choice TV, Inc., a subsidiary of Discovery Communications, Inc., recently announced it will begin field tests of its interactive television technology in eight cable systems this fall. Your Choice TV will allow more than 20,000 cable subscribers to order broadcast and cable television shows after their first run on TV.

Your Choice TV will function similarly to a pay-per-view service. Consumers will select programming from an on-screen menu of up to 40 programming options. Programs are available at set times (i.e., every half hour or hour) on dedicated channels on the cable system. Shows will appear on Your Choice TV the day after they first run on broadcast or cable networks and will be available for one week.

The service will be a “bestsellers’ rack of television,” says Jim Boyle, spokesperson for Discovery. It will not be entirely ratings driven, however. For example, Saturday Night Live may be a selection even though it’s not in the Nielsen top ten.

The cost for programs will range from 50 cents to $2, according to Boyle. “One dollar is a magic figure for us,” he says. “Television shows are kind of disposable. If the cost is sort of pocket change, [consumers] perceive it as not that big a deal.” All profits from the test will be donated to charity. When the system rolls out, programmers will receive royalties on a per-order basis.

The field tests of Your Choice TV are decidedly low-tech, with shows being shipped overnight from programmers to individual cable stations for rebroadcast. Subscribers’ homes are equipped with addressable analog settop boxes that will allow customers to order Your Choice TV shows via remote control. Discovery says the field tests are not intended to test the feasibility of the service technically, but to test consumer reactions and demand.

Discovery plans to roll out a digital system in 1994 after digital converter boxes are available. At this time, the company hopes to deliver compressed video signals to cable headends via satellite.

Discovery, whose shareholders include Tele-Communications, Inc. (49 percent), Cox Cable Communications (24 percent), Newhouse Broadcasting (24 percent) and John Hendricks, Discovery founder and chairman (3 percent), launched Your Choice TV in March after conducting focus-group testing in which it found “a fundamental consumer dissatisfaction with television’s inability to break out of the linear viewing model.” Its research also found that consumers would be willing to spend more than $20 a month for the offerings on Your Choice TV.

The test will begin on October 18 in West Palm Beach, FL. Additional tests will commence between November 1993 and April 1994 in Chicago, IL; Columbus, OH; Dayton, OH; Nassau County, NY; San Diego County, CA; and Syracuse, NY.

Cable companies participating in the test include Comcast Corp., Tele-Communications, Inc., Time Warner Cable, Continental Cablevision, Inc., Cablevision Systems Corp., Times Mirror Cable Television and NewChannels Corp.

Discovery has not announced companies which are supplying programming for the test, but says they include both broadcast and cable networks.

NAUTILUS CD-ROM MAGAZINE HITS 10,000 SUBSCRIBERS

While mainstream publications such as Time, Newsweek and BusinessWeek are making a big splash with their forays into the electronic publishing arena, Nautilus, the first monthly CD-ROM magazine, has quietly been building a business. Dublin, OH-based Metatec Corp., publisher of Nautilus, recently announced the multimedia magazine passed the 10,000 subscriber mark.

Subscriptions for the 3½-year-old magazine on multimedia have risen 60 percent since July 1992. Managing editor Mike Espindle attributes this increase to the consumer acceptance of CD-ROM and the fact that Nautilus is the only monthly publication targeted directly to CD-ROM owners.

The electronic publication also has a large following overseas. Approximately 48 percent of its subscribers are outside of North America, with the heaviest concentration in Japan and western Europe, especially Germany. “I think it points to the global market penetration of CD-ROM drives,” says Espindle. “I think it also points to the unreliability of telecommunications. It’s hard for people in the Netherlands to log on to Compuserve because of the phone lines.”

Espindle sees demand for CD-ROM drives and titles outpacing online services. “The population of CD-ROM drive owners will be, if it’s not already, much larger than the population that telecommunicates,” he says. Nonetheless, the company is covering all its bets and is exploring hybrid online-CD-ROM services.

Each issue of Nautilus contains five content sections: industry watch, desktop media, software and tools, entertainment, and education. Industry watch covers product information and approximately 500 stories from the news wire every month. Desktop media includes articles on topics such as digital imaging, MIDI files of performances, and QuickTime videos. Software and tools lets subscribers sample some of the latest software releases and includes anti-virus programs and system upgrades. The entertainment section includes games and CD-quality audio recordings. Education features demonstrations of health and fitness software, HyperCard stacks on nature topics, and the Home & School Mac magazine.

The magazine is subscriber-supported and accepts no advertising. Espindle says it has future plans to incorporate ads, but this will require an additional marketing effort by the company.

Although early technology adopters form the core of its subscribers, Espindle says increasingly its subscribers are “normal” computer users. “People who are using us are not necessarily techies anymore,” he says. As a result the content is being shifted to have a “broader appeal.” More samples of consumer titles and interactive tutorials of technology will be included in future discs.

Annual subscriptions (12 issues) for both the Macintosh and Windows versions of Nautilus are $137 in the U.S. and $222 internationally.

SIGMA TO DELIVER MPEG DECODER BOARD FOR PCS

Sigma Designs, a cross-platform hardware manufacturer located in Fremont, CA, recently announced its plans to distribute an MPEG decompression board for IBM PCs and compatibles. ReelMagic, as the board is called, is expected to deliver full-screen, full-motion video and CD-quality audio playback off a single-speed CD-ROM drive — for less than $500.

According to Sigma, the board is for consumers of “next-generation” entertainment and interactive learning software. In other words, in order for consumers to take advantage of the board’s capabilities, they must be using interactive software that has been developed using MPEG-1 digital video compression technology.

The first titles to take advantage of the full-motion compression scheme are expected to appear on the market this fall. When the ReelMagic board is shipped this November, more than 12 compatible titles are expected to be released, with a total of 25 titles expected to be available by year’s end, according to Sigma. Activision’s upcoming Return to Zork will be bundled with the board.

In addition to Activision, some of the biggest players in the game industry, including Interplay Productions, Aris, Fathom Pictures, ICOM Simulations, Sierra Online, Trilobyte and Psygnosis, have committed to working with Sigma to build game titles using MPEG-compression and decompression techniques.

ReelMagic is also being tapped as a playback controller for the newly proposed Video CD format (see Video CD brief, above).

The ReelMagic technology includes support for Microsoft Windows 3.1 as well as DOS 5.0. It comes with a VGA feature connector, so it can display 32,768 colors — at a resolution of 800 by 600 on non-interlaced displays and 1024 by 768 interlaced — on even a basic 16-color VGA card.

ReelMagic is based on graphics and MPEG video and audio decompression techniques that were developed at Fremont, CA-based E-Motion Inc., which is now a fully owned subsidiary of Sigma.

VYVX SIGNS LOCAL ACCESS AGREEMENTS

Vyvx, a nationwide fiber-optic television service founded in 1990, has been making inroads into local markets and Hollywood with a string of recent agreements with cable operators and production studios. Tulsa, OK-based Vyvx employs a 30,000-mile fiber-optic network owned and operated by its parent company, WilTel. Although AT&T, Sprint and MCI also operate nationwide fiber-optic networks, Vyvx is the only one dedicated to business.

Two of Vyvx’s recent deals are local access pacts with FIBRCOM, a subsidiary of San Antonio-based cable operator KBLCOM Inc., and Cox Cable Oklahoma City. The agreements allow for FIBRCOM and Cox to provide first- and last-mile service connections within metropolitan San Antonio and Oklahoma City, respectively.

End users of these systems, including news organizations, businesses and video production facilities, will be able to utilize video services and applications, such as the transmission of news and sports, videoconferencing and remote online editing. Both one-way and two-way service connections and digital and analog transmission capabilities will be provided by the agreement. (With the exception of certain local access agreements, Vyvx employs analog first- and last-mile service connections.)

Vyvx, through its service division for production facilities, called First Video, has also signed a number of recent agreements with video production and stock image houses, including Industrial Light & Magic and The Image Bank. The 30 production houses that are connected to the network are able to transmit video such as commercials, news features, video imaging, video graphics, interactive videoconferences and other programming in real time to other First Video affiliates or any other facility connected to the system. Remote online editing can also be conducted between multiple sites.

During work on Jurassic Park, special effects company Industrial Light & Magic and Steven Spielberg’s film studio Amblin Entertainment used the system to shuttle computer-generated dinosaurs and live film footage back and forth from ILM in San Rafael, CA, and Amblin in Los Angeles.

The Image Bank, one of the world’s largest stock footage agencies, also recently came online with First Video. First Video affiliates under special agreements with The Image Bank and its licensees may review available video stock footage, request transmission of the stock and tape the requested footage at a First Video affiliate facility. The Image Bank also supplies a high-speed film search software program.

The WilTel network is designed with a DS-3 backbone that transmits 45 million bits per second. The DS-3 platform, together with advanced codecs, provides broadcast-quality NTSC television signals over fiber optics. Vyvx says its switched nationwide network reaches 55 metropolitan markets. More than 500,000 individual status and system alarms are monitored at all times to prevent failure and keep the system at 99.999 percent availability, according to the company.

In addition to the above agreements, Vyvx has long-standing agreements with companies including ABC, CBS, CNN, Fox and NBC for fiber-optic television transmission services and Teleport and MFS Communications for alternative access in local markets.

“In the past we’ve worked with just about everybody,” says Len D’Eramo, a spokesperson for WilTel, “and we will continue to do so.” D’Eramo also said the company had “had some trouble doing deals with telcos” and is now actively seeking to build relationships in the cable community. “We’ve found cable a nice match. We speak the same language.”

ADOBE PREMIERE 1.0 FOR WINDOWS

Adobe Systems of Mountain View, CA, recently released its highly regarded Premiere digital video-editing software for the Windows platform. The software, which is a scaled-down version of the company’s video-editing tool for the Macintosh, is targeted toward developers of corporate interactive training modules or first-time users of digital video.

Premiere for Windows is almost indistinguishable from its Macintosh predecessor in interface design. Still present are all of the transition effects, plug-in filter capabilities, and Adobe Photoshop and Illustrator compatibility (for image manipulation and importing graphics files, respectively).

This version also supports files from the major PC-based software applications and file formats, such as Autodesk Animator files; AIFF and WAV sound formats; and PCX, TIFF, BMP and DIB graphics formats. In addition, it is able to import and export files in Microsoft’s Audio-Video Interleaved (AVI) format as well as the Apple QuickTime format, giving digital video editors their choice of playback platforms. (For more details on the AVI and QuickTime formats, see Vol. 2, No. 6, p. 19.)

According to Adobe, version 1.0 for Windows has most of the basic features found in version 2.0 for the Macintosh. Since it is geared toward the non-professional video market, however, the software lacks the capability to create edit decision lists or do motion control, device control and titling. Of these features, titling and motion control will be the first to be integrated into the next release. Adobe is unsure when the two different versions will attain functional parity.

Adobe is pricing the Windows version far below its Mac counterpart: $295, as opposed to the $695 price tag set for its Macintosh tool. Most people, however, will probably get their software in bundling deals with video capture and compression boards that will be released this fall and early next year. This same strategy was very effectively implemented for the Macintosh market, and rapidly fixed Premiere as the premier tool (pun intended) for digital video editing.

The real question is whether or not the PC platform is sophisticated enough to win over people interested in digital video production. The hardware upgrade kits for multimedia (even just playback) have been extremely difficult to install and use, although they are getting much better. (Apple has even joined the fray, announcing this month its CD Multimedia Kit for PCs, which it developed in conjunction with Media Vision of Fremont, CA.)

It remains to be seen whether the new video boards and the Pentium-based systems will be powerful enough, and have enough graphics processing available, to sway developers. At least the software now exists to begin experimenting.