Robert Classen, a veteran cable television executive and leader, today is president and CEO of television programming and network company Starz. In 2001, he headed interactive television technology and distribution leader ICTV, and spoke at the JackMyers Forum for Interactive TV Development in Los Angeles. His vision is as relevant today as it was then.
JackMyers Forum for Interactive TV Development
February 28th, 2001
How Will Interactive TV Impact Entertainment
Beverly Hills, CA
Jack Myers: Bob, when you spoke at one of our last Forums, you spoke for 15 minutes with no slides, hardly a script, and gave what I thought was one of the most visionary statements that I've heard for the industry, so I think it's appropriate that you are speaking here again today. ICTV is looking at future business models for entertainment and developing the first streaming video into the homes. Bob Classen, thank you for being here!
Bob Classen: Thank you Jack. I am less concerned about the technology, and I am even less concerned about the applications, but I am much more concerned about distribution, and let's get to that in a few minutes. In 1979, when I installed Pong on the television at my home, it took about two hours. Pong was after Cube, it was also after a coin operated system that they tried in L.A. in the late 60's. Interactive television has a history of starts and failures. And yet, here we are with hundreds of companies now all looking at ITV and saying the time is now. Why is that? Well, there are some reasons. ITV by definition needs efficiency because it's a one to one, not a one to many relationships.
The digitization of video and the distribution of digital setup boxes creates that environment. You also have a screen experience, the largest, most consumer oriented market in the world here in North America and for ten years we've been interacting with screens. We've been doing some of it with Game Boy's and PC's, we've been on the Internet, and now we have new technologies like ours that can take those same experiences and put them on television. We heard several speakers today talk about all the other new appliances that will do this wirelessly and so on. But content is king and convenience drives adoption. There is now tremendous content both from the libraries we heard discussed today, and from the Internet and from all kinds of video and IP sources.
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But its convenience. I know 60-Minutes Sunday night at 7 o'clock is free, I pay my cable bill anyway, but I want to watch it Tuesday at 8:30, I will pay for that. And so convenience has to be an important part of this mix. Every two or three years there is a wave of studies that say it's time for interactive television. There are now twelve to fifteen million digital cable customers, 80 percent of them want ITV. This shouldn't really surprise you; these are the early adopters; these are the truck chasers of the 80's; these are the first people that bought HBO and Showtime, and now, I think, with this convergence of issues they are saying yep, the time is right. So what's going to come to us? First, all the things we're accustomed to: movies, videos, on-demand content. And then new experiences.
I was interested that even Turner used the word immersive, which is one of our new words, and telephony and interactivity and advertising. I was remembering when I was in the cable advertising world in the late 70's and early 80's, how long it took the advertising industry to move to cable. And I am thinking, now in a few years, a television household driven by cable or satellite, I don't know, 10 percent of them might be watching VOD, 10 percent of them might be doing something interactive, 10 percent of them might be watching subscription pay.
Anybody that models this out ought to be saying to themselves that every ad agency in the country ought to be sitting in this room today. I was thinking about this because here’s a new technology, a whole new group of applications and you know we got our trials out and we see that people surf to it at midnight and I remember when I got my VCR the first movies that I rented. But what are the applications? I listen to the cable operators and the programmers, and frankly in general they don’t have a clue either about the applications. The only guy who has said anything that made sense to me in conference panels in the last two years, from the distribution side, is Barry Diller. Barry Diller was asked the question "What’s the killer application for ITV?" And he said, "You know what, there’s twenty or thirty great applications that will find their own little niches over time." And ain’t that the truth? Isn’t that what we’ve heard today? There is no ‘let’s just put this out and it’s all over’ kind of solution.
So what sells? Convenience sells, entertainment sells, communication sells. I wouldn’t mind having instant messaging on my television. But what really sells is empowerment, because this product will let the television work for you rather than you just kind of working for the television. I am going to take you through three phases, this is kind of my vision piece.
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The first phase is time shifting, all the on-demand stuff, e-commerce, There is a tremendous opportunity for e-commerce transactions as we think about the television portal, an issue that hasn’t been talked about very much today. Interactive program guides, you’ve heard a number of speakers talk about that. Who’s actually demonstrating taking his online guide and showing the previews in real time on the television as we convert IP into MPEG for example? That’s in the second and third phase. Then the two screen experience, you hear a lot of discussion about that, Monday Night Football, Survivor and so on. That’s all here.
The second phase will focus on the cable operators as they put up their portals, whether it’s the TV Guide portal or their own Comcast charter portal, we pretty quickly figure out they ought to go to customization, just as Yahoo! and the others have gone to customization, because that clearly differentiates them, for example from the satellite. So you’ve got a quick movement towards customized portals, because I want to be able to have just a few buttons, not a lot because it’s television, it’s not a PC. But I’d like to see the evening news stream from my hometown TV station. I think you will find most consumers, the early adopters, will want to do that. IP content of the television.
We need to look to ways to take that IP content and put it on television and there are technologies that are being developed and demo’ed right now that do that. The single screen experience. If you think long term, that is in the next phase. Interactive ads, commerce TV, audience response, the first simple stuff. You’re seeing an ad for Ford, an icon drops down, you click on it, and they send information. What starts to happen is when you click another time, you go right to the Ford website, you take a 3D tour of the inside of this Mustang and then you figure out where the local dealer is, that’s interactive.
Phase three, we’ve interacted, and called up and demanded library content. It’s interesting the first examples of some of this were some of the things on CNN. Multiple additions of content delivered to various devices. We had some panelists talk about home networking and all the new devices that are coming up. Voice activated navigation. I haven’t heard that yet but if you’re following what’s going on in the cellular voice portal industry, and if you are tuned in to some of the patent work that’s now in the cable and set-top business, it’s HBO into your remote, and there it is. It’s not about channels it’s about titles and access to them. It’s the first year of Star Trek and Captain Kirk and The Enterprise has found this ship with three people in suspended animation; they defrost and explain what’s going on and the guy from Texas says ‘well I guess I’ve got time to kill until we go back to Earth, I want to watch TV.’ Spock goes nuts! ‘Watch TV? What do you want to watch?’
The idea that we will focus on content and data and call it up, more than we just sit and flip through the dials, could be foreign to us today, but it won’t be in the third phase. In Europe, OpenTV liberates Canal+; people are introducing simple narrow band applications to great critical reviews and wide consumer acceptance. And in the U.S. we’ve got pioneers like WebTV and AOL-TV and critics pan them; and the early adopters say ‘oh, this isn’t as good as my high speed modem service.’ Well, of course not, it’s something else.
And so this is the distribution piece. You have two gigantic gate keepers, a couple satellite guys and a couple cable guys. And the satellite guys have a problem because well, they have great product marketing people and tremendous resources and they can come out with a high price product like Ultimate TV and it’s a wonderful product, but they don’t have that mass opportunity. And they don’t yet have broadband. They may end up with it with spot bands and spot themes, and they may do it with DSL, but they can’t step back, as you would expect that really sophisticated marketers would do, and say what are all the great products and applications and how do they fit in to my scheme?
They have to look at the things that they can do in their narrow environment.
Cable guys have another problem. You know, the cable industry, in the mid 90’s, made a bad decision frankly. They decided that they could solve their interactive long term issues by putting software in the setup boxes. They were wrong. The Internet outfoxed them, they got faster, and they got more sophisticated. You need six or seven plug-ins to stream video to the television. Who would want to stream video to the television? Oh my God, what an idea! So, the cable guys, like they are waiting forever for the set-top boxes and I hate to tell you, all the application people that are here today, everything that you are hearing, there is going to be this movement of applications between set-top and head-end processing for one important reason. Those twenty million boxes that are out there today are going to be out there in seven years. I am an old cable operator. I never got rid of my set-top boxes. I want to depreciate those until they are long gone. And you know why you can do it? Because there will be an opportunity to move functionality between limited set-top functionality and head-end stuff to create common experiences.
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And so the cable industry will eventually move in this direction. Right now, they are doing what they’ve always done. They’re twirling the products they’ve invested in. Here our investors will do some stuff with us and Bill Gates will do something with them and that’s fine to let us start to try and see what’s happening. But let’s not dilute ourselves. Did anybody step back and ask what does the consumer want? What are the applications that make sense for the demographics right out of university, who have just been accustomed to the high speed modems and are going to be bored to death with whatever I put out as interactive television for the next two years?
There are hundreds of questions like that that we haven’t started to answer. At the last panel, somebody said, when I show up at the cable company, they send me to their engineers, and I say, I don’t want to talk to your engineers I want to talk to your marketing people and see what are the products that you want to deliver, and how do you want to package them and price them and how do I fit into that mix.
So, Jack, I believe that we will see tremendous experimentation in the next five years. I do not believe there will be a massive deployment of sophisticated in game products, unless either the satellite industry develops a broadband solution, or the cable industry figures out from a product marketing standpoint, what it needs to do.
JM: Bob that is vision. Thank you.