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updated 1/6/2004 2:15:11 PM ET 2004-01-06T19:15:11

An explosion of interactive TV choices will flood the marketplace with new ways to attract television users in 2004, and Silicon Valley companies are leading the charge.

TVHead, a Los Altos-based interactive computer game developer, will be testing a virtual computer game network with an undisclosed cable company in late January and plans to open it to the public in the fall of 2004, says CEO Sangita Verma. San Francisco-based OpenTV already is in limited markets in the southern United States and Mountain View's Microsoft TV is offering TV menu and channel-surfing upgrades in Mexico and in several U.S. test markets.

If these trial runs prove successful, interactive TV could change the way advertisers reach potential customers while giving cable companies and cable network companies new sources of revenue.

By the end of 2004 millions of homes are expected to be able to use their televisions to play computer games, order movies on demand, find out more information about a product being advertised or highlighted on a show, or even get the latest statistics on a favorite sports figure while watching a game. Cable companies will be able to gain new revenue from advertisers for increased access to interested customers. New viewer fees will come from such offerings as computer games and on-demand movies.

"It's early in its infancy," says Peter Schultz, director of solution marketing for ICTV, a Los Gatos-based concern that is developing a centralized software platform that allows cable company customers to interact with their television sets. "Games will introduce people to this but I don't see games as the end-all, it is just the beginning."

Computer games will be vital to introducing a wider audience to Interactive TV because they are fun and can be used for short periods of time, Ms. Verma says.

"There is a phrase we use called 'micro-boredom' where people have a few minutes to kill," Ms. Verma says. "Cell phone games is one result of this. We count on people who will have 10 minutes to kill before their program comes on."

Advertisers are seen as prime users of Interactive TV, says John Roberts, vice president of interactive TV for the Santa Monica-based Game Show Network, which is exploring ways to get its viewers more involved with its shows.

The popularity of TiVo and its competitors has advertisers fearing their commercials are not being watched. TiVo allows the watcher to record shows and zap commercials. Interactive TV will allow customers to find more information about products they are actually interested in, rather than get hit over the head with commercials they may have no interest in, Mr. Roberts says.

"Where a user can click on something on his screen and get information, that is really the holy grail of advertising," Mr. Roberts says.

For the Game Show Network, people who play along also tend to watch longer, increasing ratings. Currently, most watchers of the Game Show Network can play along with its games on personal computers. By 2005, millions will be able to use their TV remotes to play along and compete against others watching the network on their television sets. As it does on its Web site, the network will include bonus points by asking questions about the commercials it shows.

"I really see interactive TV today as the World Wide Web was in 1993-94," Mr. Roberts says. "I think it is going to grow and it is going to grow faster than most people think."

Other uses for Interactive TV include developing a personalized TV menu to running programs when a customer wants to see them to moving swiftly between stations in a 500-channel universe.

"A lot of this stuff has been developed but is only now taking off," says Microsoft TV's Ms. Norman.

However, there are some who question whether people want to interact with their television.

Pacific Bell spent nearly $1 billion trying to develop an interactive TV platform before SBC Communications bought the company in 1996 and scuttled the program.

SBC was convinced that television is a passive instrument, and that people want to sit back and relax and not participate, says Owen Rubin, chief technology officer for TVHead, who also worked on the now defunct Pacific Bell project.

But the success of TiVo, says Mr. Rubin, shows that people want more control over how and when they watch programs.

Sky TV in Great Britain has been successfully running Interactive TV programs for its digital cable customers for a couple of years now, Mr. Rubin says.

The cable company allows advertisers to supply a button on the screen that viewers can push via the remote control. The button uses picture-in-a-frame technology to take them to another channel where they can see a longer advertisement. Banners and scroll information also are available. The cable company charges the advertisers a fee for this service while access is free to viewers.

© 2007 Silicon Valley/San Jose Business Journal

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