[back]

Century 21 - New Business Models in Travel

Speaker Transcripts

Will Vicary

Open for Business

Good afternoon to you all. You've seen lots of Powerpoint presentations today so what I'll do is try and skip through these as quickly as possible and show you a replica of OPEN. Unfortunately, we couldn't get a satellite installed, so we haven't got on-line service and it is just running from my laptop, but it will give a good indication of what the service looks like.

What I thought I'd cover today is why TV?. Why we believe TV will be the interactive medium of the future and its importance. The development and design of a service for TV, as opposed to just running a website straight through a TV and the adoption of TV. It's very early days for everyone - not just in the UK but also worldwide. There are a few lessons to be learned and hopefully I will try and share those with you today. I'll then go on to explain who is OPEN, who are we, what are our objectives, our strategies and then to show you a replica of the service.

TV. I think we have had some very understated remarks of the growth of interactive digital TV in the UK. I look after travel and banking in OPEN and I was speaking at a conference last week and before me was a speaker from Ernst and Young - Terry Cullen - and after me was the Channel Strategy Director of Barclays Bank - Jeremy Bullock - and after him was a speaker from Oracle. Each one of those three all showed slides, which I haven't got for you today, which all showed within the next two or three years that interactive TV will overtake the internet in the UK. The focus of everyone's attention at the moment is the internet through a PC, there's lots of people making millions and obviously the media loves that sort of story, but what you will see is that television will be coming up quietly on the rails and in about two or three years' time the penetration of interactive TV in the UK will exceed that of the internet. It's not just me who is saying that, you can find the stats yourself.

The reason for this. Today currently 7% of the population in the UK has a digital television and some say there is about 15% and some say 25% penetration of PC's in the UK. An NOP poll early in l999 showed about 18%. As you probably know, the government is going to switch off analogue broadcasting and they want to sell the airwaves off to the telecoms companies, so you will find somewhere between 2006 -2010 Chris Smith will hit the switch and off goes analogue TV and by that stage he will anticipate that 99% of the UK population will be receiving digital television, through a range of channels. With those obviously goes interactive TV. So, somewhere between 2006 and 2010 every one of us in the UK will have digital television. In fact you are finding in the US that take-up of PC's is starting to level off and you will find the same thing in the UK (the Henley Centre recently did some research which showed that they believe that PC penetration will max out at about 50% in the UK and about 40% of the UK population will have an internet enabled PC.) The TV is generally very populist and, in the case of Sky Digital, it's free of charge. It's nice and secure, trustworthy and people generally feel more comfortable using a TV than a PC.

Why is the time right? The UK population is generally becoming technically literate, mobile phones are growing at an exponential rate in the UK, people are spending more time in the home than they used to (you can't turn on the television without seeing a programme about pets or DIY or food), there are more single families too. The average UK worker works more hours than any other worker - poor old us! As you can see, the amount of free time we have available in the UK is diminishing and, with that, the full time worker and the parent are generally finding that they are becoming more and more time poor. This is obviously a key target market for interactive retailers and the TV being a key channel to reach those. As you can see at the bottom of the slide, the UK has the most people who feel pressurised with the amount of free time that they have - the UK is topping that league in Europe. 

Consumer expectations: TV viewing time is starting to fall a little bit, but not by much. Still TV usage in the UK is around 3.5 to 3.7 hours and is higher in pay-TV homes (i.e. satellite or cable) while PC usage in the UK is around the 27-minute mark. There was a question earlier about whether you would see a convergence between the two and we believe that this is a long time off. A PC has very different colour definitions and properties to a TV, as I'm sure most of you appreciate. A PC has a higher colour palette than a TV, certain colours just don't work on a TV, for example white looks dirty and grainy on a TV, but on a PC it looks nice and crisp. On a PC you have drop-down menus and boxes and the text is much smaller - you can fit much more onto a PC screen than you can onto a TV. A PC is obviously a highly developed piece of apparatus nowadays (hardly ever seems to work but it is highly developed!) and it enables you to download lots of plug-ins onto it, so flash multi-media applications, sound and video. A set-top box is effectively a PC of two or three years ago. It is sufficient to deliver a degree of interactivity which is enough for the UK consumer at the moment, but it is not of a great enough capacity to start loading these plug-ins into it, so you need a piece of middle-ware in the box which runs all those applications instantaneously. You can't go around downloading and looking at all the web pages through a set-top box because it's not going to be able to accommodate all the different plug-ins which are coming into it. A poll from the US showed that about 28% of users were still finding it difficult to find the product they wanted to purchase and even I, who am reasonably experienced in technology, still find difficulty in sites such as Amazon, actually reaching the product I want. There are lots of other things flashing at me from around the screen and I think you are tending to find that with internet sites in general there is a slow movement away from Flash to a more simplified approach. I hope to be able to show you these with our services on OPEN.

So still there is a large proportion of the UK population - about 20% - who don't have access through to the internet. 60% of people over the age of 40 have never turned on a PC, so there is this huge mass market out there which Sky is rapidly attracting and winning over in the race for pay TV, the traditional B1/C2 market. So, all in all, you need a service which is easy and simple to use and that is why, for the time being, you are not seeing just websites being delivered into a set-top box. If anyone was to do an experiment and buy a little converter - like the one I have here in my bag - and just convert the website picture so that it can run through a TV, you will realise how dreadful it can often look. The Web TV trials which have gone on in the US have certainly shown that.

Adoption of interactive TV. The largest trial to date in the UK was a project by BT called Project Ice and was run on the BT ADSL technology. There have also been some other trials in the UK in Hull and Cardiff, but it is very early days. Web TV launched a few years ago in the US and they sold about 800,000 boxes, but given the size of their base this is generally perceived as a failure so far. The largest trial after that in the US was in Orlando - called the full service network -, but very few lessons can be learned from that one. There is currently interactive TV running, though, in France which runs some game shows and banking. Hong Kong Telecom have also been running some little trials for a while and they are starting to roll out digital TV and, with that, there are now interactive digital TV trials in Spain, Italy, Germany and Poland. With all of those trials, you tend to find that there is a good understanding of the design and the implementation of the service and the user interface requirements, but not so much the take-up and the usage levels. So, generally, the UK is pioneering digital TV. We are all familiar with the success of Teletext. This has shown that the TV is a medium through which people feel comfortable interacting and the old story that 10% of all holidays in the UK are sold through Teletext. This has been there for a while and shown that people are ready to communicate. We have done some research with the Henley Centre recently which showed what people actually wanted to use interactive services through and you might be able to see that multi-channel homes (those who have satellite and cable) had a high prOpensity to want to consume holidays, next comes banking, grocery shopping and e-mail, with all being high proportions.

So, what are the benefits of interactive TV for the travel industry? Obviously, the speed of delivery. Be it through a satellite, or down a cable modem or down an ADSL pipe, what they deliver you is high speed connection. The delivery of multi-media sound, video, high quality, high definition pictures. This is what the consumer wants. When they turn on the TV, they expect a high quality with a certain gloss and attraction to it. Obviously, the TV with an on-line connection enables you to personalise content, so once they have acknowledged who they are, you can then start to deliver personalised content into the home. You will also be able to link directly from a TV advert or possibly even from a TV channel into a retail area. Obviously there will be regulatory issues and ITC issues about linking from a content area into a purchasing decision, but there are ways in which we can work around that. As you will see in the demonstration later, early next year you will be able to jump directly from a traditional linear TV ad into a retail area. 

Finally, every Sky digital TV set-top box has two smart card slots, one is for the Sky card which encrypts the television signal and the other one is the standard European chip card which will be issued by the banks in Europe in 2000. This will allow e-cash transactions and will start to be introduced in the UK. Going with that, all the airlines, train operators, cinemas will be talking about issuing a chip card and will enable you to offer security, personalisation etc. At OPEN we are bringing forward some development in chip card technology and mid to late 2000 we will be announcing some tie-ups. 

More specifically the OPEN platform is delivered in this format. We store a range of information on our OPEN platform servers, which are situated just behind us in the Post Office Tower, which are the videos, the texts, the sound i.e. generally the high memory assets - the heavy assets - and these get beamed up to satellite and down to the satellite dish 24 by 7, so they are instantaneously accessible. This is really the one to many and everyone can access that area very quickly. You then move through that area and choose where you would like to go on holiday, which hotel and maybe a selection of when, how many people and so on. At the moment, when you want to make it more personal and give more personal information, you have a telephone connection. The telephone dials through to us and, in some cases we actually start to handle the transaction ourselves on our own systems and in others we pass that straight through to the content provider and we access their real-time inventory. It is obviously important for the travel companies, banks and even betting companies to have that real-time link, but for others it is not quite so important. If you are selling a CD, or a book, or travel insurance or car hire we can actually work our way round that and hold the virtual inventory ourselves. I then have a one-way communication between myself sitting at home on the sofa and the content providers' - the retailers' - own inventory. The information still keeps on being broadcast across the satellite, but I have a dialogue via the telephone connection. Within the OPEN platform itself, we have about 14 centres throughout the UK and we have a real-time link through to HSBC to clear the cards instantaneously. We also have authentication, boxes which authenticate the line and hold customer data. So that is currently how the system is played out.

That neatly leads me onto say that OPEN is currently dealing with Sky Digital, but the important thing for us is, obviously, to get our service in front of as many people as possible. So all the content providers who we have signed agreements with - I will show you some of them later - want to distribute their platform as widely as possible. We are currently in conversations with the range of all channels - cable, Ondigital,, BT with ADSL - to be able to run our platform across as many different channels as we can. You tend to find that the government have succeeded in creating an Open box - they all run different middleware, which is not so great for all of you, but the good thing is that the government has forced the channel distributors - the likes of Sky - to be regulatorily obliged to offer anyone who creates their own television channel and has purchased the space for it, to offer a space on their EPG (Electronic Programming Guide). This may be at the bottom of the guide, but you would be featured. Likewise the handset button says 'interactive', it doesn't say 'OPEN'. We are not an exclusive interactive service on the box, but, to be honest, the cost of broadcasting off the satellite and the cost of running all the infrastructure means it is unlikely that other interactive services will be on Sky, at least for some time. I personally believe that this will be the same for cable companies and Ondigital - they will be forced to offer carriage to other television channels and to other interactive services. I think that is one of the reasons why you have recently seen the NTL and Cable & Wireless deal being referred. So there is a fair chance that you will in the future see OPEN across a range of other platforms, but currently this is how it is broadcast. 

So where are we now? We have launched our OPEN brand in June l998 to 1000 homes and we have been rolling it out to more and more homes. Our belief is that interactive TV is a consumer product and, therefore, it needs a brand name and we are not just going to call it "internet TV", but we are creating a strong brand name and once people get familiar with it and see the advertising across billboards and so on, they will be familiar with it and when they see it across a range of other platforms they will be familiar with the brand and come and enter. 

OPEN is free of charge. We are effectively a large shopping centre. For the consumer we are the ombudsman, so we look after the experience. People can come in and always get the same high quality experience. We have very good service level agreements with each content provider so they deliver a good service to the consumer. We don't charge, you don't have to subscribe to OPEN - you get it free of charge - and even if you don't want to subscribe to Sky, you will still get OPEN free of charge as well. We had our main launch on 12 October l999, so everyone who gets Sky Digital now gets OPEN and it is ready there for them to use. Sky Digital currently has (October l999) about 1.8 million people signing up and this is growing at about 10,000 per day. There is a little bit of a backlog as they are installing that base and by December l999 about 2million people should have Sky Digital. It is nice and secure and it is effectively one big extranet. We know who has got a box and who is broadcasting information into that box, so it is all nice and secure. This is obviously important for you and for the banks. It is reliable and accessible. Every single content provider uses exactly the same toolkit to provide their services, be they WH Smith or be they a small internet start-up. The benefit for them is that they get up in service quickly and it is easy for them to build and to maintain. The benefit for the consumer is that you don't get lots of pop-up messages saying page not found or Java script messages which I am sure you are all familiar with. So we are building a brand with integrity and reliability. We have a large number of brands on OPEN already, and they are a blend of high street names which give you familiarity and trust and security in making that leap of purchasing through the set-top box but also some young internet start-up companies, such as Gameplay or Kitbag (sports clothing) and so on.

So that is where we are. What is coming? We have more coming, we have a travel section which I will hopefully be able to show you, we have a Sport area and we have free information which is designed to pull the customer in and get them to purchase. So without further ado let me show you the service in its full glory.

I hope you will be able to hear it as the speakers are not very loud. We run sound across the whole service now, initially we only had sound on a couple of pages, but research we have done over the last four years suggests that, if people don't hear sound for a while, they think the service is broken, so we now run sound all the way through. The TV, after all, is that loud box in the corner of the room! We have a control panel right at the bottom of the screen which uses the colour fast text keys, which you are probably all familiar with from Teletext days. We have a listing down the right hand side and a video here which promotes offers and products and content providers and the service. Because we are a totally commercial area, we can break this video with adverts, promotions and whatever. I should say that the service has actually changed quite a bit since this video was prepared and a few of you might have seen OPEN at home and we have added a Christmas tinge with tinsel and so on. But this video now has a shot to camera which talks you through the product and, at home in a relaxed atmosphere rather than in the sterile environment of this hall, it really gets the message through, really impactful. We have seen the rate of sales soar. 

So I will move through the service on the set-top box, this is split by travel, entertainment, leisure, shopping, grocery shopping, pizzas and so forth. In the old days we used to split it by brands as I showed you earlier. We have free entertainment areas and I will show you one of these, probably music. We have a money area, with HSBC, Abbey National, the Woolwich and another large bank will join us very shortly. With HSBC you can look at your balance or your statement and you will very shortly be able to transfer funds as you do on internet banking. The same will be true of Abbey National and Woolwich and each will be launching share dealing in 2000. In information, we have a travel area and also weather, at the moment you can see UK weather today and a forecast, but shortly it will be European weather as well and it is all free of charge. We have email, which is BT Talk 21, so you can send an email to anyone around the world who has an email address and you can also send it to yourself and pick it up through a browser when you get into work. The only charge is a local rate call plus 1p on top of the price of the call. Yes, it is time consuming to send an email via your handset if you've ever tried it. That is why we will have a little keypad going on sale in a couple of weeks. In the US, there was something like 70% take-up of the keypads in the trials and we see take-up being again strong in the UK. We are finding that some of our content providers are actually branding the keypads themselves, putting their own branding on it so that you can have buttons which jump you straight from any page to their service and you would bypass all the menu structure you have just seen. 

I will now take you into one of our services, but I am afraid I have a confession to make. I don't have a travel content provider to show you today. The company at the moment is focussed on launching services and has not had time to invest in building these demonstrations, which I wholeheartedly agree with. So, if you want to see the travel services you will need to get Sky Digital and look when you get home! But I will be able to show you purchasing a different product which will, hopefully, give you a flavour of how easy it is. Let me take you into entertainment and I will take you, say, into one of the music areas. This is all being broadcast on the satellite system and it is nice and fast and rich, little delays while it pulls the information down from the satellite and also little delays while it just loads in a little video. The video is on a loop and is content we have purchased in from travel - the Sky television channel - and it is a 7 to 8 minute video which changes each week. This week it is a feature on Cyprus so we are obviously breaking these adverts, on travel or music or film, with a voiceover and with adverts. Say I am interested in new albums, I can move up and down selecting information on them. We also have banner advertising within the service as well. Say I was to choose new singles, I just press the blue button and jump out of our information area into a retail area. Again, this is all being broadcast with the satellite so it is nice and fast. Woolworths are running a video service then I move up and down and select Music. Let's say (Heaven Forbid) I was going to buy the Tom Jones album. Woolworths publish thumbnail images of all the CD's, videos, books, games and albums that they stock. If I want to buy it I press the yellow button and it says here CD, cassette or mini disc and I want CD. Then it says how many do you want - I want one of those. Then I can select 'continue' to select more goods, or to upsell to other areas. I can press the green button to view what I am about to buy - it gives me a confirmation. I can then press the blue button to buy that or go back and select more goods. At the moment it is taking something like 40 seconds to connect and we are hoping to get this down to 25 seconds. To be honest, the retailers download a splash screen during that time so it is a great opportunity during that 40 seconds to up-sell and cross-sell other products. For example with Domino's Pizza they will ask you if you want any side orders, or with travel you could be asked if you want travel insurance etc., so, although there is that delay, it can work to your advantage. During that time you can also collect other information from them, such as how many people are going on holiday with you? have you been on holiday recently? You can also store your credit card details with us. These are not stored on the box for security, but they are stored on a separate server and, in some instances, if you want to, you can set it up so you have to enter a PIN number to access it. But let's say you don't want to do this and you are happy just to go on-line and pull up your details without a PIN number, you enter your name and then say you will pay using a Visa switchcard or whatever and enter the number and information (this is just a demonstration). We have an on-line connection through to HSBC and, as you can see, Woolworths actually promote HSBC because it establishes trust in the platform and you say "Yes I would like to purchase it on that", there is an instantaneous check, it gives me confirmation of who I am, (because that is the information stored in the set-top box), tells me what I am about to purchase. Then I simply press the blue button to buy and I have purchased and I come back out again. In the instance of a CD the purchase takes about 2 minutes, but in the instance of travel we see it as a communal service. The TV sits in the corner of the room and it is a great time for the family to sit around and view holidays on the TV screen and make the selection as they go. 

We also have interactive advertising, which I will now show you. This will take about a second to load and about 2 minutes to show - well, maybe a couple of seconds to load and 5 minutes to show! OK, interactive advertising. So you buy your airtime off the sales house and you come to us and say you would like to make it interactive. You run the TV ad and the set-top box throws up a little icon in the top left hand corner of the screen which says Press Red. You press the red button and it gives you a range of options which could be 'get someone to give me a call', 'go and see more information', 'go and book the car hire or travel insurance' 'come back later because my favourite programme is about to start' and so on. You jump through and this corner screen would actually be a video, it wouldn't be the TV and what we will see is the actual creative agencies will try to change the tail end of the ad and instead of trying to drive people into a branch, the ad will actually say go and buy the weekend break in Paris, or go and buy the travel insurance and press the red button now. So people will be jumping in and, from there, you get them to purchase.

So, just to finish off, where are we at the moment? We have been live to about 1.8 million homes for the last 6 or 7 weeks or so. It has not all been plain sailing and there still one or two problems we need to iron out, but generally the service is running at 99% of effectiveness. The speeds are increasing, they are good, fast speeds, consumers are coming on-line and 60-70% of Sky digital viewers have come into OPEN and walked around OPEN. I can't tell you the take-up rate of some of the services, but suffice to say that the Carphone Warehouse have said that they are selling more mobile phones through OPEN than their branch in Oxford Street down the road and one of the other high street retailers announced that we are now their third biggest branch out of hundreds of branches in the UK. Another company, who have been on the internet for the last two years, are selling three times as much product through OPEN as they are through their internet site. BT Talk 21 are having record registrations for their BT email service - they had something like 200,000 registrations during the first two or three weeks, so generally speaking, although it is early days, even retailers who are at the bottom of the league are still way ahead of their own expectations. We know travel is an area which is going to be widely used and we are in the middle of signing up more content providers to offer a more rounded and tailored service. Going Places will go live very shortly, we currently have the Thomsons brand Tropical Places live and selling currently and we have some other content providers who will be joining us very shortly. Like I say, it is early days, but so far you will pleased to hear that the UK is ahead of the game and consumers are using this technology.


[back]