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The Digital Revolution

Speaker Transcripts

The Promises & Pitfalls of Interactive TV
Ian Gosling, NTL

Interactive TV offers video on demand and lots of clever ideas to give the consumer more choice. For example - time shifting. You can move the whole of BBC1 back two hours so that if you miss the 9.00 news you can see it at 11.00. It is just another way of enabling the consumer to see what they want when they want to see it. When you apply that to interactivity, the opportunities are obvious and enormous. If you can have all the information on the Internet readily available, you can get it whenever you want it. Whenever you want it to be there, it's there waiting for you to boot it up.

So, what do we aim to provide consumers with? We have done some research and have found that consumers are saying they are never going to move away from their TV sets. What we aim to provide people with are tools for everyday living so that they can go off and do what they want to do having done their difficult, laborious stuff like supermarket shopping. "If I can do it through my TV and pay a couple of extra quid to have it delivered to my door then I will do it". So that's what we aim to provide consumers with. Both the ability to order physical goods and electronic services, whether they be information or whatever, and the ability to book things such as holidays.

Another prime selling point of the digital TV revolution is education. Not something you would necessarily associate with a TV set. What we can do here, for example, is put the enormous amount of data required such as the entire GCSE syllabus. If you put that through interactive TV, your child can access the entire syllabus whenever they need to. It is an enormously powerful thing and an enormously powerful sales tool and marketing tool for us.

What is the revolution for companies? Well, it's taking those interactive services that people currently have on the Internet and making them available in the home. Taking away those barriers and providing that new channel to market. It is important that you start with widespread economies. We are taking it out of that Internet ghetto. The Internet is still in a ghetto, it hasn't broadened out as it has in the States yet. We are making that available to everybody. If you were going to launch an interactive service today and you have the choice of putting it either on a PC platform or a TV platform and both could provide the interactivity you require, which would you pick? A PC? Found in about 12% of homes at the moment, not all of those connected or a TV, in around 97% of homes? If you look at it in those terms, it's a bit obvious. What does this also mean to companies? Well, it's going to mean changes in marketing and distribution in the structure of your industry. There are disintermediation effects. This is a word that has been bandied around a lot about interactivity and we've seen disintermediation and we've also seen reintermediation and new people come in, such as Microsoft, and take advantage of the interactive media experience. And within the TV industry you are also going to see people applying their broadcasting experience.

So what has NTL done in the digital TV revolution? Well, we pioneered Digital TV. Digital TV is based on a standard called MPEG2 and we invented it so we're quite well qualified. We campaigned and drove the digital terrestrial television industry in this country, putting forward a very strong bid for a large proportion of terrestrial licences. We have a lot of backing available because of our existing terrestrial broadcast networks and major TV companies. We have Internet experience so we know about Internet technologies and about moving that across. We have telecommunications experience. We also have experience in marketing TV through our cable franchises and also in managing subscriber bases. We have the lowest turnover of customers within the cable industry and the highest penetration rates within the cable industry. That's because we know how to provide the flexibility that our consumers want.

So what are the digital TV and interactive platforms? This is a confusing area. It's confusing for me and I work in the industry. For the consumer it can prove a nightmare. There are three basic flavours of digital television, just as there are three basic flavours of television now. There is terrestrial, cable and satellite. So let's separate out the broadcasters who are actually providing the TV channels and those who are providing the platforms. Essentially the set-top boxes, the networks from which both those TV channels and the interactive services will be based.

The broadcasters on DTT, probably the people you currently see on terrestrial television. There's the BBC. They've been making an awful lot of noise about this. ITV and Channel 4. All of these are allocated digital terrestrial multiplexes. A multiplex is basically a chunk of broadcast through which you can broadcast five or six channels. Also SDN which is a joint venture between NTL and S4C. They also have a chunk of a digital terrestrial multiplex as indeed do Channel 5. Finally, you will have been hearing a lot about ONdigital. ONdigital are the Sky of digital terrestrial. They are a commercial group.

Now, who's going to be providing the platforms within digital terrestrial? Well, in some cases the people who provide the platforms are the broadcasters, but they don't have to be. So in digital terrestrial ONdigital are launching a digital terrestrial platform that will have on it all the free to air channels and their own pay to view channels. NTL will also be launching a digital terrestrial platform using our expertise and we will be providing all the free to air channels and probably some new channels, although these deals have yet to be confirmed. That's digital terrestrial.

Digital satellite TV. What will that have on it? This is an area dominated by Sky. Digital terrestrial will have all the free to air channels, excluding ITV because they refuse to pay Sky. All the Sky channels you would expect to be on there and all the pay channels that Sky are promoting. They will be launching their digital satellite platform. The BskyB side of it is the broadcast side of it. They have an interactive branch called British Interactive Broadcasting which is a joint venture between BT, Matsushita, Midland Bank and Sky themselves. They are launching BIB next year and that will provide interactive services through your digital satellite box.

Then there is digital cable TV. Essentially that has everything on in terms of broadcasts. It has all the free to air channels, it carries everything that Sky will do, including all their pay channels and more besides. In terms of platforms, there are three big cable companies in this country. There's NTL, Cable & Wireless Communications and TeleWest. Between us, we dominate the cable market. We are kind of in competition with one another and kind of not because cable franchises are delineated geographically so you can only market your services within your cable franchise areas. So geographically, we don't compete with one another. However, with digital terrestrial television, that has national coverage and we will therefore be competing with them up front.

In terms of who is going to be providing interactive services on the cable platforms, NTL will be providing their own interactive services, Cable & Wireless Communications announced they are going to be providing interactive services and TeleWest are apparently doing some trials but at this point they have certainly not announced their plans to do any interactive services through their cable networks. So there are essentially two networks out there who are not doing their own interactive services. There's ONdigital on digital terrestrial and there's TeleWest on cable. Both of those have said they are prepared to have discussions with people to provide interactive services and we are certainly talking to them, that's no secret, and BIB are, I'm sure, talking to them as well. That is a brief run down of who does what in digital television.

So, what are the promises and what are the pitfalls of digital TV? Well, the promise for vendors is relationship marketing. If you think about what you know about your standard terrestrial TV consumer. You know what TV region they are in, because that's how television advertising is sold, and you have a fairly good idea of who's watching what, when, from various statistics and surveys that the networks provide you with. But that all changes with digital because they have a set-top box and that set-top box, if it's interactive, has a back channel on it which means it has a connection back from the set-top box in the consumer's home to the broadcaster. So that means we know a lot more about them. Firstly, they are subscribers so we know where they live and probably how many people there are in the house. We probably know what TV channels they are watching and in terms of interactive services we know exactly what they are doing. So we have an advantage over the Internet on which we can see where somebody is within a site and where they have gone within a site but you don't know who they are because you only have a tag on their browser. Whereas in digital television, you have all the benefits of the Internet but you also know who they are and where they live, and quite possibly their credit card number as well. All of which is very interesting information. Then when people start buying things through interactive services on their television, you begin to know the profile of these people, not only in terms of what they watch but in terms of what they purchase. That means, for the first time, you can use the television for truly one-to-one marketing, for targeted marketing and that's very, very effective. An excellent way of cutting down wastage.

Distribution costs reduction. Put an interactive brochure on television and you don't have to print brochures any more. You don't need a shop. Eventually, you may not need a call centre. All these are ways of cutting distribution costs. This will increase margins, which is something the travel industry is very keen on. There is also the opportunity to make impulse purchases. If you think about the way that people buy travel at the moment. By and large, they walk down a High Street and go into a travel agent. What you are essentially doing is taking the travel agent to them so that they can sit there and browse over travel information and travel guides. The opportunity to use content to lead through to a purchase. You can give them lots of information about skiing and then say would you like to buy a skiing holiday. That's a good way to increase impulse purchases.

Finally, targeted advertising. Not only developing that relationship one-to-one through email and through lots of different ways, through personalisation, but also on advertising through interactive services by using a banner ad model or, indeed, using video to promote to a particular person.

So, what are the pitfalls? There has got to be something wrong with this! There are costs, barriers to entry into this market. There is the cost of technologically integrating your system to create those interactive services with the system that is broadcasting whatever it may be and you will find that those costs vary depending on what technology the broadcaster is using. There are various different flavours of technology to be used. There is the Teletext technology, then there is a system called open TV which is a c-program based system and is being used by Sky and BIB and we are using it as indeed Cable & Wireless are as well. We have announced we are also going to be using Microsoft systems.

You then have to produce those interactive services. For the first time you may have to produce more content than is currently available in the brochure. You may want to provide video brochures. You may want to provide scrolling 3D pictures. There are all sorts of possibilities that are available to you and that's a cost to you. To some extent, it will be the people who produce the best content, or, in fact, do deals with people to provide the best content who can use the content to lead through to purchases.

Designing things for TV. Even if we are using Internet standards, you cannot just slap an Internet site on television. It doesn't work. TV is a very different experience. Somebody described a computer as a lean forward experience; it's very active, it's very move around, it's very close up. TV is a very lean back experience. Somebody recently published a report on using interactive TV called Lazy Interactive TV. That's because users want to be lazy when they are using it in order to find very easily what they want, probably using a remote control, so that they don't ever really want to touch a keyboard. You may have a bigger screen on the TV but you have less screen space because you are sitting much further back from it so things have to be bigger. So that may increase the cost.

Relationship marketing experience. It's very easy to create a lot of data as I've already outlined to build up a huge profile of customers. The real challenge is how you use that data. Finding effective ways of mining the data to produce meaningful results that you can use. Therefore there is a learning curve.

Finally, out of all the platforms I outlined earlier (ONDigital, Us, Sky, BIB, C&W) who are you going to talk to first? It's a bewildering picture. So why worry about it now? Firstly, anybody who says that they are going to get it absolutely right first time cannot be sure. Nobody has every done this before. Nobody has ever taken interactive services on the TV to the mass market before, anywhere in the world. People have done lots and lots of trials but this is not a trial, this is the real thing. Therefore, there is going to be a steep and long learning curve for us all and if you are going into this business, with us or anybody else, you have expect things to go wrong, mistakes will be made and you have to learn from those mistakes and move on. If people can do that now, they will have an advantage over people in the future. Similarly, if you provide customers with a good service through their TV, then why would they want to go to your competitors later on. If you provide a good service now, they will come back to you.

So, what does this mean for the travel industry specifically? Well, consumers want to buy travel services through TV. Experience of Teletext has shown that. There is also the experience of the Internet. In the US, travel purchased through the Internet is huge. It's the biggest e-commerce area outside of software and computer hardware and it's projected to become the biggest and the reason it's huge is because lots of people are on the Internet in the States, a much higher percentage than in the UK. What we are actually doing here is leapfrogging that and providing these Internet services, the same services that are provided on TV. People don't have to go through the Internet. So the experience of both the Internet and Teletext shows us that if you provide people with accessible interactive services, they will buy. We did some research and the number one thing people wanted to do through their interactive TV is buy travel. It got a universally positive response. People don't see it as a chore. They see it as a fun thing for the family to do and they can do it in their own home. The whole family can sit around the TV, look at brochures, a video, costs and make a decision together. That's a very powerful tool. It is also up to date. We are essentially integrating live databases here so that what they see is the very latest thing, Maybe within a couple of hours or it may even be with a couple of minutes. People also want the ability to shop around. They see the TV as a very easy way to shop around to see the benefits. So one of the key challenges will be getting across what your benefits are as opposed to your competitors through the TV. As a matter of principle, NTL does not offer anybody exclusive deals. We are there to create a market place. Perhaps surprisingly, people are happy to pay for their holiday online, through their interactive TV. That's a bit of a leap from the Internet. They are prepared to find out information but want a secure purchase and they feel much more secure talking to a person on the phone.

So why this sudden change of attitude? The reason appears to be that people know that the Internet is not owned by anybody. It is a bit of a Wild West and they are not sure they are dealing with reputable companies. But they view the broadcaster as a trusted third party who guarantees that their money will be safe and the company that they are dealing with is a reputable company. Because they wouldn't have let them into their homes if they weren't and that seems to make all the difference.

This is an obvious new channel to market. It's a new way to reach into people's homes, probably directly and certainly interactively for the first time. There are threats and opportunities for individual companies, depending where they are within the chain of the travel industry. There are threats, as we have already heard about. For example there are unusual companies moving into travel, such as Microsoft Expedia. If you think about it, it's a bit of a strange move, Microsoft, a software company to move into travel but that's what they've chosen to do because they see it as a way to make money. So there's a threat there. There is the opportunity to cut costs as I've already outlined. The opportunity for one-to- one marketing. I keep harping back to this as I think it's an important point. One-to-one marketing has been valuable for a couple of decades now and we now have the chance to do it really one-to-one through an active media.

Finally, as an example of using TV broadcasts as a direct response medium, if you imagine people are watching ITV or Channel 4 and they think "I quite fancy a holiday to the Caribbean. I wonder where I can get more information about that?" A little symbol appears on their TV screen which says interactive. If you want more information about this, press the red button on your remote control. They press the red button and go to the brochure area. They can find out more details and find out what the latest deals are. From there they can go right through the process to a purchase. So you are actually turning broadcast TV advertising into a direct response medium. That has all sorts of implications for the advertising industry. At the moment, you can buy banner adverts on the Internet, you either buy them by page-impression at a cost per thousand, just as you buy broadcast TV advertising at the moment, but you can also buy them by click-through. So there is the potential to change the way you buy TV advertising by buying it by click-through. I am not going to suggest that that's going to happen overnight and TV networks would have a few things to say about that but those are the sort of opportunities that are there.

Similarly, programming. Broadcast programming, "Wish You Were Here". You can see the point where "Wish You Were Here" is sponsored by a major travel agent and that what one gets from a sponsoring travel agent is the ability to advertise within "Wish You Were Here".

So what are NTL going to do? We plan on creating a central pool of interactive services. We aim to create a central pool of interactive services with constituent parts. We then roll them out across multiple platforms. The first three of those platforms are TV based. Then we separate out the launch date of our interactive services and the launch date of the platforms they will be on. We will be launching our interactive services on 31 March next year, which makes us the first people in the market place. Some of our platforms will already be launched, some of them will have yet to be launched. Where a platform has already been launched, we will be rolling out interactive services and similarly, when platforms are launched we will be rolling out interactive services on to those. Launching Internet TV set-top box within the next month, digital cable we will roll out on our cable franchises in April next year and digital terrestrial later. Eventually, we aim to be on everything we can possibly be on. Our first three platforms are TV based. We don't ever aim to become a travel agent. We realise that if we wanted to become experts in all the industries we want to get involved in with interactive services we would never launch it. So what we aim to do is work with content partners to create interactive channels. A broad definition of a content partner is someone who shares the costs, shares the risks, shares the opportunities and shares the benefits. Those are the sort of people we are interested in working with. We don't aim to deliver everything at once. As I said earlier that there is a learning curve to this. We start small and build, hopefully, quite quickly up to a large travel market place. We will start with a small number of content partners and build up to a large number. Eventually, we would like 100 or more content partners across the whole service.

It is a little difficult to imagine what interactive TV will look like, so I am going to show you our first stab at it. This is a direct demo and is based on the sort of things we can do on a cable network because there are different technological advantages to the different type of networks. It is conceptual, it's not what we are actually going to launch. It will look very different but it does give you an idea of the sort of things we can do. It can be a bit rough and ready in places. There's a big chunk of multimedia so it takes a little while for the computer to start going.

As an example, if I want to buy a CD this is what I want to buy and I want to pay by my usual method so I go into the secure area. Of course, we know where you live so you don't have to type in your address so we know where to send your CD. You have a pin number to keep it secure from your children. We also probably know your usual payment methods so you don't have to type that in either. We know your credit card number, we know where you live. That's all the vital information we need. So I just need to confirm that. I have made a purchase without touching the keyboard, just using what's available to me on the remote control. It's very, very simple. Lazy interactive TV.

The travel section in here is not particularly well done but let me show you what we have. You can see the sort of ways that people will be able to navigate through so you may offer airline flights, great package deals and wonderful holidays. There are also more prosaic pieces of information, tools for everyday life. How often do you think you haven't got a timetable and you hang on the phone to British Rail for 20 minutes to find out what time your train leaves by which time it's left. But here, Railtrack have an excellent timetable service. So when you transfer that to digital television, and if I want to go from Farnborough to London, there's my train time. That's what I mean about tools for everyday living. Very simple, very effective and very useful. For example, for snowboarding we can have lots information about snowboarding itself, about the resorts etc. This is what I mean about content.

So that gives you an idea of what we're aiming to do. As I said, it is conceptual but I hope it's been interesting and thanks for listening.

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