The New ICE Age: TV Meets the Web Madanmohan Rao reports from the Convergence Summit in Amsterdam While the dot-com backlash is taking a heavy toll on the B2C front, numerous start-ups are focusing now on another set of fronts on the convergent infrastructure side: the convergence between the Internet and telephony (dot-telecoms), the Internet and wireless communication (m-dotcoms), and the broadband Internet and television (broad-coms). Over 240 delegates from 30 countries representing 200 companies gathered in Amsterdam recently for the third annual convergence conference titled "TV Meets The Web" (www.tvmeetstheweb.com). "TV content on the Web has come a long way since the early days of online Webcams and the TV clip of the Pathfinder landing on Mars in the mid- 1990s," said Monique van Dusseldorp, CEO of pan-European research firm Van Dusseldorp and Partners (www.vandusseldorp.com), which hosted the conference. Players are approaching this interactive convergence from three different sides: Internet companies, telecom operators, and media players (TV and print). E-commerce is also being integrated with television commerce or t-commerce as we enter a new ICE age—with converged information, communication and entertainment sectors. Music can be streamed well at 160 Kbps, half-screen video content at 300 Kbps, and full-screen video at 2 Mbps. But in addition to a good data pipe, key requisites for convergent ventures to succeed include compelling content, interactive services, and person-to-person (P2P) connectivity. "It is very difficult to gauge what consumers may want or reject, and the struggle for content providers in this austere times is how to monetize their content and service streams. At the same time, many entertainment companies are terrified of getting Napsterized," said van Dusseldorp. There is also a huge flux in business plans as media players struggle to find out what works and when, she said. "This month's good idea looks like last month's disaster," said Rob Shepard, executive vice president of interactive services at UPC Media (www.upccorp.com), a leading broadband player in Europe with offerings in broadcast and pay-per-view TV as well as broadband Internet access and multilingual portals via its subsidiaries like Chello and Priority Wireless. "The broadband access market in Europe is expected to grow much faster than the United States, but the growth will be steady and not spectacular," Shepard said. "The key for interactive content players is to deepen customer relationships and keep them consistent across TV and PC channels," he said. Adding interactivity to TV via two-way set-top boxes is being offered by some operators by integrating online chat and SMS messaging with TV programming; it works particularly well for offerings like educational content (tutor interaction), game-shows (vote-along), sports (statistics, choosing different camera angles), finance (home-banking) and information inquiries (yellow pages). The European market for interactive TV (iTV) is expected to reach $3 billion by 2005, according to research firm Jupiter Media Metrix. Europe has close to 1.5 million DSL and cable broadband connections, expected to reach approach 20 million in year 2003. "The future lies in integration of traditional and new media. Synchronization of the two is the key digital proposition. But to survive in today's climate requires focus and nerves of steel," according to Shepard. "Unfortunately, there seems to be a lack of honesty or modesty, maturity or clarity in the industry," observed Stuart Nolan, an independent media analyst. The land-grab phase of digital TV is now moving to a more sober phase of increasing revenue per user (RPU) and profitability, observed Robert Henderson, interactive TV analyst at NDS TV (www.nds.com) in the United Kingdom, which has recently opened a development office in Bangalore. "There is now a new interpretation for B2C: back to cash," said Brett Savill, director of financial advisory services at Pricewaterhouse Coopers in London. "We have evolved a new rule for development initiatives: if you can't bill it, kill it," said Rafael Bonnelly, VP of content at Terra Networks, the Internet wing of Spanish telecom Telefonica which acquired the Lycos portal. "We are now the No. 3 Internet company in the world, and are focusing on an all-band strategy across all networks and sites with a mix of free services on our search engine, registration services on Tripod and Wired News, subscription for Terra Premium, pay-per-use on Quote.com, and pay-per-view as with the Big Brother TV show and Web site," said Bonnelly. Telefonica is focusing not just on B2C Web and WAP portals, but also the B2B market via new media consultancy and Internet data center services, said Silvia Rico, investment manager at Telefonica Media in Spain. At the device level, a strong iTV player is U.S.-based Tivo (www.tivo.com), which essentially offers set-top caches which store up to 60 hours of TV content so that users can watch programs whenever they want and also pause, rewind and replay movies in slow motion. "Prime time in a world of personal video recorders (PVRs) is when the user wants to watch TV, and is not defined by fixed broadcast time slots," said Andrew Cresci, VP of Tivo UK. Founded in 1997, the company claims that it sold more of its set-top devices in the first 18 months of retail availability than VCRs, CDs or PDAs did during each of their first 18-month periods. "Tivo is a stable environment, and is friendly to everyone along the TV and advertiser value chains," said Cresci. The company has also forged a strategic partnership with AOL Time Warner which is expected to extend service and marketing capabilities along the Internet front. Other European media conglomerates aggressively moving into broadband Internet and iTV include the UK's Pearson Publishing and The Economist magazine. "We are moving from a content to an ASP model of broadband delivery for areas like e-learning," said Keric Morris, director of strategy at Pearson Broadband Education Television in London; over 80 percent of Pearson Publishing's text books are now online, with a Web companion. The Economist magazine is extending its strong print brand to the Net via a Web site (www.economist.com) and a TV site (www.economist.tv), according to Tony Wales, director of Economist TV. The company has formed alliances for airline in-flight programs and regular TV content. In addition to the TV and print players, innovative entry approaches to consumer homes are being launched by mobile communications companies like Nokia. "There is a huge opportunity in integrating mobile communication needs into the home environment," said Richard Nelger, head of home product management at Nokia in Finland. "The Berlin Wall in Germany came down over a dozen years ago, and now the Berlin Wall between television and other channels is coming down as well," said Nelger. Over 20 billion short message service (SMS) messages were sent worldwide in December 2000; 750 million were reported in the U.K. In addition to being a leading global player in the mobile market, Nokia is backing an initiative called Open Sources Terminal (www.ostdev.net) to promote the creation of a media terminal for homes, based on the Internet Protocol (IP) and Open Source components like the Linux operating system, Mozilla browser, and HTML/Java. "The key to integration of different channels is an open platform for internet provider (IP)-based entertainment in the living room, along with public collaborative development," Nelger said. Bluetooth is expected to play a major role as a 'glue' for home IP devices. "There is a real hunger out there for IP," said Jonas Birgersson, CEO of Framfab Labs in Stockholm. But this will converge to the content level, and not just to the access device level like cable modems. IP television sets will soon open up a whole world of programming to viewers, Birgersson said. A leading Internet player in streaming content is Real Networks, whose Real Player plug-in crossed the 200 million user mark in April 2001, with 40 million in Europe alone. "The economics of the Internet are real and profound, despite popular sentiment. But making money online is more difficult than expected. People will pay only for compelling content," said Joanna Shields, VP at Real Networks for Europe. 85 percent of Web pages with streaming media reportedly use Real Networks tools. The company has recently launched a Gold Pass subscription service for premium content like music and videos. For 'middleware' developers, huge opportunities are opening up in content development and syndication, user authentication, customer profile management, billing systems, set-top applications, ad server systems, multi-channel content management platforms, data centers, and systems integration. European players in this space include X-CA.com and Mindport.com (which outsources some of its pay-TV software development to India). "The key to interactive broadband content like iTV lies with third party developers," said Peter Larson, head of content services at Liberate Technologies, which recently announced an agreement with Sun Microsystems to extend Java technology to its set-top boxes. At the packaging level, extensible markup language (XML) platforms can help content providers structure their offerings simultaneously for Web, TV and mobile channels—referred to by acronyms such as CODE (create once, deliver everywhere) or COPE (create once, play everywhere). "All our news stories are created with headlines and summaries, and are packaged and tagged in XML in three different formats and speeds for the Web, PDAs and digital TV," said Barak Matzkevich from the online video business development unit at Reuters. Languages like virtual reality modeling language (VRML) have failed due to inappropriate applications and an obsession with 3-D; Flash has now emerged as the established broadband middleware platform, according to Simon Birrell, CEO of Silicon Artists in Spain. He also cautioned against too much emphasis on one-way broadcast-only content, and stressed the importance of two-way as well as P2P channels, though this raises challenges in ensuring quality, propriety and monetization. For content developers in a converged TV-Web world, an apparently intractable issue involves reconciling the differing nature of "lean backward and watch" nature of TV viewing with the "lean forward and type" nature of PC interaction. Current iTV infrastructure is also asymmetrically structured with a narrow up-channel as compared to a broadband down-channel. At the artistic end of the spectrum, one solution to keeping consistent "brand carriers" across multiple channels is via animated icons called avatars, said Stefan Kloos, managing director of I-Dmedia in Berlin. Such avatars can represent game characters, site guides, customer care representatives, pop stars, sales agents, and newscasters, said Kloos, whose company has created successful avatars for TV and the Web like e-Cyas, E-Sha, and Sonya (for promoting the Sony Vio in Europe). Avatars can be easily scaled across online and offline strategies in multiple languages, and do not entail messy negotiations for artists' rights, he joked. Another emerging sector of players on the Internet front is in digital content delivery, by caching content closer to the 'edge' of the network whereby interaction latency times can be reduced. Companies in this sector include US-based Akamai (which has formed partnerships in Europe with British Telecom and Spain's Telefonica), Digital Island (recently acquired by UK-based Cable & Wireless), and AstraNet. "Content delivery network functionality will become a must-have standard for telecom and media companies in broadband space. We will see more pan-European players on this front," said Johan Meulekamp, manager of Digital Island Europe. Satellite operators will become major movers of IP-based multicasting services for MP3 files and radio/TV streaming of microchannels, according to Christian Schock, director general of SES Multimedia, operator of European DVB/IP satellite service company Astra-Net, whose Asia partner is AsiaSat. As more and more information and entertainment content moves to Internet formats, security and digital access management will become paramount, and metadata will be increasingly merged with data itself. Over 80 companies have also formed the Internet Streaming Media Alliance. "MPEG-4 has been chosen as the standard of choice for IP content over next generation 3G mobile networks, and ensures vendor interoperability as well as a digital rights management interface," said Ahmad Ouri, general manager of Philips' MP4Net division in California. "Most content will soon be delivered via IP. And IP content delivery will eventually change the way content is produced, archived, and consumed," Ouri said. While much of this Internet-TV convergence has vast implications for the entertainment and education industry, it has also caught the eye of numerous governments and policymakers around the world, who have launched broadband initiatives in partnership with the private sector to gear up their citizens for the coming multimedia explosion. These include the Digital Island initiative (Singapore), Digital Delta and e-City (Holland), Multimedia SuperCorridor (Malaysia), Netville (Toronto), Cyberport (Hong Kong), Virtual Village (Helsinki), and WiredUp Communities (UK). "Public initiatives on the broadband front should supplement the business models of industry. Benefits of city-based initiatives should percolate to the rest of the country as well," advised Philip Weinberg, a McKinsey consultant in London. The writer can be reached at madan@inomy.com