Microsoft pushes interactive TV services

As previously reported, the software giant unveiled a partnership with hardware maker Matsushita and an alliance with British digital TV company Pace Micro Technology, reiterating its plan to put Windows CE-based Microsoft TV software on cable TV services.

The announcements, made at the National Cable Television Association's Cable 2000 convention in New Orleans, are the latest attempts by the software giant to tackle the crowded interactive TV market.

So far, Microsoft has been hamstrung by industry inertia and its own delays in introducing interactive TV services, which include TV-based Internet access, chat services, e-commerce and email.

Its aggressive positioning may be an attempt to shake perceptions that its strategy has been somewhat confused and its delivery has been slow. The company's strategy has evolved to encompass two businesses: WebTV, which consists of TV consoles and subscription services sold directly to consumers, and Microsoft TV, a collection of Windows CE-based software sold to cable and satellite providers, which lets them offer interactive services including email, chat and Web surfing to subscribers.

The first generation of Microsoft TV, which runs on the company's Windows CE operating system, is expected to be released this fall, although beta versions already are being shipped to licensees.

The company is readying four versions of the services, it said today: Microsoft TV Basic Digital client software, which will reside inside individual set-top boxes; Microsoft TV Server, a Windows 2000-based software designed to run the back end of next-generation interactive services; Microsoft TV Access Channel Server, a Windows 2000-based server software that brings some interactive services to existing cable set-top boxes; and Microsoft TV Advanced, a high-end bundle of services for next-generation set-top boxes, including multiplayer games, digital video recording and support for third-party services.

"We are thrilled not only to offer an expanded product line but also to see an ever-increasing level of industry support for the Microsoft TV platform," Jon DeVaan, senior vice president of the company's consumer group, said in a statement from the show.

The software company said it is working with Matsushita to develop advanced digital cable set-top boxes that will work with existing home networking standard protocols and offer Internet access and email. Through its alliance with United Kingdom-based Pace Micro, it will create interactive programming for these devices.

Interactive TV services lose sparkle
Interactive television, which reached a marketing hype zenith in the early 1990s, has lost some of its luster as focus has shifted to interactive gaming consoles. Products such as Sega's Dreamcast, Sony's PlayStation 2 and Microsoft's upcoming Xbox also offer broadband, or high-speed, Internet access.

Several players are vying for the lead in this industry. The market for interactive TV services is expected to generate as much as $9 billion from e-commerce and subscription revenues by 2004, while television-based online advertising is anticipated to reap $3.2 billion in the next five years, according to Forrester Research.

But interactive television has appeared to be more hype than reality, with little to show for the predictions thus far. Existing services, such as Microsoft's WebTV, have suffered from slow subscriber growth and the perception that the technology is dated.

"Microsoft has been fairly low key," said Gary Arlen, president of Arlen Communications. "They've announced a lot of manufacturing deals, but there are not a whole lot of cable systems."

The software maker isn't alone in its tribulations, Arlen added. Rivals such as Liberate Technologies and America Online have yet to make major dents in the market.

"There's a lot of talk but not a lot of rollouts," he said, adding that cable providers are likely nervous about the technological hurdles involved in offering interactive services, as they try to discover how to make money off the proposed features.

"They all have great hopes, but cable operators are very cautious," Arlen said.

Liberate, which is providing software for AOLTV, is demonstrating the service at the Cable 2000 show along with its own Enhanced TV interactive programming, including game shows such as "Jeopardy" and "Wheel of Fortune" and video-on-demand demonstrations.

Adding more partners
Microsoft later today will unveil a development agreement with The Kiss Principle, which develops interactive software for television-based Internet services, sources said.

The alliance is expected to build on an earlier pact in which Kiss provided Microsoft with one of the first chat applications for television.

Under the new arrangement, Kiss will provide "conversational interfaces" for Microsoft TV, including Chat on Television, Chattercast and Future Radio. These applications are expected to be added during the third quarter, sources said.