Liberate said today it acquired technology from Source Media and Insight Communications that will enable the company to bring interactive TV applications to a greater number of set-top boxes. Liberate will exchange 886,000 of its stock for the technology, which totals about $181 million, pre-split.
In addition, Insight will use Liberate's software to deploy interactive TV services. Insight is the eighth-largest cable operator in the United States, with around one million customers. Also, Liberate will market Source Media's interactive program guide and local content services to its customers.
"A lot of the activity in interactive TV has been around higher-end digital boxes," explained Liberate CEO Mitchel Kertzman. While those devices such as General Instrument's DCT 5000 are beginning to ship, the majority of digital set-tops can't support interactive TV applications that are designed for those boxes, such as email and Web surfing.
With the Source Media technology, Liberate can now target the estimated 5 million digital set-tops, such as GI's DCT 2000 and 1200 series, that fall into the less elegant product categories, Kertzman said. The overall number of set-tops is expected to grow, he said, as the use of two or even three digital set-tops of varying capabilities become more prevalent in homes.
By extending its reach to a larger number of devices, Liberate hopes to make its software a more obvious choice for cable operators. Ideally, the cost of deploying the technology can be spread over a larger number of customers, letting the cable operators realize revenues from new services and eventually e-commerce activities sooner, according to the company.
Even where Microsoft's Window CE operating system and associated software is being used for interactive TV, Liberate could gain a potential inroad through the Source Media technology.
AT&T's publicized plans for interactive services, for example, currently revolve around the DCT 5000. The DCT 5000 uses Microsoft's Windows CE operating system. AT&T could conceivably offer a more limited range of interactive services--Web surfing, for instance, would likely be precluded--using Liberate's software, in addition to a "premium" interactive TV service.
Liberate isn't the only company to have seen the wisdom of this strategy.
OpenTV, another provider of interactive TV software, is tuning its products for use on GI's low-end digital cable boxes, affording OpenTV the same opportunity as Liberate. The only hitch for OpenTV is that, while they are a dominant supplier in Europe, they don't have a deal with a U.S. cable company yet.
Meanwhile, Liberate has made moves to get its software into devices other than the traditional cable set-top boxes. Last week, the company said it has started working with TiVo to provide interactive services alongside TiVo's digital video recording service.
With Liberate's software, TiVo-based boxes from Philips and Sony would theoretically be able to deliver Internet content along with video-on-demand, an entertainment package similar to strategies currently being fleshed out by Microsoft and AOL.
Liberate's moves would seem to set the bar higher for any new entrants into the interactive TV space such as PowerTV. PowerTV is the software subsidiary that Scientific-Atlanta is planning to spin off later this year, as first reported by CNET News.com.
PowerTV makes an operating system and associated applications that currently run on Scientific-Atlanta's cable set-tops. The company has shipped out over 1 million copies of its operating system to date.