Can Mitchell Kertzman liberate TV?

The CEO of Liberate is trying to introduce interactive TV to the U.S. public while keeping rivals such as Microsoft at bay. His success could hinge on his software know-how and his addiction to the idiot box.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
6 min read

In the late 1980s he finally hit it big when he and a few other programmers created a piece of software called PowerBuilder, which became a hit with some software developers. In 1993, his newly renamed Powersoft went public. Two years later, it was bought for $904 million by database company Sybase in what was the largest software acquisition to date. Kertzman's stake in Powersoft was about 3 percent, or $35 million, at the time of the sale.

Not long afterward, however, Sybase's fortunes plunged. Kertzman was made Sybase CEO in 1996 with the goal of rescuing the foundering company. He now concedes that he's not a turnaround artist, although he did bring Sybase back into the black. His successor, John Chen, is given more credit for rescuing the company.

Kertzman, who says he never sold any Sybase shares, has consistently been a popular figure in the industry, and now sits on several boards, including those of Handspring and CNET Networks, the parent company of News.com.

The rise quickly brought him into the orbit of the software industry's two prickliest luminaries, Gates and Oracle CEO Larry Ellison--figures who would become consistent threads in his career.

Stung by what he saw as predatory moves against PowerSoft and Sybase, Kertzman was one of the most visible CEOs campaigning to have Microsoft declared a monopoly. His 1998 congressional testimony against Microsoft's alleged abuses was widely reported. Outside the Senate doors, he was quoted as calling Gates' company a "godfather" that "told me to stop selling drugs on their street corner."

 I think interactive TV... Meanwhile, Ellison was Sybase's most direct competitor. The two exchanged rhetorical barbs over the years, and many were surprised when Kertzman accepted the job at NCI, a company formed to pursue Ellison's vision of the Microsoft-killing network computer.

Kertzman says he was assured that Ellison would have little to no influence over NCI. Although the two had never been close, his hard words for Oracle had never been personal and that helped the two keep a "cordial, friendly" relationship, Kertzman says. Nevertheless, the two have not met for the past year and half.

He lost little time remaking the company. Renaming it Liberate, he stopped work on the network computer idea in favor of interactive TV projects. The network computer company was spun off and became the New Internet Computer Co.

Against the "big bag of cash"
Kertzman is at his most animated when he talks about the cable business, his own approach and Microsoft's "baggage." Microsoft invested $5 billion in AT&T in 1999, along with smaller amounts in other cable companies around the world.

The investment was seen by many in the industry as a typical Microsoft pay-to-play maneuver. However, in a market where cash is as common as a rerun of "Friends," money doesn't always buy success.

AT&T initially said it would try out Microsoft's software in its cable business. But after consistent software delays, AT&T agreed to try out Liberate's offer as well. Moreover, it scaled back its interactive ambitions to a point where Microsoft's powerful software suddenly appeared to be a poor fit.

Amsterdam-based United Pan-Europe Communications (UPC) tells a similar story. UPC is the largest cable operator in Europe with more than 7 million subscribers. Microsoft TV tried to fertilize the soil with a $300 million investment in 1999. But the cable company said in a recent earnings call that it has deployed set-top boxes with Liberate's software in the Netherlands, a new territory for Liberate, after determining that Microsoft's software was not quite ready.

Microsoft's own delays aren't wholly to blame. Cable TV companies are beginning to realize they can do much of what they want with an inexpensive set-top box, Motorola's DCT-2000, which is already in the homes of millions of cable subscribers. Microsoft's software is too bulky for these boxes, while Liberate's is not, giving Kertzman's company an unexpected gift of time in which to consolidate its position.

Kertzman doesn't hide his feelings about Microsoft, his long-time nemesis.

"Microsoft comes to a cable company and says, 'Take a look at this big bag of cash,'" Kertzman says, leaning forward in his chair and miming a heavy sack being plopped on the table in front of him. "It's kind of pathetic in a social way...But they're using the proceeds of an illegal monopoly to compete against me in another market."

 When outsiders come in ? The investments clearly haven't purchased Microsoft a solid foothold in the cable world yet. But the recent settlement proposal of the government's landmark antitrust case against Microsoft puts few restrictions on the company's ability to tie new Internet services to its Windows operating system. This worries Kertzman.

"Microsoft...got away with what is effectively corporate murder," Kertzman said shortly after the Microsoft settlement was announced this fall. "How are they going to be after that?"

What's the new TV
Nevertheless, the cable industry is very different from the PC world that Microsoft has dominated. It is cliquish and slow-moving, and diplomacy is as important as dollars. Executives are adamant about keeping control of their own subscribers and of the destiny of the medium itself. Kertzman's familiarity with the zeitgeist of television and his genial personality are serving him well here.

"The interactive TV market is much more of a relationship game than for other technology-related companies. I think Mitchell and his guys realized that early and have worked to get along," said Jack Ripsteen, an analyst with J.P. Morgan Chase.

The industry clearly isn't moving as fast as Kertzman would like. But insiders say he's taken the right approach to the joining the club. Microsoft initially prompted some early "hurt feelings" with its aggressive, PC-centric moves, according to some cable executives, even if the company has smoothed much of the friction over now.

"When outsiders come in, if they're not willing to listen and understand the industry" they'll do badly, said Leo Hindrey, the former CEO of AT&T Broadband, who now heads a new sports-focused cable venture. Kertzman "went to great pains to show himself to be a thoughtful listener."

Added AT&T's Marshall, "If I didn't know better, I would say he was born in Omaha, Neb. He's got middle American views and values. That plays well with the cable industry."

The fit runs deeper than personality. Liberate offers a basic platform on which others can build applications such as video-on-demand or games. Microsoft is more ambitious, seeing the interactive TV platform as a way to tie viewers into the MSN Internet world and its Passport online identity-authentification system.

That's a daunting notion for many cable executives, who are wary of seeing their relationship with subscribers undermined.

"It's easier for us to work with companies that don't have that goal," said one executive at a major cable company who asked not to be named.

That's finally where the psychology of television comes back in. It's the cable companies that are serving as the first judge of Liberate and Microsoft's respective vision for the future of TV. The cable execs have their own ideas. But without clear demand from consumers, they haven't made up their minds yet.

The ongoing trials, even after a decade of experimenting with various forms of interactivity, make it clear that nobody--cable companies, Liberate, Microsoft or analysts--know exactly what subscribers want or what they'll be willing to pay for.

"There is a very special relationship between people and TV," Kertzman said, in words that capture his own company's delicate balancing act as well as rivals'. "You mess with that at your own peril."