Gemstar-TV Guide International announced on Tuesday a 10-year deal with St. Louis-based Charter Communications, one of the nation's largest cable companies. Under the agreement, a digital version of "TV Guide" will be available on all of Charter's digital services including digital cable, video on demand and high-speed Internet access.
"An interactive program guide is like interactive TV on training wheels," said William Bean, a vice president of research at Banc of America Securities. "It gets the viewers used to pushing buttons other than just volume up and down and channel up and down."
Bean added that there is much more interactive television can offer than just program guides. For example, Bean expects that video on demand will become a major source of revenue for cable companies this year.
Multimedia Research Group expects worldwide sales of digital services for interactive TV set-top boxes to exceed $11 billion annually by 2004 compared with about $1 billion this year.
Under a previous agreement, the digital version of "TV Guide" has already been available to about 600,000 households that subscribe to Charter's digital cable services. Charter has cable subscribers in 40 states.
The specific terms of the new agreement were not released, but the companies said Gemstar-TV Guide will get 85 percent of national advertising revenue from ads placed on "TV Guide Interactive," with the rest going to Charter. The companies will also evenly split revenue from any commerce generated from interactive TV services. In addition, Gemstar will be paid a fee for each new Charter subscriber.
Before Gemstar's purchase of TV Guide last year, TV Guide had signed a similar 10-year agreement with cable company Tele-Communications Inc. before AT&T bought TCI. With the new deal, Gemstar-TV Guide now has two of the top five cable companies signed on to long-term deals.
TV Guide Interactive will be available on all Charter set-top boxes, including those from Scientific-Atlanta. In an ironic twist, Gemstar is suing Scientific-Atlanta along with Pioneer, EchoStar Communications and SCI Systems for alleged patent infringement.