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Microsoft TV signs customers for guide

The giant's TV unit enters the market for on-screen guides, signing a deal with two U.S. digital cable operators. Can the unit unseat the dominant but troubled Gemstar?

Microsoft TV said Friday that it will introduce its new interactive programming guide to 20,000 digital cable subscribers in Oregon, its first entrée into a market dominated by Gemstar-TV Guide International.

Microsoft TV, a division of the Redmond, Wash.-based company, teamed with Willamette Broadband and Uvision, two Oregon-based digital cable operators, which will use Microsoft TV's interactive program guide in place of TV Guide Interactive, the on-screen version of the well-known print publication. On-screen programming guides help people sift through the hundreds of channels and pay-per-view options afforded through digital services.

The Oregon companies' Microsoft TV service will be unveiled in the first quarter of 2003. Financial terms and the length of the deals were not disclosed.

Microsoft TV introduced its interactive program guide (IPG) for thin-client digital set-top boxes in June. The Oregon deals mark the first deployment of the unit's IPG in the commercial market. The on-screen programming guide and server software is part of a collection of products Microsoft is developing for the digital cable and satellite industries. The unit has already introduced a more robust version of its IPG and server software for digital video recorder company UltimateTV and cable set-top box providers in France and Portugal.

"Interactive programming guides are the most used feature in any digital TV service," said Ed Graczyk, director of marketing for Microsoft TV. "Also, it's an area in which the existing IPGs out there today aren't very well liked."

Microsoft is getting its feet wet in the IPG market at a time when television guide kingpin Gemstar has faltered. Among other woes, the company is under investigation by the Securities and Exchange Commission over its accounting practices, and its chief executive Henry Yuen was ousted recently by Rupert Murdoch's News Corp., which holds a 42 percent stake in Gemstar.

Still, the company, through its TV Guide subsidiary, reaches about 16 million homes, or about 80 percent of the market. Though it holds nearly 200 patents related to the listings format and on-screen guides that are built into set-top boxes, the company has encountered some legal setbacks concerning the validity of the patents regarding set-top boxes. This has offered competitors a way to break the virtual lock Gemstar holds over the business.

"Microsoft is wise in coming in now--there could be an opportunity to usurp Gemstar as the No. 1 on-screen guide. By starting it off where no one is looking, it's a great way for them to work out the kinks," said Philip Swan, president of industry Web site and newsletter Tvpredictions.com.

Microsoft TV's Graczyk said the unit has developed a better mousetrap relative to TV Guide's IPG. Graczyk said that among other features, Microsoft's IPG lets people scroll through four channels' worth of shows while leaving a TV show on in the background, and it lets people search for programs faster by calling up an on-screen keyboard with which to type in show names.

Currently, the software gives cable operators the ability to offer subscribers pay per view programming. In early 2003, Microsoft TV will introduce a new version that also supports video-on-demand programming.