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Kagan's Column: The ITV Drumbeat Booms, But

Let's see, this may be the 2,503rd time I've said interactive TV in the U.S. is about to take off. But I'm saying it again, and will continue to until the colonies catch up with their forefathers in Europe. Frustration abounds in this ever-nascent industry, while progress within goes almost unnoticed. It doesn't help that consumers confuse ITV with IPTV, and that even media executives don't fully grasp the boundaries. As keynote speaker Josh Sapan of Rainbow Media said at the Kagan Digital Media Summit: "The content industry has to do a whole lot more to take advantage of new technology. If we don't, we'll miss out on some big new thing."

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That "thing" has long been ITV, the giant step from passive TV (couch potato) across active TV (DVR) to a new form of personal TV, in which the viewer can participate, with a remote control, within a given program or a specific commercial. The latter application is gathering steam, according to David Cohen, Universal McCann's SVP/interactive media director. He told the Kagan Summit that "advertisers are more willing to experiment with new methods of advertising. Anyone who has, has been fantastically successful. There is no doubt that TV advertising is getting into the interactive game. It isn't double digits, but next year it may be. In three to five years the market will shift from the way advertising dollars are spent now."

Other panelists noted why it has taken so long. "The reality is, everybody in the media food chain has generational issues to get over," said Starcom MediaVest SVP/director Tim Hanlon. "It's no longer watching TV, it's consuming media. Network schedules are artificial constructs that are being swept away. Broadband video will attract more advertising. The fissures are there. There's not an advertiser under the sun who doesn't want to know more about digital media."

"It's an evolution, not a revolution," noted TiVo CFO Dave Courtney, who's in a frontline trench in this war. So is Rick Mandler, Walt Disney Internet Group/ABC Enhanced TV VP/GM. Long a pioneer in two-screen ITV (PC and TV), he explained the networks' dilemma:

"We need to control what goes out over our air, and there isn't enough time in it for us to sell it. We either sell something worth millions or just a few thousand." He also noted that "rollouts have been slowed by the pace of technology." But as I see it, the issue is grave for what is increasingly labeled traditional, big, old and/or entrenched media. As Rainbow's Sapan said, if you want to progress, "you have to threaten your own incumbency."

Challenged to name the coming catalyst of change in interactive advertising, Hanlon said "measurement is the Rosetta stone. That which gets measured, gets bought." Courtney said "with only 8 million DVRs in 6-7% of TV homes, there are not enough deployments," agreeing with Cohen's complaint that "there are not enough set-tops." Microsoft's Eric Picard, not surprisingly, looked further out at "things we aren't talking about yet." And Kagan analyst Ben Reneker suggested "Google could commoditize all the others." Indeed, the intensifying competition in the Internet space is no longer just a wild card, it's a menacing force to the incumbents. My choice for change, earlier this year, was Rupert Murdoch and DirecTV, who have not moved as aggressively as I expected. Still, I can feel the beat of that different, ITV, drum...again.

Analyst/investor Paul Kagan is chairman/CEO of Kagan Capital Management, Inc. in Carmel, Calif. Information in his columns is not intended to be a recommendation to buy or sell securities.

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Kagan's Column: The ITV Drumbeat Booms, But

Cable World, Oct 10, 2005

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