Interactivity May Bring More Revenue Opportunities

CARMEL-BY-THE-SEA, CALIF.— As manufacturers and service providers continue to mine new revenue streams few consumer electronics products going forward will undergo as much change as the set-top box (STB).

Ironically, while STB designs are caught in this whirlwind of activity, the hardware itself is likely to change very little. Instead, most changes will take place in middleware — or the software that serves as the foundation to deliver huge sums of new Advanced Interactive Multimedia (AIM) content and services.

Middleware serves as the software base upon which all services will run, regardless of the device. Growing numbers of Direct Broadcast Satellite (DBS) and cable interactive TV subscribers help to verify this potential for growth.

Two important questions are addressed here in order to measure the subject of middleware revenue streams. First, what has middleware done thus far to enhance the way we watch TV? And second, are there any special middleware-based opportunities for CE dealers in the years ahead?

The answer to the first question is focused primarily on the developments and opportunities that have already occurred in Europe. Sources at Liberate, Microsoft and OpenTV suggest that Interactive TV in Europe — primarily on satellite, but also on cable — is a big hit.

For example, 5.5 million out of a total 8.5 million BSkyB digital customers take middleware-enabled interactive TV services.

What has been shown so far is that powerful middleware quickly develops a healthy community of content creators, especially in the areas of iTV sports, news, weather, shopping and gaming.

This content capability gives consumers more from their purchase of a STB, and it helps dealers and distributors increase STB sales. More STB sales also mean more installations and after-the-sale ancillary purchases, such as warranties, speakers, home theaters, etc. Therein lies the most immediate opportunity for CE retailers.

Most consulted for this article felt the best opportunity for incremental revenue from interactive television is T-commerce. One form of this will be so-called "virtual channels," where viewers will shop for cars or real estate, much like they purchase goods from QVC and The Home Shopping Network in the U.S. today.

T-commerce services empowered by middleware from OpenTV and Wink, are building into the ultimate impulse-driven sales tools. Eventually, a small icon will appear during programs signaling viewers to click the remote, and instantly go to a screen to purchase a product related to the show they are watching.

The question left unanswered is how retailers will dip into this new revenue stream. One option for larger players could come from retail chains allying with system operators to sell goods and services through T-commerce channels of their own. For others, long-term incentives come by providing compelling in-store demonstrations. If the subscriber then purchases that service, middleware providers and system operators will benefit from recurring revenue streams and may be motivated to eventually give dealers a piece of the action.

On the down side, some CE retailers might balk at helping to activate T-commerce-systems that compete with them for product sales. But frequently these dealers will benefit from the promotional hype these services give to products.