Still scrolling for dollars
TV Guide Interactive deal with Charter is a good start for Gemstar
John M. Higgins -- Broadcasting & Cable, 2/25/2001 7:00:00 PM
Gemstar Chairman Henry Yuen eased-but did not eliminate-anxiety over his ability to lock up a critical mass of cable deals for his interactive TV guide.
After months of investor concern, Gemstar last week signed a 10-year affiliation deal with Charter Communications, the third-largest cable operator. The deal was an important one, because, although Gemstar's TV Guide electronic guides are widely deployed among cable operators, the company had not been able to secure long-term deals with major operators for TV Guide's advanced interactive product. And Yuen and Wall Street are betting that it is interactive advertising revenues that will drive the company's growth. That means Gemstar not only has to secure license fees, but also a fat slice of advertising revenues.
Gemstar has a number of short-term deals with larger operators, but its only other top-5 MSO deal is with AT&T Broadband. That deal was inherited along with Tele-Communications Inc., which signed a favorable deal when sister company Liberty Media Corp. owned a controlling interest in TV Guide.
And while Gemstar has a near monopoly on the analog guide business-that endless scrolling guide that makes you wait a few minutes for a channel to pass by-there are at least four other options for operators looking for interactive guides. And cable operators hate being on the receiving end of a monopoly and accompanying pricing power.
One analyst said that only 50% of Adelphia Communications Corp.'s digital subs get the TV Guide product. The rest are getting a guide developed by set-top manufacturer Scientific-Atlanta. The same goes for Cox, while Insight Communications isn't using TV Guide at all.
"Henry's going after advertising," said one media analyst. "But he needs a big market share for critical mass. The smaller his reach, the less attractive interactive advertising is."
A gloating Henry Yuen called TV Guide Interactive's long-term affiliation deal with Charter Communications a "significant milestone" in the Gemstar chairman's plans to rule the interactive guide business.
Charter agreed to deploy TV Guide Interactive to what TV Guide President Pete Boylan said was "the substantial majority" of its digital cable homes. Charter will pay a license fee that was not disclosed, take a 15% split of national ad revenues and take a 50% split of interactive shopping revenues. "Gemstar is here to do business with the cable TV industry, not to do battle," Yuen said.
Charter has 1.1 million digital subscribers, and digital service is available to about 90% of its 6.4 million basic customers.
But TV Guide will not get all of Charter's digital homes. The affiliation deal is nonexclusive, and Charter said it still intends to support Internet provider Worldgate's TV Gateway guide. That's a joint venture with Charter, Cox and Adelphia aimed at keeping Gemstar from getting a guide monopoly. "There's absolutely no retrenchment with Worldgate," said a Charter executive.
TV Guide Interactive works primarily on Motorola digital converters. Companies using Scientific-Atlanta or Pioneer converters are using guides those companies provide. However, Boylan said the company is close to adapting TV Guide to the S-A box. UBS Warburg media analyst Tom Eagan noted that effort will significantly expand TV Guide's potential installation base.
In other good news, Boylan said Gemstar had successfully integrated the guide with Diva, a video-on-demand service. TV Guide Interactive is a memory hog, so MSO executives have worried how well it will live in the set-top box alongside other applications.
No related content found.
No Top Articles
Digital Rapids provides market-leading software and hardware solutions, technology and expertise for transforming live and on-demand video to reach wider audiences on the latest viewing platforms more efficiently, more effectively and more profitably. Empowering applications from..more