Television service providers have talked about offering truly interactive services for years. In the U.K., France and elsewhere, TV-based games and other interactive applications have become a familiar part of TV service line-ups from many providers. In some places, it’s even legal to place wagers over TV using the remote control. Here in the U.S., however, where the penetration of interactive services lags by a few years, such interactive applications are still something of a mystery; at least outside Las Vegas and the hospitality industry. (“Interactive,” by the way, means that the subscriber communicates with the application upstream: Button-presses cause messages to be passed back to the application, so actions occur on-screen in response.)

This is very likely to change. Some, if not all, of the technology suppliers that have been in the process of introducing interactive TV applications platforms to cable, satellite and yelco service providers in other countries may be expected to arrive in North America in the not-so-distant future. This makes it timely to take a peek at things to come.

The IPTV technology suppliers have been evaluating and testing various approaches toward offering interactive applications as their product offerings have moved from the idea stage into commercially-viable and deployable form. Applications requiring very little interactivity are already here: “Walled Gardens” using Web technology have been available since their earliest releases and are used for program guides, information portals, weather reports and local advertising. But going beyond the ability to click through statically-rendered buttons and banners on a TV-based Web page has been a technical challenge, given the perceived need for a high-powered set-top box that can render multimedia content and 3D immersive content (such as games) on-the-fly.

These suppliers have considered a number of alternatives. One possibility has been to consider customized proprietary set-top box designs that would be sold only with their software and content services. Another has been to accommodate commercially-available game consoles like the Sony PlayStation or Microsoft X-Box. Yet another has been to offer what, in essence, is a “headless PC” with expansion slots and plenty of processing power; capable of the kind of immersive 3D game experience commonly found in game consoles. Suppliers are also offering client environments that can host Java and “C” software applications which don’t have to constantly communicate upstream for their interactivity. But most of these options have proven to be impractical, expensive to develop, expensive for the service provider to buy or a combination of these factors.

Two companies exemplify an approach to interactive TV that requires little or no additional horsepower in the set-top box: ICTV Inc and G-cluster. Both of them offer platforms that reside at a centralized location such as the TV headend or the central office; host and execute multimedia applications centrally; and deliver the resulting video to individual TV subscribers in the form of standard video streams. The required processing horsepower is found in the centralized system. 

The receiving device can therefore be any set-top box capable of accommodating a small software client and of receiving MPEG video. To the box, the programming looks much the same as any other broadcast TV programming.  Because these applications play over the network, latency is a concern but both suppliers contend that response delays are practically insignificant.

The ICTV system, called HeadendWare, is a Windows-based platform that hosts interactive applications and content designed expressly for television. The applications come from about 30 different suppliers; appealing to a wide variety of television subscribers, not just gamers. In addition to trivia, contest-oriented, educational and board games, ICTV’s applications library includes kids’ programming, e-mail, news and localized information portals, interactive advertising and customer self-service. Their suppliers include Disney, Buzztime, Sesame Street, Totally Hollywood, Atari, LocalSource, iacta and MagRack.

G-cluster’s system delivers interactive 3D games; also to low-end set-top boxes. The company believes that subscribers will tire of having to buy a new game console every two or three years and will welcome the opportunity to play recent and current immersive interactive games over the network. In addition, G-cluster believes that game developers will be excited by the potential to extend the typical console game’s three-month product life cycle. In any case, according to G-cluster, the service provider can capture new revenue that otherwise would have gone to other types of game retailers.

As we all know, telcos can already offer a wide variety of services. In addition to “regular” broadcast TV, there are the now-familiar (at least to us industry analysts) Video-on-Demand, Digital Video Recorder/DVR (aka Personal Video Recorder/PVR, aka “TiVo functionality”), Walled Garden, Caller-ID-on-Screen and Emergency Alerts. Most of the telcos actually doing video are starting with bundles of network TV, pay-per-view programming and premium channels; a smaller number are offering movies-on-demand. But very few are motivated to offer the other services that have not quite proven their worth as revenue generators. 

When it comes to games, however, interactive applications and games hold a strong potential to add new dollars to the service provider’s revenue mix. The Broadband Content Delivery Forum, in a report entitled Playing for Keeps issued at the end of 2003, forecasted that the worldwide “Massively Multi-player Online Games” (MMOG) segment, comprising of PC and console gamers, may surpass U.S.$1 billion by 2005. The same report estimated that, worldwide, the top seven MMOG games alone brought in more than U.S.$280 million in 2002. It’s difficult to say how much of this will translate over to IPTV-delivered service providers but it is difficult to argue against the possibility that some portion of it will.

These up-and-coming developments are great news for telcos seeking to further differentiate themselves from local cable and satellite competition while at the same time expanding their revenue opportunities. We’ll stay tuned for more developments in the interactive applications and games arena.

Steve Hawley is principal consulting analyst of Advanced Media Strategies.  He may be reached via his Web site, http://www.tvstrategies.com.