Interactive TV: does the reality match the hype?

Everyone talks about what digital TV may be capable of in the future, but what's actually possible now? James Curtis looks at how far interactive TV has come.

It seems as if people have been talking about it for years, but finally, interactive TV has arrived. Once the British public becomes used to the possibility of doing more with the TV set than just slobbing in front of it, interactivity could become as integral to the telly as EastEnders or Coronation Street.

The national launch of Open in October heralded the dawn of a new era in the TV world, enabling, for the first time, UK users to buy goods, send and receive email and communicate with their bank via their TV set.

This digital satellite offering via Sky Digital will soon be followed by nationally available cable platforms from Cable & Wireless, NTL and Telewest, as well as digital terrestrial interactive services from ONdigital.

There are huge possibilities for brand owners, in the form of e-commerce, interactive advertising, and even advertiser-owned programming.

However, anyone who thinks that with Open up and running interactive TV is there for the taking will be left frustrated. Compared to the internet, the level of interactivity available on TV in these early days is not going to set pulses racing. Many of the features that interactive TV promises, such as video-on-demand, multi-layered enhanced programming and ads that can be controlled by the viewer are still months - if not years - away.

For the time being, TV is more inactive than interactive.

Sky Digital and Open - the only mass-market models now in operation - do have interactivity, but it is limited. On Sky Sports Extra, it is possible to view the action from different camera angles and call up additional information on teams and players, but there are still no interactive opportunities for advertisers. This will change next year, when new set-top boxes from Pace hit the market. These build a profile of viewers' TV habits, enabling advertisers to target their ads more effectively.

Open has the benefit of being an entirely new concept. The fact that there is any interactivity at all is a plus, so the service gets away with a lot on novelty value alone - the 'Wow! You can buy your CDs from Woolworth's and have them delivered the next day' sort of reaction. But can you listen to the CD before you decide to buy it? Er ... no. And how about the 'Cool! You can do all your banking from your TV!' enthusiasts?

Sorry, did you say bank? Actually, HSBC can show you its product range and how much you have in your account, but you can't do anything with it.

So compared to the internet, interactive TV is looking distinctly clunky.

An ad on Open or Cable & Wireless will most likely be a static banner which clicks through to a competition or a phone number to call for more information. There's virtually nothing in the way of video, animation, or personalisation. But that's not stopping advertisers and agencies from having a look around.

Vicky Grinnell, digital strategist for WCRS, says: "It's frustrating because there's incredible potential for clients, but the reality is that we're still some way off being able to give them something technically and creatively excellent. The other problem is that nobody wants to admit that they don't know how it works."

Three years ago, J Walter Thompson created a pilot interactive TV ad for Kellogg's Frosties which has become something of a legend in the industry.

Agencies and clients tend to mention this ad as if it were an unfeasibly juicy carrot that was waved in front of them only to be snatched away at the last moment. Viewers were able to control the ad, dictating the action and choosing different outcomes.

Grinnell says: "You see what's actually possible now and it all looks amateurish and bolted together. Clients' expectations have been built up very high and they end up thinking: 'Is that it?'."

Chris Harrison, managing director of Grey Interactive TV, agrees: "Clients have been sold interactive TV for years. Now it's here, it's interesting to see how few have signed up. Platform operators are guilty of overselling expectations of what it can do."

Lack of interactivity is not the only problem. Advertisers and agencies also have to get their heads around incompatible standards among the platform operators. This may be the biggest hurdle in the way of interactive marketing taking off in the UK.

Each of the operators builds its interactive content using different technology. The cable operators use content built on html and Java, but the OpenTV standard, which is used by Open and Sky Digital, is wholly different - this standard requires advertisers to tailor-make content for them. And even the cable platforms aren't exactly the same. For advertisers wanting to run interactive campaigns across all platforms, this is clearly a major problem.

Agencies find themselves advising clients to opt either for a cable or a digital satellite platform. Andrew Lowe, interactive TV strategist with Billco, complains: "It's a nightmare. There are different operating systems and different browsers. It's imperative that we understand exactly what each box is able to do so that we can honestly advise a client to go for one platform as opposed to another."

Kieron Gavan, general manager of global distribution for British Airways, says that this disparity of standards is "a huge issue". Having used video-on-demand during interactive trials on Yes! TV, BA has signed up with Cable & Wireless to offer product range information in the initial stages and then online sales next year. BA and its agency, Agency.com, can re-task web content for the CWC work, but would have to start from scratch to build services for Open.

"I'm worried about these different standards," says Gavan. "It's not just the cost of doing the work all over again, it's also the extra maintenance and management involved. Our preference would be for the industry to have a common standard."

This is the case in the US (see panel, p32), where the spread of interactive television is predicted to accelerate faster than in the UK because of the Advertising TV Enhancement Forum, a standard based on html agreed upon by advertisers, operating system developers and the TV networks.

Josh Bernoff, senior analyst with Forrester Research, comments: "This is going to frustrate advertisers in Europe. The number of interactive users will grow fast, but the platforms' ability to make money from ads will be slow, because advertisers can't approach interactive TV as they do normal TV."

BA is not the only advertiser frustrated by standards disparities. It is also frustrating the world's biggest advertiser, Procter & Gamble.

P&G is a keen advocate of interactive TV and has done ground-breaking work in France on the digital satellite service TPS and also on Cable Lyonnaise (see panel, p32). The ads, for Pantene shampoo, enable the viewer to select personalised hair care tips. Rahul Chakkara, interactive marketing manager for Europe at P&G, says the ads are "very exciting for the way they enable us to add value and understand our consumers on a micro level".

P&G is keen to invest more in the medium, but is put off by the costs involved in tailoring ads for different standards.

"If I wanted to run a national interactive campaign in the UK, I'd have to repurpose my ad many times over," says Chakkara. "That creates a lot of cost and is hindering us, and a lot of others, in our efforts to invest more in the medium. It's a huge barrier."

This looks like being more of a hindrance to the uptake of interactive TV advertising than the technological limitations of the platforms themselves.

What is possible now might be limited to clickable banners and basic e-commerce sites, but fuller interactivity will soon be available. The reason that most platform operators and clients are holding back has more to do with fears about the possible effects of the millennium bug than any technological limitations. BA, for one, says that it could offer transactional services now but is waiting until next year to be safe. HSBC offers the same argument.

But it is essential that UK platforms make the interactive medium more attractive for advertisers. Grey Interactive's Harrison says: "Platform operators have focused so much on getting transactional services up and running that the needs of advertisers have been neglected. But that's not necessarily going to hold advertising back. Ultimately, it's going to be up to agencies and clients to push the platform operators forward."



CASE STUDY - DORLING KINDERSLEY ON CABLE & WIRELESS

Book publisher Dorling Kindersley has a track record of getting into new multimedia channels early, and interactive TV is no exception. It was one of the first brands to sign up with Cable & Wireless's interactive TV service, now available in Manchester before rolling out elsewhere in the UK.

The company has created the DK Interactive Learning Channel as a revision and study aid for 11-16 year-olds studying for exams. It features structured tests in maths, chemistry, biology, physics, English and geography, in which students navigate questions using the TV remote control. The system assesses them and can build a profile of their knowledge in different subjects.

The system is an extension of a version already available on CD-Rom, only differing in some elements of animation and video that are not yet possible on the TV platform.

Andrew Goff, director of business development at DK Online, says: "We've always wanted to be at the cutting edge in interactive media, so we wanted to get into this early. It's important for us to get in and start learning how people want to interact over the TV and to see what they look for."

So, the learning channel is an educational aid not only for students, but for DK as well. And the relative lack of technical capacity on the early interactive TV services has not put the company off. "Just because we can't do much with video or sound, it doesn't mean it's not worth doing. We feel we can do some really useful stuff even with these technological constraints," says Goff.

Having recently started selling books directly from its web site, DK is considering whether also to sell books and CDs from the TV service.

"There are too many constraints now, but we will look at it," says Goff.

DK is also testing its service with NTL, but has no immediate plans to launch onto Open.



THE INTERACTIVE TV MARKET ABROAD

France

Having had digital TV since 1996, France is by far the most advanced market for interactive TV in Europe. An impressive 2.3 million households have interactive TV, in a market dominated by two platform operators: Canal Satellite Numerique (owned by Canal Plus) and Television Par Satellite (backed by TF1 and France Television). CSN has 1.2 million subscribers, compared to TPS's 900,000.

Digital cable services are provided by Cable Lyonnaise (with 140,000 subscribers), France Telecom Cable (with 40,000 subscribers), and NC Numericable (majority owned by Canal Plus and with 70,000 subscribers).

TPS provides 40 interactive services organised in eight sections, including culture, e-commerce, sport, weather, classified ads, home banking and children's games.

CSN offers the same range, as well as a channel with downloadable computer games and software. CSN has also grouped together all of the banks which offer TV services into a single banking channel.

TPS is more advanced in terms of interactive advertising, and has seen the number of interactive campaigns grow from five last year to 14 so far in 1999. Interactive advertisers include Procter & Gamble, which ran a shampoo ad offering personalised hair advice on TPS and Lyonnaise Cable.



Spain & Italy

France's Canal Plus is also the power behind digital television in Spain.

Canal Plus's Canal Satellite Digital package has more than 700,000 subscribers and is running interactive services which include a banking channel for BBV, a leading Spanish bank.

CSD's rival, Via Digital, (with 348,000 subscribers) is beginning to roll out its first interactive services.

Canal Plus is behind Telepiu D+, Italy's biggest digital satellite operator, with around 650,000 subscribers.

Some interactive services are available, but these lag behind those available in France and Spain.



Germany

Although Germany has had digital TV since 1996, when it was launched by Kirch's DF1, interactive services are yet to be made available. This is probably due to the low digital uptake (around 300,000 subscribers for DF1) and the fact that analogue cable TV is very cheap and very popular.



USA

In the US, interactive TV penetration is still less than 150,000 households.

Although a lot of activity is coming from digital satellite platforms like Echostar, interactive TV will only take off if it is championed by the cable operators, which plug into 70 per cent of US homes. The principle model is for set-top boxes to recognise TV signals with interactive content, automatically giving the viewer enhanced options. Domino's Pizza has tried out TV ads that include an interactive option to buy pizza in the San Francisco area. The game show Wheel of Fortune has built interactive home-play options into its broadcasts.

The main players in this embryonic market are Wink and Web TV, the latter owned by Microsoft. AOL is also trying to get into the market with a net/TV platform. Unlike the UK, broadcasters, platform operators and advertisers have agreed on a standard for interactive content, enabling internet information to be repurposed for the TV.



PLATFORM OPERATORS - WHO DOES WHAT?

Sky Digital

Sky Digital's 1.8 million subscribers are offered two interactive options: Sky Sports Extra, with which viewers can choose camera angles, replays and enhanced content; and Open, the new interactive shopping service.

Users can choose from a walled garden of content providers, including HSBC, Woolwich, Woolworths, Dixons, Carphone Warehouse, Manchester United and Somerfield 24-7. Latest additions include Going Places and fashion from Next. The retail sites are transactional, while the banking applications have yet to replicate internet functionality.

At the moment, there is no interactive advertising on Sky Sports Extra at all. On Open, advertisers are limited to using banners which take the viewer into a competition or an opportunity to request brochures. Ford, Persil and Scottish Power are among the early advertisers.



Cable and Wireless

In August, Cable & Wireless launched its digital cable interactive TV service in the Manchester area. It is rolling out digital television in franchise areas elsewhere in the country and will add interactive services as it goes along. CWC's stake in the pre-Christmas market will be limited to the 50,000 customers now using its interactive services in the north west.

Like Open, CWC offers a walled garden of content, featuring interactive services from Tesco, Littlewoods and Scoot. More partners, like BA, Dorling Kindersley and Barclays - which is launching a TV banking service - will follow as the service rolls out.

For now, advertising options are limited to banners and tickers. Interactive advertising will follow next year.



NTL

Although NTL is in the process of acquiring Cable & Wireless Communications, the two operators will offer distinct interactive services for the time being. NTL was one of the first on the market with internet TV, launched in March. However, as it is an analogue service, functionality is limited compared to what NTL plans to do on digital platforms next year. Nevertheless, with 42 partners - including Tesco - and 10,000 users, it has been able to gain some valuable experience. When it launches digital interactive TV next year, NTL plans to offer full internet access and will put a priority on interactive advertising options. These will include the ability for advertisers to target viewers by postcode, using data gathered from registrations.



Telewest

Launching in the first quarter of next year, Telewest's interactive TV service will comprise the usual mix of home shopping, banking and entertainment. It plans to offer a walled garden and is in discussion with 50-60 retailers. It currently has 1.5m cable customers in seven franchise areas, the biggest of which is in the Midlands. It also plans to offer personalised interactive advertising, based on data gathered from viewing and usage habits.



ONdigital

Pre-Christmas, ONdigital's interactive offering will be limited to a digital version of Teletext called Digital Text. Faster and more interactive, Digital Text will be more attractive for advertisers and users than its analogue predecessor, but it is hardly a major step into the interactive world. Limited bandwidth is the biggest hurdle, preventing ONdigital from even contemplating internet access in 2000. However, it plans to have shopping and banking content up and running in the first quarter of next year.



CASE STUDY - HSBC ON OPEN

As one of the founding partners of Open, HSBC is a trailblazer in the interactive TV world. As the first to go into telephone banking with First Direct 10 years ago, HSBC is keen to continue playing the role of pioneer by launching the first banking service on TV.

So far, customers can only access HSBC via Open on Sky Digital, but this is not a bad way into the market. Open is free to Sky Digital's 1.8m subscribers, so HSBC has the potential to capture a lot of customers on this platform alone.

Since it launched on digital TV in September, HSBC has been gradually rolling out its service, starting with service information and loan and mortgage quotes before expanding into account access and viewing in the past few weeks. Paul Seward, HSBC's head of strategic planning, says that customers will not be able to perform transfers, pay bills or conduct other transactions until next February. "We're taking it step-by-step, waiting for the customer to get comfortable before expanding any further," says Seward.

Cynics will argue that this is a gloss, concealing difficulties in getting fully transactional services operative, but Seward insists that gradually phasing in interactivity is the best way forward. "Open has gone from having two to 20-odd content providers in no time, so we don't want to drown customers in services," he says.

The evidence suggests that customers are not scared of the technology.

By early November, HSBC had received 80,000 requests for information through its Open site, of which 50,000 were advance registrations for full TV banking. All were from existing customers, but Seward says that around 20,000 potential customers have requested information on TV banking, so it could prove to be a powerful customer acquisition tool.

HSBC admits that concerns over millennium compliance have contributed to delaying transactional services until February. "If we'd launched in mid-summer, we'd have had it up and running by now, but having launched so late in the year we thought we may as well wait to be safe," says Seward.

Although HSBC is a shareholder of Open, the partnership does not prevent it from launching the service onto forthcoming cable interactive platforms.

Nothing is definite, says Seward, "but there is no limitation on where we can go. We've talked to the other platform operators and as far as rival malls are concerned, we'll be there if there is sufficient demand".

As well as rolling out account viewing and transactional functions over the next few months, HSBC says that it will also use the TV banking site for selling financial products like pensions and insurance throughout its portfolio.





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