SBC, EchoStar Plot Online Movie Venture
(From THE WALL STREET JOURNAL)
By Almar Latour, andy Pasztor and Peter Grant
SBC COMMUNICATIONS Inc. and EchoStar Communications Corp., which have a successful partnership selling packages of satellite-television and phone services, are taking their relationship a step further, jointly developing a set-top box that will more closely link the Internet with TV.
The box, scheduled to be available in the middle of 2005, will enable subscribers with high-speed Internet connections to download movies and watch them on their TVs, as well as watch satellite television. Customers also will be able to use the box to view personal photos on their TVs and download music from the Internet.
The box is the latest development in the contest between cable operators on the one hand and joint ventures of satellite-TV and telephone companies on the other. Each wants to offer "triple play" bundles of phone, high-speed Internet and TV services.
SBC and EchoStar executives are hoping their new box will neutralize the fact that cable companies can deliver true video on demand and satellite can't. This service allows viewers to pick from many movies and other programs that are stored on a distant computer and watch them any time they want. In most such systems viewers can pause the video, rewind it or fast-forward it, as with a DVD or VCR.
The SBC-EchoStar venture will offer movies on demand probably through a partnership with an existing online movie-download service such as Movielink LLC, a venture of several Hollywood studios. While there currently are ways to connect a PC to a TV so that downloaded movies can be watched on the set, they require a bit of technical know-how and so aren't used by many consumers.
The box also will allow customers to record shows on a hard drive, an arrangement known as a digital video recorder that was popularized by TiVo.
SBC already has signed up some 120,000 subscribers to EchoStar's Dish Network since the phone company began offering the satellite-TV service in March. Other Bells have made similar moves: BellSouth Corp., which began offering News Corp.'s DirecTV satellite service in early August, has signed up 30,000 customers, while Verizon Communications Inc., which also has an agreement with DirecTV, has begun heavily advertising its TV offer. Still, the cooperation between SBC and EchoStar goes beyond what other companies in both industries are doing and carries greater financial risks -- as well as potential rewards.
Phone companies think they need to offer TV programming to compete with cable companies, which increasingly are moving into the Bells' core phone business. The largest cable company, Comcast Corp., aims to reach 40 million homes with its phone service by the end of 2006.
To be sure, SBC and EchoStar are independently exploring options to expand their offerings and could end up competing. SBC aims to roll out a fiber-copper hybrid phone network that could deliver TV service to homes, in direct competition with services like EchoStar's Dish Network. EchoStar, meanwhile, is dabbling in Internet service delivery via satellite, which would compete with the Internet service SBC sells. EchoStar Chairman Charles Ergen warned in a conference with analysts recently that "SBC may just decide to be a competitor" to EchoStar.
SBC appears to be the leading force behind the new set-top box. "We are taking a supportive role, and they are driving," says Nolan Daines, senior vice president for broadband at EchoStar. He added that the overall goal is to provide EchoStar with a "more competitive solution for consumers" interested in broadband access. He stressed that the project is distinct from EchoStar's efforts to provide Internet via satellite.
The new box also represents another step toward the blending of TV and the Internet, a field that includes Microsoft Corp.'s MSN TV, originally called Web TV. However, SBC and EchoStar plan to restrict the box's Internet access to just a few movie and music sites, at least at first. Giving subscribers broad access to the Web could make it less likely theys would pay extra for premium channels such as HBO and Showtime sold by Dish Network.
"The content that gets through to the TV is going to be the content that the [two partners] are comfortable with," says Forrester Research analyst Josh Bernoff. "It's not really in their best interest to create an alternative distribution method" for the Internet at large.
Internet content increasingly is becoming a weapon in the arms race of the telecommunications industry. Adelphia Communications Corp. and Charter Communications Inc. have begun to deploy boxes with software from Digeo Inc. that pipes Web content to the TV screen. Cable companies are using it to allow viewers to choose from sports, news, stock-market quotes, weather and other information. Digeo executives expect that cable operators will soon use it for other services as well.
(From THE WALL STREET JOURNAL)
By Almar Latour, andy Pasztor and Peter Grant
SBC COMMUNICATIONS Inc. and EchoStar Communications Corp., which have a successful partnership selling packages of satellite-television and phone services, are taking their relationship a step further, jointly developing a set-top box that will more closely link the Internet with TV.
The box, scheduled to be available in the middle of 2005, will enable subscribers with high-speed Internet connections to download movies and watch them on their TVs, as well as watch satellite television. Customers also will be able to use the box to view personal photos on their TVs and download music from the Internet.
The box is the latest development in the contest between cable operators on the one hand and joint ventures of satellite-TV and telephone companies on the other. Each wants to offer "triple play" bundles of phone, high-speed Internet and TV services.
SBC and EchoStar executives are hoping their new box will neutralize the fact that cable companies can deliver true video on demand and satellite can't. This service allows viewers to pick from many movies and other programs that are stored on a distant computer and watch them any time they want. In most such systems viewers can pause the video, rewind it or fast-forward it, as with a DVD or VCR.
The SBC-EchoStar venture will offer movies on demand probably through a partnership with an existing online movie-download service such as Movielink LLC, a venture of several Hollywood studios. While there currently are ways to connect a PC to a TV so that downloaded movies can be watched on the set, they require a bit of technical know-how and so aren't used by many consumers.
The box also will allow customers to record shows on a hard drive, an arrangement known as a digital video recorder that was popularized by TiVo.
SBC already has signed up some 120,000 subscribers to EchoStar's Dish Network since the phone company began offering the satellite-TV service in March. Other Bells have made similar moves: BellSouth Corp., which began offering News Corp.'s DirecTV satellite service in early August, has signed up 30,000 customers, while Verizon Communications Inc., which also has an agreement with DirecTV, has begun heavily advertising its TV offer. Still, the cooperation between SBC and EchoStar goes beyond what other companies in both industries are doing and carries greater financial risks -- as well as potential rewards.
Phone companies think they need to offer TV programming to compete with cable companies, which increasingly are moving into the Bells' core phone business. The largest cable company, Comcast Corp., aims to reach 40 million homes with its phone service by the end of 2006.
To be sure, SBC and EchoStar are independently exploring options to expand their offerings and could end up competing. SBC aims to roll out a fiber-copper hybrid phone network that could deliver TV service to homes, in direct competition with services like EchoStar's Dish Network. EchoStar, meanwhile, is dabbling in Internet service delivery via satellite, which would compete with the Internet service SBC sells. EchoStar Chairman Charles Ergen warned in a conference with analysts recently that "SBC may just decide to be a competitor" to EchoStar.
SBC appears to be the leading force behind the new set-top box. "We are taking a supportive role, and they are driving," says Nolan Daines, senior vice president for broadband at EchoStar. He added that the overall goal is to provide EchoStar with a "more competitive solution for consumers" interested in broadband access. He stressed that the project is distinct from EchoStar's efforts to provide Internet via satellite.
The new box also represents another step toward the blending of TV and the Internet, a field that includes Microsoft Corp.'s MSN TV, originally called Web TV. However, SBC and EchoStar plan to restrict the box's Internet access to just a few movie and music sites, at least at first. Giving subscribers broad access to the Web could make it less likely theys would pay extra for premium channels such as HBO and Showtime sold by Dish Network.
"The content that gets through to the TV is going to be the content that the [two partners] are comfortable with," says Forrester Research analyst Josh Bernoff. "It's not really in their best interest to create an alternative distribution method" for the Internet at large.
Internet content increasingly is becoming a weapon in the arms race of the telecommunications industry. Adelphia Communications Corp. and Charter Communications Inc. have begun to deploy boxes with software from Digeo Inc. that pipes Web content to the TV screen. Cable companies are using it to allow viewers to choose from sports, news, stock-market quotes, weather and other information. Digeo executives expect that cable operators will soon use it for other services as well.
