The dream of interactive television has been floating around for almost as long as the medium itself. In the 1950s, CBS aired Winky Dink and You, a children’s series that allowed kids to send away for a kit that contained a set of crayons; a “magic drawing screen”—a piece of plastic that adhered to the TV screen thanks to static electricity—allowed them to draw on the screen during each episode to reveal a set of secret messages. But while children grew fond of the format, their parents were considerably less pleased, particularly since many kids dispensed with the screen and special crayons and simply drew directly on the screen. (It seems parents were also a bit perturbed that their kids were parked about six inches from their television sets.)
The notion that the television could function as a two-way medium gained new momentum in the late ’70s when Warner-Amex Cable debuted QUBE in Columbus, Ohio. QUBE was a system that permitted viewers to access thirty channels—a considerable improvement over what was available at the time—as well as order movies on a pay-per-view basis and participate in polls and auctions. It was unusually advanced for the era. But these were highly unusual times. The system emerged during the so-called cable franchise wars, a time when media companies were furiously competing for the rights to establish cable beachheads in local communities across the United States. To sway local officials, aspiring franchisees made grand pronouncements about the services they planned to offer to residents, and QUBE was intended to showcase exactly what a high-capacity, interactive cable system would look like.
Most of the lofty promises made by emerging cable companies never came to pass. As soon as the lucrative franchises were handed out, the cable companies backed away from their elaborate—and expensive—plans to construct such advanced systems. QUBE, which had been popular with viewers but had never turned a profit, was eventually phased out.
The idea that the TV could do much more than simply deliver entertainment hardly faded. Interactive television ended up becoming one of the most overhyped technologies of the 1980s and ’90s. With each passing year, consumers were assured that a host of exciting, new services were on the way, and industry analysts made bold predictions about what lay ahead: viewers would be able to pick and choose what they watched and when they watched it. They’d be able to play along with game shows and gamble from the comfort of the couch. A giant catalog of merchandise would allow viewers to purchase a barbecue grill or hair dryer with the click of a button.
Dozens of companies hoping to capitalize on the iTV revolution came and went during the 1980s and ’90s. Even Barry Diller’s decision to purchase a $25 million stake in QVC in 1992 was predicated on a vision of the future of interactive shopping, as he made quite clear to Ken Auletta of The New Yorker shortly after he took over the shopping network:
As Diller envisions it, the customer will say, “I want a raincoat. Instantly! I want an umbrella,” and it will figure out the cheapest ones, and deliver them to the door. He predicts, “Three years from now, you’ll say, ‘I want shoes.’ You’ll press a button and see yourself in various shoes on the screen.” From their homes, he says, consumers will be able to roam the aisles of Bloomingdale’s; avoid the last-minute Christmas rush by calling up a special selection of gifts for the “special person,” choosing one, and having it delivered the next day; find a hotel in the Caribbean, inspect its rooms and amenities on the TV screen, and then press a button to make a reservation.
In 1994, when Time Warner trotted out an interactive cable system in Orlando, Gerald Levin, then the CEO of the company, told reporters that he expected to soon see the day when viewers would use their cable systems to order pizzas and renew their driver’s licenses in lieu of waiting in line at the DMV. You know the rest of this story: it’s been fifteen years since Diller and Levin made these pronouncements, and while you can order a pizza, renew your license, and roam the aisles of Bloomingdale’s from the comfort of home, you do it via your computer, not your television.
In theory, these newfangled cable services sounded delightful. Making them happen was another matter. Interactive services couldn’t simply be turned on with the flick of a switch. The cable networks that had established a foothold in three-quarters of American households during the 1970s and ’80s hadn’t been built as a two-way communication medium. Cable’s “tree-and-branch” architecture was designed to deliver the same programming to every subscriber in the neighborhood, not let lazy couch surfers send in their orders for pepperoni pizzas. To support new features like pay-per-view movies and home shopping, the cable companies would have to invest billions in new infrastructure. Coaxial cables lines, which connected the cable companies to nearly every community in America, would have to be replaced with high-capacity optical fiber. New software and security protocols would have to be designed. And the cable companies would have to install new, digital set-top boxes in subscribers’ homes. Who was going to pay for all this?
The cable companies sure didn’t want to. After all, they enjoyed one of the most lucrative monopolies in America. Consumers couldn’t go out and pick another provider or simply pick up another set-top box at an electronics store. There was no choice in the marketplace: the government-regulated franchise system allowed local municipalities to pick a single cable provider, which would dig up the city streets and wire the community—and pay the local government a five percent fee—in exchange for exclusivity. What incentive did they have to pour billions into building out new infrastructure?
They would have gladly spent the money if they knew that consumers would pay for these services, but that wasn’t necessarily obvious at the time. Accessing a mall from your TV set sounded great, particularly to wide-eyed entrepreneurs, but it was hard to assess the level of public demand and even harder to figure out just how the exorbitant costs associated with constructing such a system would ever be covered. When Time Warner wired 4,000 homes in Orlando with interactive cable, it spent tens of millions to do so; each set-top box alone cost $5,000. Yet viewers turned out to be slow in embracing the high-tech functionality at their fingertips.
Industry analysts were quick to point out that many of these new features violated the basic tenet of television that TV is a “lean back” environment. Our consumption is passive: we sit back in our La-Z-Boy recliners and take in the entertainment and advertising as it flashes before our eyes. Did Joe and Jane Consumer really want to do more than sit back, relax, and enjoy the show? It wasn’t clear. And since viewers had little notion what interactive television would entail, it wasn’t as if the public was rioting in the streets, demanding that the cable companies provide them the ability to freeze live television and order cubic zirconia necklaces with the click of a button.
The tide started to change in the early 1990s when new competition emerged on the horizon. In 1991 the FCC startled the cable industry when it proposed that phone companies be permitted to transmit television programming. But other threats loomed as well. In the early ’90s, digital broadcast satellite companies like DIRECTV and EchoStar started arriving on the scene with the promise of more video and audio channels than consumers had ever seen before; there was also the nascent Internet to contend with, which was poised to emerge as a potentially disruptive force. In 1996 Congress passed the Telecom Act, which had wide-ranging effects on the entire broadcast media sector, unleashing unprecedented deregulation on the industry and providing a road map to a digital future. The force of regulatory change, the threat of increased competition, and a sharp drop in the costs associated with replacing legacy technology spurred the cable companies to take action; all the major multi-system operators (or MSOs) responded by aggressively upgrading their networks and accelerating plans to roll out interactive systems.
They faced no shortage of challenges. Most critically, the industry had no established technology standard. Each cable company operated a proprietary system, purchased set-top boxes from one of several manufacturers, and relied on software provided by dozens of smaller firms. There was no way to create any sort of interactive platform that would be compatible with all of them. And because each functioned as a closed network, not a single bit of content could be delivered to subscribers’ living rooms without the blessing of the cable company.
Things couldn’t have been more different on the Web, of course, which was accelerating at a blazing clip in the late ’90s. The Internet was predicated on open standards and designed from the very beginning to be a fully interactive medium. There was nothing to prevent scrappy entrepreneurs in Silicon Valley from experimenting with new services and rolling them out to the public at large. The Internet had no gatekeepers or near-monopolistic forces that could squelch innovation. So while the dysfunctional cable industry sat back and mulled over its technological limitations and what seemed to be a lack of consumer acceptance, all the fuzzy dreams about interactivity migrated to the Web in the late ’90s. Amazon.com showed the world that people did, in fact, want to buy products from home. Search engines like Yahoo! demonstrated that people wanted access to local information. Millions of consumers flocked to eBay to buy and sell goods. The notions of what you’d use your television to do back in the 1980s had been transferred to a new device: the personal computer.
It certainly didn’t bolster iTV’s chances that many of the early experiments generated a tepid reception from the public. Attempts to add interactivity to entertainment content in the late ’90s proved disappointing: when NBC offered interactive clues to its hit show Homicide, few people accessed the service, leading to the conclusion, once again, that television viewers weren’t terribly interested in diverting from the entertainment programming on their screens. Another blind alley was the premise that the computer and television would converge, leading to the launch of services like WebTV, which allowed viewers to browse the Web and check their e-mail using their television sets. It quickly became evident that the TV wasn’t well suited to either application since you don’t sit close enough to your TV screen to type e-mails, and you needed additional equipment to do both, namely, a keyboard. The one thing that did seem to work, of course, was the sort of functionality that television could do best—giving viewers the ability to control what they watched and record their favorite programs. It was also something that had an obvious business model. Few had any clue if consumers would pay for access to sports scores or for the ability to order a pizza, but video on demand promised to be a clear moneymaker: if consumers went to Blockbuster to pay four bucks to rent a movie, wouldn’t they pay the same amount to do the very same thing without getting off the sofa? The cable companies quickly focused their attention on the services guaranteed to earn them a profit, like pay-per-view movies.
Interactive shopping raised a series of complex challenges. Despite all the hoopla about its enormous potential and the exciting prospect that you’d be able to use your remote control to purchase what your favorite sitcom star was wearing or a news anchor’s tie, in practice adding those functions promised to be a nightmare. What if, instead of buying the bracelet that Jennifer Aniston was wearing on Friends, viewers wanted to buy her dress? How would the shows make it clear which items were for sale and then manage the inventory? What would happen when the episode appeared as a rerun years later? And would people even be interested in this? In those days, many people doubted that TV viewers really wanted to interrupt their viewing to go shopping. Product placement was one thing: they were subtle brand messages, and there was no direct response component to it. Asking viewers to break out of entertainment mode and switch into shopping mode was another proposition altogether.
Home shopping was a much more obvious opportunity. Viewers of QVC weren’t watching a show with a narrative. They were watching a program designed precisely to sell them goods, which viewers appreciated full well. What better way was there to get someone to purchase something than to make it as easy as a click of a button? Developing the technology to support these services wasn’t a trivial matter, however; each cable system would require a customized platform, and there were complex security and billing issues to contend with. And neither the cable companies nor their home shopping partners were particularly focused on the subject at the beginning of the twenty-first century. MSOs were directing their attention to proven revenue opportunities like video on demand. Home shopping players like QVC and HSN were enjoying enormous success online, which provided them with a chance to sell direct to the consumer without giving up a cut to their cable partners.
This wasn’t the case in Europe and Asia, however. Interactive television was embraced in places like England and Japan much earlier on, the result of fewer system operators, fewer technology platforms, and fewer consumers willing to conduct commerce online. In 2001 QVC launched its first interactive purchasing system in Britain in partnership with BSkyB; it now processes more than a million orders a year thanks to the “buy” button on remote controls. But these services should finally debut in the United States over the next few years. In 2006 Time Warner and HSN unveiled a “buy” button in Hawaii, and it’s only a matter of time before the technology is integrated into cable systems nationwide. Equipping infomercials with this sort of click-and-buy capability is a longer way off, but it will arrive one day, too. The conventional wisdom that we want to sit passively in front of the TV no longer necessarily holds water. The Web has introduced us to interactive services we couldn’t imagine living without. The time-shifting capabilities of personal video recorders has turned us into our very own programming chiefs. A rising number of people watch TV and surf the Web simultaneously, gossiping about plot points on message boards as they watch shows unfold. And there is little doubt about the connection between TV programs and merchandise sales. A product mention on a TV show can lead to an almost instantaneous sales response on the Web.
In the meantime, the direct response industry has been aggressively expanding its efforts to build robust businesses on the Internet. QVC generated more than $1 billion in revenue from qvc.com in 2007, and all of the major shopping channels now actively encourage viewers to conduct their purchases online, where customers can view a much larger catalog of inventory and where the costs associated with processing transactions is substantially less than having viewers speak with a phone operator. Both HSN and QVC have been actively incorporating new features and functionality: customers can access video clips, post product reviews, and chat with other customers. And both companies also have plans to unveil mobile shopping platforms in the United States in the near future. (In Japan, QVC makes ten percent of its money from mobile commerce.) Infomercial marketers have been busy exploiting the Web, too: some products now generate as much as half of their sales from transactions that are conducted online.
But the Internet isn’t a substitute for interactive television. Much of what’s advertised on TV, after all, is designed to capitalize on our impulses, and while viewers can now head to the Internet and spend a few minutes entering their credit card information to purchase a product, it’s easy to see how an interactive platform would make buying a new barbecue grill or treadmill a two-second process. You’d click a bright red button on your remote control, a message would ask you to confirm the purchase, and that would be that. Your credit card on file—or your cable bill—would be charged accordingly.
There will be challenges, of course. More than a few parents will inevitably have to deal with their kids who rack up thousands in charges, repeatedly clicking the “buy” button with each successive demonstration.
Even diehard home shopping fans are concerned about the prospect they’ll turn into compulsive shoppers. When I polled a half dozen longtime fans, they all said they hated the concept, not because they thought it was a bad idea, but because they all thought they would have trouble resisting temptation. “I really can’t imagine what would happen,” said one such woman. “I have a feeling I’d go from buying items once a week to buying things daily. I might have to throw out my TV and go back to listening to the radio.”