November 2, 1999 4:00 AM PST

WebTV exec: Business humming, despite setbacks

WebTV is on track despite some setbacks and slower-than-expected subscriber growth, according to new president Bruce Leak, who predicts that the company's enhanced television services will come online next year.

In an interview with CNET News.com, Leak laid out the long-term agenda for the company that pioneered Internet access via the television. In the future, the WebTV brand name will be marketed less as a simple way for consumers to access the Internet and more as a means of enhancing television shows with interactivity, Leak said.

Meanwhile, WebTV's original mission will be carried out by its participation in Microsoft's TVPAK (Platform Adaptation Kit), a suite of services and technologies for interactive television. TVPAK will be sold to cable operators and programmers, Leak said.

Now in beta testing, the product is expected to be available by mid-2000. The kit will be the first WebTV set-top box to integrate Windows CE technologies, one of the primary stated goals of the 1997 acquisition of WebTV by Microsoft. Windows CE is Microsoft's scaled-down operating system.

The continuing refinement of WebTV's strategy reflects the growing pains often experienced by start-up companies acquired by larger companies, observers say, as well as Microsoft's response to relatively lackluster reaction to the current WebTV service.

When acquired by Microsoft in 1997, WebTV was making a name for itself as a low-cost and simple Internet access device that works in conjunction with the TV. Since then, however, the division's focus has meandered as the company has tried to carve a niche in Microsoft's competing online and cable efforts. Other issues, including the use of the Real Audio media player and the departure of cofounder Steve Perlman, have plagued WebTV.

Industry observers predict that the television will be an integral piece of the networked digital home of the future, as "broadband" or high-speed Internet access becomes more widely available. But despite its first-to-market advantage, WebTV's subscription growth has failed to keep pace with the rest of the industry, or even its own expectations.

WebTV's user base has steadily doubled in each of the company's three years of existence, Leak said. In addition, as Microsoft's TVPAK becomes available to AT&T's cable subscribers, the number of households with WebTV technology will skyrocket, he said.

Counting about 900,000 users, WebTV is on pace to hit 1 million users by the end of the year, Leak said. However, the company was projecting 1 million users by the end of last year. By comparison, AOL Germany alone recently hit 1 million subscribers.

Subscription numbers were hurt by product turnovers and a slow summer sales season, Leak explained, noting that the company recently introduced new versions of its Classic and Plus set-top boxes.

WebTV-brand set-top box will continue to be sold through retailers, Leak said, while the interactive services which require broadband cable access will gradually be deployed through Microsoft's relationships with cable providers like AT&T and Rogers Communications in Canada. "WebTV will stay the consumer brand," he stated.

The separation of the two brands is a necessity of the market, Leak said.

"Cable operators see WebTV as a competitor," he observed, noting that the TVPAK arrangement will allow cable companies to choose their own programming, while WebTV provides a set service.

After the completion of the platform kit, WebTV will finish work on integrating Windows CE into the TV set-top boxes for retail, Leak said, predicting that WebTV-Windows CE devices will finally be available by the end of 2000.

In addition, users can expect upgrades to target communications applications like messaging, fax, and, voice mail capabilities, he said.

 

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