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GartnerGroup's Dataquest Sees 'Time Shifting' as Portal to Interactive TV in American Households; Interactivity Will Ride in on Entertainment's Coattails.

STAMFORD, Conn.--(BUSINESS WIRE)--Aug. 18, 1999--

"Time shifting," the increasingly common consumer habit of recording TV entertainment for later viewing, appears to be developing into the long-awaited portal that will finally bring interactivity to the television set in the United States, according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE:IT).

Feeding this migration to interactive television are new set-top boxes that are able to digitize a TV signal and store it on a high-capacity fixed-disk drive for later play-back. Although they are commonly called digital VCRs, they require no videocassette, nor do they require tedious programming to record programs, which makes time shifting much easier.

Viewers simply choose programs they wish to record from listings on the TV screen and the shows are recorded automatically. Viewers can even pause a live program (to answer the phone, for example) and then begin playing it again before the show is over. The device also offers the option of skipping TV commercials.

"Research has shown that Americans generally have not been willing to pay for television interactivity," said Mark Snowden, industry analyst for Dataquest's The Interactive Home: Media and Entertainment U.S. program. "But they are willing to pay for entertainment -- or more accurately, the ability to control their entertainment. With these devices, interactivity rides in on the coattails of entertainment. Once in the home, consumers will begin to appreciate the benefits of interactivity."

Still, it's not easy to establish a new technology platform in the home. Mr. Snowden said there are three requirements that platforms must meet in order to be successful. They include: (1) a primary consumer motivator, (2) a secondary revenue generator, and (3) a churn inhibitor.

Of the three devices now on the market that use digital VCR technology-TiVo, Replay, and DISHPlayer-DISHPlayer, which is offered by Echostar and incorporates WebTV and interactive television technology, appears to best satisfy all three success requirements.

"At a $299 price point, the consumer urge to purchase this deluxe set-top box at an incremental cost over the standard Echostar set-top boxes will be difficult for digital satellite consumers to resist," Mr. Snowden said.

At the same time, WebTV will build a base of potential customers with an interest in interactive TV services, which can be developed into a secondary revenue stream generated through electronic commerce. This will satisfy the success requirement for a secondary revenue source

Third, by offering interactive television data services such as news, weather, sports, and TV listings, the system can inhibit churn through built-in customer loyalty.

"The beauty of all this is that it will require no significant change in consumer behavior," Mr. Snowden said. "People showing the most interest in these devices already frequently use their VCRs to time shift. They are well aware of the deficiencies in conventional VCR technology and will be quite open to paying the initial price for faster, easier control of their TV viewing."

By identifying additional revenue opportunities, and by forming distribution partnerships, Echostar and WebTV have positioned DISHPlayer well to launch a new generation of interactive TV platforms, Mr. Snowden concluded.

Additional information on this market is available by subscribing to Dataquest's The Interactive Home: Media and Entertainment U.S. program. This program provides strategic analysis of changes in consumer technology use and the impact of these changes on the TV, print and content industries, supported by data from extensive consumer research.

More information on this program, as well as other Dataquest e-commerce and Internet programs is available on Dataquest's Web site at http://www.dataquest.com/dq/static/offer/inteco_products.html.

To subscribe to this program or other consumer Internet related programs, please call 203/316-3107. To subscribe to other Dataquest programs, please call 800-419-DATA, or 408/468-8009. More information about Dataquest's programs, descriptions of recent research reports, and full text of press releases can be found on the Internet at http://www.dataquest.com.

GartnerGroup's Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.

As the world's leading authority on IT, GartnerGroup provides clients with a wide range of products and services in the areas of IT advisory services, measurement, research, decision support, analysis, and consulting. Founded in 1979, with headquarters in Stamford, Conn., GartnerGroup is at the center of a global community serving Fortune 1000 clients from 80 locations worldwide. Additional information about the company is available on the Internet at http://www.gartner.com.
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Date:Aug 18, 1999
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