Comcast, Intel back launch of interactive broadband pioneer
New Media Strategist - The International Newsletter of Entertainment Technologies and Markets

February 27, 1998
A new entertainment startup, called Intertainer, has launched the first on-demand programming service aimed at the interactive broadband networks, such as ADSL and cable modem. These are being built to homes nationwide by telcos and cable companies.

The new service signals the beginning of a new medium for delivery of entertainment, information and interactive services to home PCs. It uses broadband networks that can carry full-motion, high quality digital video.

Intertainer has also signed a distribution deal with US West. The telco will deploy the service on its ADSL services, as it intends to roll out the service to as many as 40 cities in the next year. It will also be offered through Comcast's cable modem systems, as they are deployed.

Backed by Intel and Comcast, Intertainer has assembled a complete package that includes programming, network management, settop technology and interface designs.

The Intertainer video-on-demand program package has movies from major studios Sony, MGM, Warner Bros., Universal and Twentieth Century Fox. It also has TV programming from National Geographic, PBS and a number of cable channels. Other offerings are cartoons, fashion shows, and a travel site by American Express that incorporates extensive video and a number of e-commerce applications.

Intertainer is now in two beta tests. The first began November 1997 on Pacific Bell's Fast Track ADSL system, through three central offices in Northern California. The other will begin in February on Comcast's cable modem system in Buena Park, CA.

At any time the service will have available for playback 500 hours of programming cached on UNIX servers, and will change about one-quarter of the programming mix each month.

Consumers will pay $3.95 for first-run movies in the pay-per-view window, and from $1.95 - $2.95 for library films. Hour-long TV shows will be $1 and kids' programming 50 cents.

The business model for the service is to share revenues from on-demand sales, advertising and transactions with the network provider and the content owner. VOD will be split with both, while advertising and transaction revenues will be split with the local network provider.

With both cable and telco (ADSL) systems we are using what I would describe as the basic cable model, said Intertainer co-chairman Jonathan Taplin. "They are charging consumers $40-50 per month for broadband cable (cable modem) or ADSL. If you get that service, you get our service for free. We are charging them [cable or telco operations] a per-month per-person fee that is fairly low."

Consumers already paying $39.95 or $49.95 for cable modem or ADSL services will not pay a monthly fee for Intertainer. Network operators will pay a small fee for each subscriber, but that is likely to be offset by VOD shares.

The service will use intelligent agent software by Firefly to monitor customer preferences and suggest programming. Each family member can have a sign-in ID. Advertising will be delivered based on the demographics of the user and past programming preferences.

Intertainer enters the interactive broadband market with almost no competition, except from the cable modem packagers, such as @Home, MediaOne Express and Road Runner, but those companies offer mostly information services in addition to Internet access.

Intertainer is focused squarely on on-demand video entertainment. Discovery Channel's Your Choice TV, originally aimed at the digital cable market, is a time-shifting service for current TV shows. It could migrate to an on-demand environment - although Discovery had not announced plans to do so.

"We see them [@Home, etc.] as complementary," says Intertainer co-chairman Jonathan Taplin. "They are doing Internet access and short bursts of two-inch by two-inch windows of video, but we are doing a full video service. They are complementary products because we are both trying to drive broadband penetration."

Taplin and co-founder Richard Baskin have extensive experience in entertainment programming, Taplin as a tour manage for Bob Dylan and producer of the movie Mean Streets, as well as in mergers and acquisitions for Merrill Lynch Capital. Baskin is the producer of the score of Nashville and has worked as a composer and producer in the music industry.

To receive the service, home users will need a PC, Pentium 90 or above. Programming will be delivered in MPEG 1, which the PC will decode and display at sub-broadcast quality. An MPEG 1 decoder card can be installed in the PC at the same time that the service is first delivered.

Eventually the service will migrate to a standard settop box, rather than one of its own design. "We want to be the navigator or client server of choice for all sorts of settop boxes," says Taplin. "When the Open Cable standard (the digital settop standard in development by the cable industry) settles in, we'll be in the center of it."

The company expects to migrate to the settop quickly and for that reason has written the applications on the box in Java for portability. Among those applications is a simple search engine to find titles or actors in the movie offerings and an intelligent agent that will make programming suggestions, and an e-commerce ordering application. For telco ADSL systems, they will also include e-mail service.

Having applications written in Java also assures easy portability to European settop platforms. Taplin said the company is already in talks with France Telecom, Deutsche Telekom and BT about its program packages and settop applications. It may also be featured in Stream, Telecom Italia's broadband cable service.

Intel is working with Intertainer to deliver the service to "settop computers" and will help it optimize the service for Intel architecture servers. It will also add video conferencing capability to the system.

Comcast will work with Intertainer on broadband PC and settop box applications, and may also provide programming from its E! Entertainment Television network.

Intel's undisclosed investment in Intertainer is highly strategic for the chip maker's ambitions to be a player in the TV settop market. As yet, no major settop designer or maker has incorporated Intel processors in a settop box design. In mid-February, just after the Intertainer announcement, Nokia, one of Europe's leading settop makers, announced a design using a rival processor.

If traditional Intel designs are not incorporated in emerging standards, such as Open Cable, the chip maker can still use its Intertainer experience as a base to develop new products.

Comcast is upgrading its network and deploying cable modem services. An investment in a program packager would give it preferred access to the kind of new programming that many believe is necessary to develop public interest in cable modem. If the new service succeeds, it would also bring in additional revenue.

Intertainer does not include any Internet services. Most broadband proponents believe that Internet services appeal to a smaller segment of viewers than VOD programming generally, and high-speed Internet access alone is not enough to encourage the average consumer to part with $40-50 a month.