The tortured tale of the telcos

Technology like TiVo could learn from ahead-of-its-time Tele-TV

Here’s what anyone pushing new technology should know by now: It takes more than a few bells and whistles to shove couch potatoes out of their seats and into the electronics store.

Consumers abhor technology. It reminds them of those tangled wires behind their TV set, the triage they have to perform when their PC crashes, and the 12 different remotes scattered around their living room.

And your product may change lives, but if you can’t get it into people’s homes, it’s time to rethink your entire business model.

To that end, the brass pushing au courant technology like TiVo might learn a thing or two by reviewing the promising start — and fateful collapse — of the last major techno-fueled product hyped as the second coming of television: The telephone company-backed venture Tele-TV.

Name ring a bell? Call it the TiVo of its day. In 1995, Tele-TVwas poised to revolutionize television, and turn a whole new range of players — the mega telcos — into Hollywood titans.

With the promise of fiber optic-delivered video right around the corner, Tele-TV parents Pacific Telesis, Nynex and Bell Atlantic spent $500 million on the belief that they could change the way people watch the tube.

Hollywood chilled to the out-of-towners. Were these “pole climbers,” as some entertainment vets derided them, about to march into town and steal their talent, take away their viewers and — worst of all — snatch their backend?

CAA rainmaker Mike Ovitz even convinced the Baby Bells to open their pocketbooks wide and attract a dreamteam of Hollywood heavyhitters to run the show and create content for those pipes: Among them, CBS/Broadcast Group president Howard Stringer, former Fox Entertainment prexy Sandy Grushow and then-Fox exec VP David Grant.

It was the perfect time to snag such marquee names, as the broadcast business was undergoing one of its frequent sea changes. Stringer wanted out of CBS, while Grushow was let go at Fox when Rupert Murdoch decided to go a different direction (he later triumphantly returned).

Ovitz and Stringer managed to entice the town with dreams of original on-demand content and fresh ways to dazzle increasingly bored audiences. And Grushow, Grant and company even came up with several futuristic features for the venture, including an interactive program guide and video-on-demand features.

With so much furor surrounding Tele-TV’s launch, industry execs braced for the hurricane of change. Gripped to their desks, they closed their eyes and waited. And waited.

One problem: Getting the technology into people’s homes proved more daunting than originally thought.

Wiring homes for that kind of video delivery wasn’t going to happen overnight — and it wasn’t going to be cheap. That original dream dashed, Tele-TV was forced to reorient its focus — in their case, to the less-flashy world of wireless cable.

But the telcos grew disinterested, particularly once they were allowed to enter the long distance biz — something less pricy, and more up their alley. Ovitz jumped to Disney, leaving his Tele-TV pals in the lurch. And Stringer and Grushow found themselves stuck with a great product, but no means to shove it into peoples, houses.

The Baby Bells chucked their video ambition by 1997. Stringer and Grushow left with hefty severance checks, believed to be worth a cool $8 million each.

“We were a prisoner of expectations,” Grant says of Tele-TV’s fall. “It was like we were setting out to build a really hot car, but no road to drive them on.”

But that’s not the end of the story. Several of the venture’s early innovations have indeed made it into the marketplace–and its promise seems more attainable in 2003 than 1995.

In other words, by shutting down, Tele-TV missed its own revolution.

The PVR biz now finds itself at a similar crossroads.

Like Tele-TV back in the mid-1990s, DVRs promise to rattle the business down to its core. But not overnight.

In theory, TiVo and Replay should be racing off the shelves: No more blank tapes, no more confusing timers, no more digital clocks that blink 12:00 at all times. Recording’s a snap, commercials are zapped, and DVRs can pause and rewind in real time. Despite all the hype, TV audiences haven’t yet warmed to the digital video recorder. Just 4.3% of households currently own one of the machines.But hold on. DirecTV and Echostar have slowly begun offering DVR service (including TiVo, in DirecTV’s case) on its set-top boxes. Cable companies are looking to do the same.

TiVo and Replay can either get out of the way, like Tele-TV ultimately did, or stick around and figure out how to remain a part of the action — whenever that action takes hold.

“It’s not about how many people have TiVo now, but in five, ten years,” Grant says. “It doesn’t sound that far away. It’s really about timing.”

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