In his latest high-profile gamble, John Malone is betting about $300 million that viewers are ready to tune into interactive TV.
The media mogul’s Liberty Media Corp. announced plans Wednesday to acquire iTV technology providers OpenTV and ACTV, as well as the formation of Liberty Broadband Interactive Television, a subsid to oversee the conglom’s iTV investments and product developments in the burgeoning arena. The iTV company acquisitions are expected to be the first of several for Liberty.
Interactive TV services, which similar to a Web site, let viewers interact directly with programming and advertising, have been struggling to find a mass audience and have faced fragmentation from competing technical standards among cable providers.
Malone’s investment in the sector should help give iTV the booster shot it’s been looking for to grow — especially in the U.S., which has become a tough market to crack — as well as some incentive to investors who are confused over whether to support iTV, video-on-demand or telephony services.
By the end of this year, about 15% of the 105 million United States households with television sets will have some kind of iTV service — almost double last year’s number, according to Forrester Research. Interactive TV isn’t expected to fully take off until 2006, analysts predict.
At the very least, the acquisitions will make it easier for Liberty to increase revenues by rolling out inexpensive and easy to use iTV products, as well as beef up programming offerings to cable subs. Liberty owns QVC and a partial share of the Discovery and Game Show Networks. It also controls Europe’s largest cabler United Pan-Europe Communications, as well as 25% of Telewest, Britain’s second-largest cabler.
Cash, stock deal
Liberty is spending $185 million in cash and stock for a 43% economic stake and an 87% voting interest in OpenTV, which makes iTV software for cable set-top boxes. Liberty, which is taking control of the company from MIH Limited, a British Virgin Island-based pay TV services provider, will pay 21% of the total OpenTV purchase price in cash and the balance in common stock.
OpenTV provides interactive television services to more than 24 million cable and satellite homes. The company becomes the third major TV software company that would be controlled by a broadcaster. News Corp. already controls NDS Group, while France’s Vivendi Universal-controlled satcaster Canal Plus owns Canal Plus Technologies.
In the ACTV deal, Liberty plans to purchase the 84% of the company it does not already own for $2 per share, payable in either cash or stock. Deal for the New York-based company, which makes applications for interactive advertising and features that enable viewers to change camera angles during sporting events, for example, should close within the next 65 days and is worth as much as $92 million.
The new Liberty Broadband Interactive Television subsid will be based in Tulsa, Okla. Peter Boylan, a vet of United Video Satellite Group, the predecessor to Gemstar TV Guide Intl., has been tapped prexy and CEO of the company.
OpenTV will initially concentrate on creating interactive ads and “t-commerce” offerings, which let consumers buy goods and services through their TV sets, Boylan said.
Liberty’s significant investment in iTV also mirrors a similar move the conglom made several years ago when deciding to buy up some of the biz’s largest post-production facilities, including Todd-AO, Four Media Co. and Soundelux, and improve profit margins through consolidation and resource sharing.
“The iTV sector along with other technology areas have been out of favor with investors for the last few years, creating a unique opportunity for us at this time,” he said. “I firmly believe that with Liberty Media we can create substantial shareholder value in this sector while forging new, mutually beneficial relationships with multi-channel video providers and programmers seeking to enhance their existing applications, traditional advertising businesses and associated revenue streams.”
Shares of Engelwood, Colo.-based Liberty rose 53¢ to close at $10.55, a gain of 5%. ACTV’s stock surged 48% to close at $1.67, while OpenTV gained 64¢ to close at $5.08.