|From OPTV conference call|
From J. Ackerman, CEO
Great, thank you, Craig.
As outlined by Craig, OpenTV’s restructuring initiatives have begun to bear fruit in the form of a significant drop in quarterly losses and cash burn.
OpenTV has now completed the acquisition of two public companies announced last year. As a result of these acquisitions, the combined workforce has been reduced by 357 people and our total employment stands at 411 employees worldwide. Of this, approximately 286 are engineers, supporting our customers and technologies worldwide.
We have also completed our efforts to consolidate our Bay Area operations and now have the former OpenTV and Wink headquarters under one roof here in San Francisco. We will continue to seek to operate the Company as efficiently and as smartly as possible.
Lastly, as previously indicated, we continue to our plans to divest non-strategic assets. To this end, we are in the process of selling ACTV’s eSchool business, which includes approximately 35 employees.
A year ago this month, Liberty Media completed its acquisition of the control stake in OpenTV. Since then we have initiated a major restructuring of our global operations to better align our expense structure with the realities of revenue in iTV today.
As part of this effort, we have closed over ten offices worldwide and now operate our business from approximately ten locations in seven countries, to more efficiently serve our global customer base.
It is said that a three-strand cord is not easily broken. We believe these three companies, OpenTV, Wink and ACTV, are stronger together than they ever were individually.
Today OpenTV is the largest enabler of interactive television in the world. As of June 30, television viewers in over 70 countries can interact through their television sets via nearly 50 million digital set-top boxes empowered by OpenTV’s various technology platforms.
Nearly 50 network operators, including digital cable, satellite and terrestrial platforms, distribute these interactive television services globally.
Our games channel, PlayJam, is available to over 12 million subscribers through seven network operators. Our library of games, many in both English and French, is now approximately 300 games strong.
Further, we have developed applications for clients throughout the world, that include, for example, news, weather, sports, soccer, football, traffic, horoscope, lottery, finance, the list goes on.
Focusing on the U.S. market specifically for a moment, OpenTV’s technology platforms enable more than 20 million digital cable and satellite set-top boxes.
Today for example, U.S. TV viewers are able to participate in quizzes while watching episodes of Trading Spaces on The Learning Channel. They’re able to look up the weather of hundreds of cities on demand with just the push of a few buttons on the remote control. Some are playing games, checking listings for movies, buying a CD or interacting with a commercial.
We are cautiously optimistic and hopeful we will be able to broaden this technology and we are out selling network operators and programmers our new business model for pro sync (program synchronous iTV) in both full-motion video and advertising.
Consumers ultimately sit down to watch TV and we believe that content- sensitive pro sync interactivity, inserted and developed in the creative process itself, by the creative community, will provide consumers with a very compelling experience. Today networks like Discovery, ABC Television, Bloomberg and Turner, are creating compelling pro sync content that is attracting top tier brand advertisers.
It is not uncommon today for specific programs to see 20-40% of viewers in homes with our pro sync technology, interact with the interactive content within that program.
In today’s multi-channel environment, it’s becoming increasingly difficult for advertisers to target audiences, and when they do, to effectively get the message across. Today our enhanced TV and interactive advertising platform business, via
Wink, enables advertisers like Ford, Coca Cola, P&G, Wal-mart, to interactively enable their brand advertising. Whether it is to get a sample of a product in to the hands of a targeted consumer or to generate qualifies leads for a new car, interactive advertising is allowing brand managers to reach their consumers more effectively.
But that is only part of the solution, connecting with consumers effectively is important, but it is equally important to reach them efficiently, by seeking to eliminate the tonnage problem. You see, most television advertising is seen by a high percentage of viewers who do not meet the target demographic being sought for that product or brand. Advertisers are looking for ways to better reach their specific targeted audiences. In other words, they are looking for addressable advertising.
OpenTV’s SpotOn technology platform is being trialed with Comcast today at their Aurora office in Denver. The trial is reaching nearly 15 thousand Comcast subs in that franchise. Participating with us in the trial are networks ESPN, Discovery, Lifetime and TBS, as well as advertisers General Motors, Coca Cola, Johnson & Johnson, U.S. Army and Home Depot. And these advertisers are represented by major agencies like Starcom and McCann-Erickson.
What SpotOn does, is to seamlessly switch between multiple adds during the same commercial break. This allows networks to offer one advertiser the opportunity to present say, three or four different products, each sent to specific subscribers, based on demographic profile, or alternatively, to sell that one commercial break to different advertisers seeking unique demographic segments. Either way, the advertisers are able to reach the exact audience targeted, making the ad buy more efficient, while the programmer is able to charge a higher CPM, meaning costs per thousand, which is how advertising is generally sold, per spot.
For sake of example, ESPN might be broadcasting a Cowboys versus Redskins game with Ford as a major advertiser. Watching the game are both men and women, young and old, single and married, with kids in home and without and a broad range of income levels, etc. With SpotOn, ESPN is able to offer Ford the opportunity to present commercials for Mustang, Explorer, Expedition and Taurus to their specific target audiences within the same 30 second commercial break.
Imagine, when you combine the two together with OpenTV’s global reach, advertisers will be able to efficiently reach their specific target audiences while connecting with them directly through interactivity. For the cable and satellite operators, these platforms present an opportunity to create uncapped value through their local avails across nearly all networks that carry it. Using Ford, and the Ford example on ESPN, run within a local avail, each one of the addressable
commercials for Mustang and the Explorer, etc., can be tagged with an interactive call to action. Reviewers can request the local dealer in their community contact them directly to arrange a test drive.
Good tools for ad trafficking and billing are extremely important as well. We believe we have the most advanced ad trafficking and billing system available today in our Advision product. Advision already supports a few systems at each of Comcast, Cox and Time Warner Cable. We will seek, over time, to increase the distribution of this product, as well as all of our platform products.
When we dream about the future, on-demand content, time-shifted content, addressability, any interactivity, will all fundamentally change the old rules of how we receive marketing messages and how TV advertising is bought and sold.
Having a state of the art ad trafficking and billing solution that addresses these issues and provides the network operators with the ability to handle and charge for this capability is essential. We think we have the best solution in the industry.
Lastly, advertisers need good research and data to better plan their campaigns and measure consumer response to new products and special offers. To this end, OpenTV has started a new research division to help us better standardize and market our research to the advertising, program network and operator communities. As a result of our technologies, we have the ability to provide our clients and partners with excellent quantitative information of what’s really happening and what’s really being used.
Combined, these three companies, that are all now part of OpenTV, allow us to be a world leader in one; pro sync enhanced TV and advertising, two; addressable advertising and trafficking, three; middleware and digital network technologies, and four; the development and operation of interactive TV applications.
We believe the complete product suite of OpenTV gives operators, programmers and advertisers the “best of breed” of technology platforms to enable advanced forms of content, enhance programming and interactive and addressable advertising.
We bring global reach and thus scale economics to our partners. We bring knowledge and experience to assist programmers, operators and advertisers on how to effectively use iTV to improve their businesses. And, we bring the added benefit of being able to stand behind our products with a patent portfolio of 307 patents issued worldwide. This includes 76 patents issued in the U.S. alone.
Last, but not least, we have a very significant research and development organization. And have a pioneering and important intellectual property portfolio that covers key areas including but not limited to, managing thin-client set-top boxes, how to get data in to and out of set-top boxes from cable and satellite networks. How to either push or pull information to the set-top boxes. How to deal with transaction processing and various pro sync activities. How to support addressable advertising and seamless switching.
Our substantial intellectual property portfolio allows us to stand behind the products we bring to our customers.
Let me give you more detail around our patents. As a result of the two acquisitions, we now have a very significant and important patent portfolio that includes over 900 issued and pending patents worldwide, with over 38,000 claims. The issued patents worldwide is the 307 number I mentioned, and these come with 8,000 claims. Then again, as I mentioned before, 76 of these patents are issued in the U.S.
Pete and I have been spending a lot of time on the road recently with program networks and the cable and satellite operators. We believe from these meetings, there is real demand for our products and a general belief that iTV can play an important role in increasing customer satisfaction, reducing subscriber churn and opening new revenue streams for all involved in bringing iTV to the market.
There is still a lot of work to be done before we can claim victory, but we believe these three companies combined are all well positioned for success. We believe that iTV has finally arrived. And evidence around the world continues to support this belief.
Just yesterday, OpenTV customer, British Sky Broadcasting announced their fiscal year-end results. Interactive revenues were up 17% year-on-year, while revenue from interactive advertising was up 54% year-on-year. Today, Sky generates a total approximately $50 per sub per annum in ARPU from iTV. That’s revenue per subscriber services, and that’s across 6.8 million DBS subscribers.
Now their platform of course is utilizing a telco return path, as opposed to an always-on, two-way cable back channel. Betting still represents 50% of all revenues generated by Sky from iTV and approximately 12 million bets were placed through the TV set on Sky in just the last twelve months.
We too are looking to expand our own involvement in the area of interactive gambling and games. By exploring fixed odds games and betting, it’s our intent
in the short-term, to add fixed odds games to our own PlayJam games channel where regulations allow. In addition, and consistent with our longer-term strategy outlined last year, we’re considering an acquisition in the interactive gaming space, which we will report on in more detail in due course.
We spent a lot of time over the last year acquiring the necessary pieces of a puzzle that includes technology and intellectual property that should allow us to establish a leadership position in pro sync and addressable advertising, in addition to the leading position we have in middleware, application and games at OpenTV.
We are now intensely focused on operating, integrating and completing the restructuring of these three companies. We continue to expand and build our talents at senior management team and plan to make some additional announcements shortly in this regard. As I stated before, I believe, we’re all well positioned for growth.
In closing, when you take a look at our global business, technology footprint, intellectual property, product offering and geographically distributed customer support network, you will realize that we are substantially ahead of our competitors in virtually every measure. Install base of set-top boxes, number of network customers, number of games developed and played, number of applications written and developed, number of languages supported, number of tools and services offered, number of set-top boxes supported to our various technologies, depth of our partner program, etc. etc.
Last but not least, we truly look forward to the possibility of expanding our relationship with Liberty Media Corporation affiliates as they begin or continue, to offer iTV products, services and technology to their customer base. We fully appreciate and realize, we can’t control the capital markets, nor can we control investor interest in iTV. It is our belief that these will develop over time, as people better understand the future of iTV.
We thank you for your continued support. With that, let’s turn the call over to questions. Operator?