Keeping an Eye on the Interactive TV Industry

On the slow road to interactive television, privacy advocates are trying to erect a sign reading "Private Drive -- Keep Out."

The Center for Digital Democracy, a Washington, D.C.-based watchdog group, issued a report on Tuesday alleging that companies in the fledgling interactive TV industry are getting ready to deploy technology allowing companies to capture and analyze "tremendous" amounts of information about TV viewers and their viewing habits. CDD also called for Congress to strengthen current laws to make data-collection curbs on interactive TV firms easier to enforce.

The report arrived as various executives in the industry gathered at a trade show in New York to express what might be termed as patient optimism on behalf of interactive TV, an industry held in check both by unclear economic returns and by tight budgets at cable TV systems and other network operators that might deploy the new technology. But speakers at eTV World insisted that in their search for advertising dollars to support the business, they wouldn't cross any lines viewers didn't want them to.

Called "TV That Watches You: The Prying Eyes of Interactive Television," the CDD report's publication illustrates how the interactive TV business -- including software firms like Liberate Technologies (LBRT), WorldGate Communications (WGAT) and ACTV (IATV) -- may one day face privacy-related public-relations disasters like DoubleClick(DCLK), which saw its stock plummet in early 2000 after it was reported that the Federal Trade Commission was taking a look at DoubleClick's practices for collecting information about Internet users.

Capturing Information

The report says companies including ACTV, digital video recorder marketer TiVo (TIVO), interactive programming guide developer Gemstar-TV Guide International (GMST) and cable TV equipment supplier Scientific-Atlanta (SFA) all are working on various data-gathering systems that would collect information about people's TV-watching habits and/or use personal information to target viewers with particular television commercials.

"They're going to be capturing a tremendous amount of personal information that can be used without your consent," says Jeff Chester, CDD's executive director.

But it appears that the CDD hasn't quite found a smoking gun in its search for interactive TV privacy violations that might outrage TV viewers, legislators or regulators. The report doesn't actually document any recent interactive TV privacy violations, only company plans. It also seems unnecessarily alarmist about at least one company, the CMGI (CMGI) subsidiary AdForce, which the report cites as one of several companies marketing technology that threatens viewer privacy. In fact, CMGI said two weeks ago that it was shutting AdForce down; a CMGI spokeswoman says interactive TV technology wasn't a core product of AdForce's.

David Limp, Liberate Technologies' chief strategic officer, says cable and satellite operators have lengthy experience in handling privacy issues. It's been traditional, he says, that people who reveal information about themselves for marketing and research purposes get some sort of compensation for their cooperation. "The consumer should get value for every peel that comes off the onion," Limp says.

Similar to the Internet

Rick Mandler, general manager, enhanced TV for Disney's (DIS) Walt Disney Internet Group, says Internet privacy policies likely will be transplanted to the interactive TV arena. "The issues in the interactive television space are the same issues as in the Internet space," Mandler says. "Our interactive privacy policy to cover that platform shouldn't be much different."

Despite excitement about a year ago that the interactive TV market was on the verge of going mainstream, some of the panelists at a Tuesday morning eTV World session professed limited expectations over the next few years. WorldGate Senior Vice President Gerard Kunkel, for example, expressed skepticism about the commercial viability of video on demand, given the current costs to supply the service. Video on demand permits viewers to watch a movie or other programming from a centralized video library at any hour of the day they choose, and also to pause, fast-forward and rewind as if they were watching a tape in their own VCR.

Most of the panelists said they had to clearly demonstrate to themselves and their customers that their services could generate dollars, either from consumers or from advertisers. The mantra of Disney's enhanced TV group, says Mandler, is "How can this make money?" He adds that the group is "slightly" profitable.

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