SAN FRANCISCO -- Strange bedfellows met this week in San Francisco as cable companies and tech gurus put their suits and pocket protectors together in a concerted effort to make boatloads of money.
The event was the National Cable Show, the cable industry's annual convention. At stake is the melding of broadband pipes and digital television into a new series of products that leverage the strength of Hollywood, Silicon Valley and Wall Street.
The cable industry wants consumers to use their cable service to record and time-shift TV programs, play online video games, call up video-on-demand, or VOD, content on a whim, access the internet and replace their old telephone company with voice over internet protocol, or VOIP, service.
In many cases, consumers may have trouble discerning between the different services. And that seems to be the point.
"We're going to see that the internet and television are really two sides of the same sheet of paper," said Gary Stein, a senior analyst at Jupiter Research.
Such talk of "convergence" has been bubbling for years within the cable industry with limited results to show for it. But if comments this week were any indication, cable operators and tech companies are starting to project renewed confidence -- along with the realization that they need each other to turn visions into reality.
RealNetworks chairman and CEO Rob Glaser said he "would be foolish to not work in a collaborative way" with cable operators because they serve such a high percentage of broadband households. Glaser said such partnerships "are core and central to our future."
At the same time, cable executives are also warming to the tech sector.
"I'm glad you're looking at us as a partner and not as an enemy," said Jim Robbins, president and CEO of Cox Communications, in comments directed at Glaser.
In addition to Glaser, other tech luminaries at the show included Yahoo co-founder Jerry Yang, Vulcan chairman Paul Allen (Vulcan owns major cable operator Charter Communications), Google co-founder Larry Page and America Online chairman and CEO Jonathan Miller -- to name a few.
"We don't see ourselves on opposite sides," Yang told cable operators in attendance.
Meanwhile, Bingham Gordon, executive vice president and chief creative officer at Electronic Arts, predicted that the typical consumer will pay an average of $150 per month for various internet services within the next 10 years -- much of that potentially over cable lines.
Cable operators are banking much of their future on next-generation set-top boxes that they hope will convince customers to use cable for all their communications and entertainment needs.
Brian Roberts, chairman and CEO of Comcast, the largest U.S. cable operator, predicted that 50 percent of all TV viewing will be time-shifted in the next five years, suggesting an explosion of DVR set-top boxes.
Steve Burke, Comcast's chief operating officer, said the company's goal is to provide at least 10,000 hours of VOD programming to its 21 million customers. Burke predicted that by 2009, cable operators will provide VOD to 41 million U.S. cable households and capture about 44 percent of the DVR market.
The growth of VOD and DVR features, however, also could force the cable industry to adopt new advertising models as increasing numbers of consumers skip over TV commercials.
"Some people just don’t want to see that Aflac duck over and over and over again," said David Cassaro, president of Comcast's network sales division.
Jon Mandel, chairman of media buyer Mediacom U.S., said his advertising clients continue to scratch their heads over VOD -- especially when it comes to tailoring commercials for niche audiences rather than the traditional mass audiences they are used to.
"The problem is the creative people," he said, regarding traditional television advertising agencies' approach to VOD. "We need to find a way to somehow get the creative people to use this beast."
Advertisers may not have a choice: On the show floor, new set-top boxes were all the rage. For example, Digeo, a Kirkland, Washington, firm primarily backed by Vulcan, demoed several "Moxi" branded set-tops that allow users to record shows, display digital photos, stream music, play video games and call up news tickers on TV.
Despite a long history of failures among interactive TV vendors, executives say the cable industry's newly digital networks and other innovations are giving them hope that efforts will prove more successful this time around.
One Moxi box even includes a VOIP phone connection, along with the ability to organize voicemail and messages on the TV screen.
In fact, show organizers devoted several panels to VOIP, suggesting increasing interest among cable operators.
Sam Howe, senior vice president of marketing for VOIP at Time Warner Cable, said the company had 220,000 VOIP customers at the end of 2004 and is adding new subscribers at the rate of 11,000 per week.
But even as cable operators increase VOIP awareness with marketing and ad campaigns, Pulver.com general counsel Jonathan Askin said many consumers still need convincing. The industry needs to provide a compelling pitch to get the public excited about the technology.
"We're still waiting for the Steve Jobs of VOIP," he said.
