The front-runners in the race to develop a new type of advanced television system announced Thursday that they had reached a tentative agreement to share any future royalties, thus dramatically reducing the financial stakes in the long-running high definition television competition.
The deal partially unites two rival consortia, one an alliance of American Telephone & Telegraph and Zenith Electronics, and the other a link-up between General Instruments and the Massachusetts Institute of Technology. Both groups have entries in a Federal Communications Commission technical competition that will lead to the selection of an American high definition television standard late next year.
High definition television will provide cinema-quality pictures and stereo-quality sound, though the HDTV sets and the necessary broadcasting equipment will initially be far more expensive than for conventional television.
The protracted process of selecting technical standards has been closely watched because HDTV is expected to be a multibillion-dollar business by the late-1990s--and because many had feared that this new market would be dominated by Japanese firms. These fears have eased over the past year as AT&T;/Zenith and General Instruments have moved ahead with systems that use digital computer technology rather than the analog technology used by the Japanese companies that once led the field.
Under the agreement in principle announced Thursday, AT&T;/Zenith and General Instruments/MIT (which has two entries in the FCC competition) will share royalties if any of their systems are selected. Specific terms were not disclosed and a definitive agreement must be negotiated. In addition, the two groups have agreed to cooperate in perfecting the winning system after the competition is over.
The two other competitors in the race are the Japanese broadcaster NHK, which for both technical and political reasons is given little chance of winning, and a consortium that includes the European consumer electronics powerhouses Thomson and Philips along with NBC and the Sarnoff Laboratory.
The AT&T;/Zenith/General Instruments/MIT deal does not call for any technical cooperation in advance of the FCC's selection, and it does not call for equal sharing of the royalties. If the AT&T;/Zenith entry wins, for example, AT&T; and Zenith will get more royalties than if one of the General Instruments/MIT systems wins.
In addition, company officials said they still had other incentives to win. All hope that if their system is chosen as the standard, they will have a head start not only in HDTV broadcasting equipment and TV sets, but also in the provision of related gear for cable TV, satellite TV and possibly even for business teleconferencing and computer video systems.
"This is really an insurance policy for the financial risk," said William Warwick, president of AT&T; Microelectronics. "We are still very interested in seeing our technology become the standard."
It has never been clear how much it might be worth to win the FCC competition, both because nobody knows how big a market it will be and because the FCC will require that the technology be licensed to other manufacturers for a "reasonable" royalty rate.
Joseph Donahue, senior vice president of Thomson Consumer Electronics, said his group had not been invited to join the others, but he said such a link-up was still possible in the future. He said he was still confident of his consortium's chances and noted that though Thomson and Philips are European, they employ 20,000 people in their television manufacturing operations here, far more than the American competitors.