2 More Net-TV Companies Tell Merger Plans
Just one day after Microsoft endorsed the idea of the TV as an Internet-surfing device by agreeing to buy WebTV Networks, two other upstart companies that hope to bring the Net to people’s living rooms announced plans to merge.
NetChannel Inc. of South San Francisco said its agreement to acquire Georgia-based ViewCall America Inc. was put together weeks before Sunday’s announcement of the Microsoft-WebTV deal.
But the acquisition may help define the shape of a budding industry that, after enduring derisive snickers from skeptics in the high-tech community, is suddenly being taken seriously.
NetChannel, ViewCall and WebTV are all in various stages of development of systems that enable consumers to access the Net cheaply through their television sets. So far, WebTV is the only company among the three to have a significant customer base, with about 50,000 subscribers.
Many computer companies, eager to continue selling $2,000 home PCs, have been quick to dismiss the Internet-TV combinations as hopelessly crippled devices that will never have broad appeal
But analysts estimate that the number of subscribers to WebTV and comparable services could grow to as many as 3.2 million by the turn of the century. After all, only 40% of American households have computers, while virtually all have televisions.
“Long-term, this is an interesting and potentially lucrative business,” said Josh Bernoff, an analyst at Forrester Research Inc. in Cambridge, Mass. All three companies require users to spend about $300 for set-top boxes, and about $20 per month for subscriptions.
But for the industry to reach its potential, he said, companies will have to develop services far more compelling than simple Web browsing on a television screen.
On that front, executives at NetChannel and ViewCall say they already have advantages over WebTV. While WebTV lets subscribers use their television sets to access the Internet much the way they would with a computer, NetChannel and ViewCall have both developed systems that deliver specific content for each subscriber.
“WebTV in essence puts the Internet on TV and forces you to browse,” said David Atkinson, chairman of NetChannel. “Our philosophy is to take the Internet, turn it upside down and shake out those pieces of information that are of interest to you.”
Subscribers who turn on the television and click over to a designated Internet channel can find weather reports for their region of the country, for example, or sports scores of their favorite teams.
Beyond that, Atkinson said that the industry will ultimately depend on the efforts of television broadcasting companies to develop more compelling ways to use Net-TV technologies. That process will be accelerated by the broadcasting industry’s pending switch to digital technology.
Analysts said that the two acquisitions of the last two days bolstered each of the companies involved.
Microsoft’s $425-million infusion will help WebTV continue to expand in a business that is unlikely to generate profits for years, Bernoff said. And since NetChannel and ViewCall were pursuing similar strategies, it made little sense for them to fight with each other over market share.
The combination of NetChannel and ViewCall also enables the companies to bring together their exclusive arrangements with RCA, Mitsubishi and other TV manufacturers that have agreed to equip their sets with Internet-TV capabilities.
Terms of the NetChannel acquisition of ViewCall were not disclosed. Both companies are privately held.
Atkinson said that the combined company’s headquarters will be in South San Francisco and that Philip J. Monego, a co-founder of NetChannel, will be chief executive.
