General

ITVN: Vertically Integrated IPTV

It claims to be the only truly IPTV product available. It truly wants to work with ISPs. But is the technology and the product line really ready for prime time?

by Gerry Blackwell [December 29, 2005]

Laguna Niguel, Calif.-based Interactive Television Networks Inc. (ITVN) (OTCBB: ITTV), a broadband pay TV provider that works something like a VoIP provider, is trying to come out of the shadows of its early history as a porn peddler.

With new more TV-like content; less emphasis on adult material; and proven, inexpensive technology, ITVN is an intriguing proposition for ISPs. But it needs to put more distance between the porn and the mainstream content.

ITVN started as XTV, a purveyor of hard core video porn. It still sells the adult service but has added some tamer content, including old movies, and is promising more in early 2006. Subscribers receive a set-top box which they connect to their TV with composite, S-Video or component audio-video cables and to their broadband router via Ethernet. ITVN developed much of the technology itself.

"What we do is manufacture a tremendously inexpensive, small, and easy-to-use box that connects between router and TV without the need to use a PC," says ITVN CEO Charles Prast. "It allows us to bring the power of broadband to the home TV."

The box, with its own remote control, uses off-the-shelf hardware and ITVN-developed firmware. "Middleware represents the largest part of the technology that is proprietary," Prast explains. "The software that manages the programming of the network, that manages the video streams, the billing, the ad insertion, all the e-commerce capabilities, and the subscriber data—all that software is our own."

The box delivers programming at a variety of bit rates—currently 300, 500, and 700 Kbps, but it will be increasing to 700 Kbps, 1 Mbps, and 1.5 Mbps with some of the new content.

ITVN also owns the content rights. It negotiates directly with rights owners in some cases. In others, it's using material in the public domain. For the new content coming in January, it negotiated with aggregators in some cases.

More diversity needed

The current offering is still dominated by porn—20,000 hours of content, over 60 hard core movie channels, and seven "interactive portals" with on-demand material. Subscribers pay $30 or $50 a month depending on the package, with the first month free.

ITVN also has "thousands of hours" of old, mostly bad movies in its Silver Screen collection, which it offers on a pay-per-view basis for $2.95 each or on programmed channels for $4.95 a month.

The website advertises Music Vault (music videos on demand), Fitness Network (exercise programs), and Worldwide News (local news services). These networks also show up as links when subscribers log into ITVN with the box, but none is available yet. The company recently announced Indie Film Theater, a new service to be launched in January that will offer an extensive catalog of independent and student movies on a pay-per-view basis at $2.95 each for 72 hours of access.

Other new content, to be announced at CES in Las Vegas in January, will include a channel for an as yet unnamed professional sports league and more of the type of channels "you typically find on cable or satellite," Prast says.

ITVN will also announce a service that allows users to share photos online.

The new content will stop short of including mainstream network channels. ITVN does, however, have big plans for adding more content in the future. "Our intention is to eventually carry everything that you would find on a basic cable service," Prast says. "But it will probably take us 12 months to get there. There's a lot of legal wrangling at the corporate and regulatory level."

For now, ITVN is controlling all aspects of its business. It developed and builds the set-top boxes and middleware, negotiates content rights, pulls some programming down from satellite feeds, compresses content for delivery at different bit rates and manages all the back-office functions. It does outsource some media storage.

"The reason we're so vertically integrated," Prast explains, "is that we don't really know how [the IPTV space] is going to evolve, and we don't want to limit ourselves until we can determine which parts of it will be most profitable."

In the meantime, he says, the technology's disruptive character, plus the tangled and contentious issues around content rights, make the IPTV industry a fascinating one. Prast claims ITVN is the industry's first and so far only true IPTV player.

"We know that the IPTV space is going to be huge," he says. "It's also going to be devastating for a lot of traditional media distribution platforms. We can deliver unlimited content on demand at a very reasonable level of quality, and that's going to cause problems for satellite and cable companies."

Go to page two: Plans for a video future, plans for ISPs >