May 31, 2007

tvCompass Hopes It Has a Remote Chance with Cable Ops

By Jim Barthold

America's love affair with handheld gadgets – let's keep this clean, shall we? – has led to the inevitable: a universal remote that's really universal. That's what tvCompass, a company founded by veterans of such firms as Motorola, the late unlamented General Instrument, Research in Motion, Liberty Media, Macrovision and InstallShield have developed and hope to sell to the cable industry.

The tvCompass Smart Remote (a clever name that no doubt reflects the technical background of the company's founders) is a universal remote with color LCD, Wi-Fi connectivity and mobile wireless connectivity, of a sort.

"It looks like a mobile phone, but its primary function, how it gets sold and brought into the home, is as a premium home theater learning remote," said Ed Zylka, tvCompass' CEO and a veteran of both Moto and GI.

The company figures by adding Wi-Fi connectivity to the unit "there are a lot of opportunities to take what the mobile industry is doing with gaming and text messaging (and) add those to our device and create a revenue stream based on the remote control, which, up to this point, has been a cost center for everybody."

A remote possibility

Actually, the typical cable remote has never been a cost center. Even the most full-functioned devices have a quick and ongoing payback thanks to operators' leasing fees. tvCompass might take a little longer to recoup the investment, Zylka conceded.

"It costs a lot more than a $5 cheapie remote," he said of the device, which has a retail tag of $299 but would be considerably discounted for cable operators. "There is a business model behind it that once it's in the home, it will generate revenue for the cable operator or for any video service provider. There's not only payback, but there's a continuing revenue stream."

Zylka thinks that tvCompass hits a couple sweet spots the revenue-conscious cable industry is targeting: text messaging and interactive advertising.

"Text messaging is a very high margin application," he said. "Think about any voting on television. The cable operators carry a majority of that video content into homes in the U.S., but when it comes to text revenue, they get zero."

Mobile operators get about 20 percent of their revenues from that sort of text thing, he added.

Stealing from the cellcos

"This is a way for us to help (cable operators) redirect revenue from the cellular carrier into their pocket using our device," he said.

Interactive advertising is frankly still on the whiteboard, but with advertisers moving away from supporting linear programming faster than Custer's troops retreated from the Sioux and Cheyenne, the cable industry is welcoming any suggestions to stem the flow – even if that includes a super-expensive remote control.

"Our device is two-way. We have a patent issued in Europe, and it's pending here, that will allow us to receive a timing cue from a broadcaster so we can synchronize our screen with the main screens. If an ad came on from BMW, you could respond to it (and who wouldn't?). Not only could we track it for the advertiser, but we could request information for the consumer and then actually count a click-through for an advertiser," he said.

Of course, if the cable operators don't want to play – and the industry is nothing if not cost-conscious when it comes to CPE investment – tvCompass has fallback positions. First of all, with all the high-end home entertainment center owners consuming remotes faster than a kitten devours dinner, there's always a need for a high-end universal remote.

"That's natural for us to go into the market in this growing segment," said Zylka. "We're going to be building applications into this that will allow you to control different media in the home, and that could be sold in retail ... in the wireless section of the store."

And, of course, cable's not the only service provider in the consumer home anymore.

"We run the network; we're the equivalent of a mobile virtual network operator," said Zylka. "We have servers; we find content, provision the content and deliver the content."

About the only thing tvCompass doesn't run is a mobile network, so "we may need the mobile carriers to hand off between a text message on our device to a mobile phone or from a mobile phone to our device," he said.

And that opens up an intriguing – or if you're a cable operator, troubling – notion.

"If you're Sprint and you do have content like games and applications, there is an opportunity to repurpose some of that content, or even Verizon to some extent. In that case, they're just the distributor of the content. There's no conflict; there's compatibility," Zylka concluded.

- Jim Barthold