WebTV: Simplicity, Convenience and Customer Satisfaction Make It the Second Most Used Online Service

REDMOND, Wash., June 2, 1999 — When Lora Hoffer, a retired registered nurse who lives in Harrisburg, Pa., overheard an elderly man in a department store explaining to a salesperson why he wanted to buy a personal computer, she couldn’t resist. The man’s wife had developed cerebral palsy, and he wanted to be able to research the disease on the Internet. Hoffer struck up a conversation with the man and soon led him away from the PCs to a WebTV display. In just 10 minutes she had introduced him to the world of interactive TV, where the television and the World Wide Web come together to deliver a whole new level of entertainment and information. The man left the store with a WebTV device, and a few months later sent Hoffer an email from his TV set, thanking her for talking him into buying it.

Hoffer has been using WebTV since 1996 and loves it. She has sold dozens of WebTV devices this way, and she is not alone in her enthusiasm for the product. Since its debut in 1996, WebTV has won more than 800,000 subscribers, adding 500,000 in 1998 alone. According to Microsoft research, 85 percent of these subscribers are either “satisfied” or “very satisfied” with WebTV, and 95 percent of them have recommended the product to a friend. And while WebTV is the sixth-largest online service in terms of number of subscribers, the total hours that those subscribers spend online boost WebTV to the second most used online service.

“Aggregate hourly usage is not a measure that’s often used to gauge the success of online services, but it’s particularly relevant in this industry,” said Bruce Leak, president and co-founder of WebTV Networks, Inc., a wholly owned subsidiary of Microsoft. “Our subscribers average a lot more hours online than other online subscribers. They clearly are engaged with WebTV and love using it.”

WebTV set-top boxes, along with the WebTV Network service, allow users to surf the Internet from their televisions, or surf the Internet and watch TV at the same time. WebTV Networks announced today the second generation of its WebTV Classic and WebTV Plus products, which will provide more power, speed and internal memory for the same retail price as their predecessors. The company also announced it will deliver a network service upgrade with a new set of features, which lets subscribers shop online with more confidence, build a personal Web page, and enjoy more options via the WebTV Web home page.

It’s About More than Internet Access

While 71 percent of WebTV users don’t own a personal computer, Leak is quick to point out that interactive television is not about WebTV vs. PCs.

“Nobody would buy WebTV for the same reason they’d buy a PC,” Leak said. “Because they have different viewing distances-about six feet for the TV and two feet for PCs-they have entirely different functions. It’s a matter of a variety of devices, and different devices will be ideal for different uses.”

For example, users can’t run Microsoft Word on WebTV, but at the same time they wouldn’t be able to use a PC to quickly and easily find Web sites related to a television mini-series. Interactive TV is all about television and about giving users the ability to watch what they want, when they want. While the Internet is a large part of what enables interactive TV, the WebTV vision doesn’t stop by simply providing Internet access to television viewers.

Basic Internet capability is the first step to interactive TV, which is what the WebTV Classic system provides. Users can watch TV, search the Internet, send and receive email, and participate in chat sessions simply by turning on their televisions.

The next step, Enhanced TV, involves merging the Internet with the television so that viewers can watch television programs and access content related to the shows they watch. The WebTV Plus system delivers this capability by allowing viewers to surf the Internet and watch TV at the same time. Users can view local news headlines while watching a network drama, see plot summaries for upcoming shows, look up individual player and team statistics while watching the Superbowl, and even chat with other fans.

The third stage of interactive TV, which is in developmental stages at WebTV, is what the company calls Personal TV, in which users essentially create their own television channels by recording the shows they’re interested in and adding enhancements to those shows.

“WebTV Classic and WebTV Plus have laid the groundwork for 21st century television,” said Leak. “Soon all programming will be interactive and on demand, and Internet connectivity will be a given.”

WebTV has tackled some difficult technical challenges and created some great user experiences in the four short years since the company’s inception. Successes include defining and delivering Internet TV and Enhanced TV; developing partnerships with leading broadcasters, service providers, and consumer electronics manufacturers worldwide; and establishing international service capabilities.

Democratizing the Internet

WebTV Classic, which was introduced in 1996, is an easy, affordable way to search the Internet and send and receive email using a television. It consists of the WebTV Internet Terminal-a small set-top box, remote control and optional wireless keyboard-and the WebTV Network service. The terminal, which is available from Philips Consumer Electronics and Sony Electronics, has a suggested retail price of $99. The WebTV Classic service is $21.95 a month. With the update and service upgrade announced today, the retail price of the Classic terminal is still the same as the first version.

“For as little as $99, users can get a system that is accessible and easy to use, boots in three seconds, doesn’t crash, and upgrades itself automatically,” said Leak. “There aren’t many devices that can do that. WebTV opens up a whole new world to people who can’t afford or don’t want to figure out how to use a PC.”

WebTV Plus, which was introduced in 1997, more tightly integrates the Internet and television programming to dramatically enhance the television experience. It is a higher performance system that does all that the Classic system does, and more.

For example, WebTV Plus provides TV Listings to help users find out what’s on television and get them there quickly. WebPIP technology gives users the ability to simultaneously surf the Internet and watch television, and the TV Crossover Links Web page locator provides direct access to entertainment and information that uniquely complements TV shows. WebTV Plus consists of the WebTV Plus receiver, remote control, an optional wireless keyboard, and the WebTV Plus Network service. Its retail price, which also remains unchanged from the previous version, is $199, and the WebTV Plus online service is $24.95 a month.

WebTV is designed to be easy to install-most subscribers are able to browse the Internet within 30 minutes after opening the box. The device hooks up just like a VCR to any standard audiovisual or high-resolution input. It also hooks up to a user’s current phone line. If users have call waiting and get a phone call while they are online, the WebTV system will pause to allow the incoming call. After completing the call, WebTV automatically re-establishes the online connection and returns to the Web page that was previously being viewed.

“WebTV is wonderful for people like me who weren’t raised in the computer era,” said Hoffer. “It didn’t take us more than five minutes to set it up. Anyone can do it-it involves a couple of plugs. Then the onscreen instructions, which are very clear, tell you the rest. It’s kind of scary, it’s so simple.”

A Microsoft Boost

Another of WebTV’s milestones was its acquisition by Microsoft in 1997. According to Leak, having the name recognition of Microsoft, as well as financial backing from the company, gave WebTV Networks more credibility and allowed it to transition from a regional to a national presence. The company gained 200,000 subscribers in 1997 and 500,000 more subscribers in 1998. In addition, Microsoft assets, both on the technical and content side, have helped WebTV improve its products and beef up its services.

For Microsoft, WebTV Networks has provided the company a portal into the living room. Microsoft’s overall strategy is to provide access to the Internet anytime, anywhere, and from any device. For WebTV Networks, that device is the TV, and the acquisition plays heavily into Microsoft’s digital TV strategy. The ability to give consumers access to information and services is key to the success of digital TV in the 21st century, and WebTV provides this capability.

Another landmark success for WebTV Networks lies in the company’s partnerships with leading content providers and television broadcasters, Internet service providers, and consumer electronics manufacturers.

In the United States, WebTV Networks has partnered with more than 100 content providers, such as Discovery, E! Online, MSNBC, Nickelodeon, PBS ONLINE, Showtime, TV Guide Online, and Warner Bros. Online, to give viewers a variety of WebTV programming. The company has also partnered with Internet service providers, such as Concentric Networks, UUNet and PSI Net, SBC, and Ziplink, to offer reliable, high-performance Internet access throughout most of the country.

WebTV is distributed in the United States by Sony and Philips. Microsoft has also signed wide-ranging agreements with Matsushita and Thompson/RCA for the development of WebTV Plus products in Japan, Europe and the United States.

WebTV’s technology partners include Hewlett Packard and Canon, who have worked closely with the company to provide printing capability for WebTV Plus.

In addition to WebTV’s availability in the United States, WebTV Networks is currently providing service to customers in Japan and Canada, and is participating in a multiphase trial in the United Kingdom.

Personal TV Hits Prime Time?

Personal TV, the next frontier of interactive television, will allow viewers to create their own television channels by providing the capability to record their preferred shows and enhanced content. WebTV Networks has laid the foundation for this vision through the WebTV Classic and Plus products, as well as the new satellite and Internet Displayer product developed with EchoStar Communications Corp, a satellite TV company.

WebTV Networks and EchoStar earlier this year announced the WebTV Network Plus service for satellite and the EchoStar Model 7100 satellite receiver. This combined service and product will provide the first Internet TV service via satellite. Scheduled to be available this summer, it will integrate the DISH Network’s digital satellite television programming with the WebTV service. With this product, WebTV Networks is focused on providing consumers enriched TV functionality, which broadband connectivity can more easily deliver.

Personal TV hinges on a technology called digital video recording (DVR) and the arrival of larger-than-life hard drives, which will allow consumers to download and record programs and interactive content that they can view whenever they choose.

“As disk drives get larger and can store more and more hours of video, it becomes not so much a matter of what’s on TV now, but what was ever on TV that you wanted to watch,” said Leak.

A software upgrade for the WebTV and EchoStar system, scheduled to be available this fall, will allow users to record shows via DVR. The system will even be able to make some intelligent choices about what the viewer may be interested in and offer those listings.

All these developments bode well for people like Lora Hoffer, who can’t get enough of WebTV. Hoffer has WebTV installed on her TV at her home in Harrisburg, as well as on the TV at her summer home in Fenwick Island, Delaware.

“When it came time to head to the shore, I thought I couldn’t live without the Internet and email,” she said. “So we took my WebTV Classic down there, and my sons bought me WebTV Plus for the house in Harrisburg. It’s so easy to hook up that we didn’t really need one in each house, but it’s much more convenient this way.”

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