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OpenTV Puts Static on Remote Control

Banking on the theory that interactive TV gaming will be a "killer app", Mountain View, Calif.'s OpenTV Thursday snatched up London's Static, a privately-held iTV media and entertainment company, for $59 million.

OpenTV will acquire all of Static's stock in a combined stock and cash transaction. In all, Static shareholders will receive roughly 2.6 million shares of OpenTV's Class A ordinary shares and approximately $17 million in cash. Approximately 14 percent of the gross deal value, all in ordinary shares, has been withheld subject to certain earn-out provisions.

Static's developer and design teams, which provide iTV application development expertise across multiple iTV platforms and broadcast design services for TV networks, respectively, are key benefits of the purchase for iTV. But the standout feature is the acquisition of PlayJam, an iTV entertainment and games channel, from which OpenTv will reap recurring revenue streams immediately.

Boasting the development of 55 iTV games, PlayJam is tapped by more than 9 million homes across digital television networks in Europe, including BSkyB, ntl, Telewest, TPS and Canal Satellite. PlayJam runs on several iTV platforms, including OpenTV's, and those of rivals Vivendi's Canal Plus Technologies and Liberate. Popular iTV games include arcade-style action games, trivia, word puzzles, golf and darts.

OpenTV Chief Executive Officer James Ackerman, who called iTV gaming the "killer app" for the iTV market, said his company will distribute PlayJam through multiple iTV platforms where it will continue to incur revenue streams via premium-rate telephone calls that allow players to store their game points in order to vie for prizes through ads placed on the games and via game sponsorships.

OpenTV, whose software has been installed in 16 million set-top boxes worldwide, competes with Liberate Technologies Inc. and Microsoft Corp. But the market, particularly nascent in the U.S. where it has been slow to catch on, has plenty of room for growth and should explode, according to recent research conducted by Jupiter Media Metrix.

While OPTV's Ackerman called gaming the next killer app for iTV, Jupiter is bullish on interactive shopping via TV, which it said will account for 44 percent of total U.S. TV-based shopping by 2005. The research firm Thursday claimed revenues from iTV shopping will total 4.3 billion dollars by 2005, with the majority of purchases taking place on iTV shopping programs where viewers use a remote control to buy showcased items.

Jupiter said that while iTV advertising will prove lucrative, it will be fragmented across networks.

"Even though our research shows that there's money to be made in the iTV space, carriers, programmers, advertisers and merchants are struggling with models to justify iTV deployment," said David Card, Jupiter senior analyst. "Outside of video-on-demand, the new business that iTV brings will divide evenly between shopping and advertisements."

In a broader view, Allied Business Intelligence said the array of services for iTV, which were being used by 14.9 million households at the end of 2000, will experience an explosive annual growth rate of 59 percent, totaling over 244 million households worldwide by 2006. This will amount to iTV services sales increasing from $300 million in 2000 to $19.2 billion in 2006.

Upon closing of the acquisition, Static will become a wholly-owned subsidiary of OpenTV. Static CEO Jasper Smith and Chief Creative Officer Mark Rock will continue to head Static. This transaction is expected to close in early third quarter 2001.