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.

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