By: George Garneau Hearst Corp. joins six Canadian firms in $570 million venture sp.
HEARST CORP. IS joining six Canadian companies in a consortium that plans to invest $570 million to provide 1.5 million Canadian homes with free access to one of the broadest arrays yet of in-home commercial services, delivered by cable to computerized television sets operated by remote control. The consortium envisions the following: Without leaving the glow of their TV sets, cable subscribers browse through advertising, order anything from food to a refrigerator, and pay almost any way they want. They watch pay-per-view movies, order a chicken dinner to be delivered, attend class, balance bank accounts, transfer funds to debit cards, play video games, pay electric bills, adjust their home-heating system, buy lottery tickets and chat with neighbors on electronic bulletin boards. The system adds some new twists to interactive TV tests. Hardware is provided free to cable subscribers, who pay nothing extra for a broad array of services. Service providers foot most of the bill using revenues collected from advertisers and marketers. Hearst's electronic ads, for instance, will be free. It plans no news services. Subscribers will have to pay for services they order, such as video games and pay-per-view movies, and "transaction fees," such as bank charges for electronic bill-paying. The consortium's strategy is to make the services available at no extra charge and reach up to 80% of homes in its targeted areas. In addition, using the familiar remote control-operated TV set as the communication instrument vastly expands the universe of potential customers, compared with services available on personal computers. The system is called Universality, Bidirectionality and Interactivity, or UBI. Le Groupe Vid?otron, the cable operator and spiritual leader of the project, is rolling out the services starting in 1995 to 34,000 homes in the Saguenay region of Qu?bec. They will be expanded to 1.4 million more homes in Qu?bec City and Montr?al by 2002. Vid?otron already has 26% of its 1.2 million subscribers using a basic interactive service for which they pay a premium of about $6. The six partners are investing $134 million to install equipment into people's homes: the set-top computer terminal in a box that is the heart of the system plus such peripherals as printers, for coupons and receipts, and credit and debit card machines. For Hearst, the upfront money comes to about $13.4 million. But that's just the ante. Each member also must invest in developing and marketing the services it will offer. Closely held Hearst said its costs were "impossible to predict." But Vid?otron chairman Andr? Chagnon said his company was committed to investing more than $500 million in fiber-optic cable and other equipment. Developers said UBI is designed to be a going business from the outset, not an experiment. Consortium members plan to hire a general manager. Partners in the consortium are Vid?otron, 20%; the publicly owned electric company, Hydro-Qu?bec, 20%; the national postal service, Canada Post Corp., 18%; the provincial lottery, Loto-Qu?bec, 12%; National Bank of Canada, 10%; Vid?o-tron subsidiary Vid?oway, 10%; and Hearst, 10%. Vid?oway is developing the system software and communications protocols. Hearst chairman and CEO Frank Bennack Jr. and Alfred Sykes, president of Hearst's new media division and former chairman of the Federal Communications Commission, announced the consortium at a New York news conference, linked by satellite with concurrent press conferences in Canada. Hearst's products, all funded by advertisers, will include yellow pages, display ads, coupons and advertising circulars. Advertisers also may be able to deliver "personalized" messages to specific homes. Bennack said Hearst has "no concrete plans" to export UBI south of the Canadian border, but "certainly, we are thinking in those terms." If governments drop their prohibitions on gambling, he speculated, UBI could allow people to buy lottery tickets or bet on horse races without leaving their homes. Bennack said Hearst envisions the "enormous prospects" for electronic advertising and plans "several significant announcements" on the subject. Using a yellow pages publisher it acquired this month in Texas, where it owns six newspapers, Hearst said it was "looking at" interactive ads that combine yellow pages and newspaper classified ads. Abilene, Texas-based Associated Publishing Co., publisher of 10 directories circulating 750,000 books in West Texas, two in Hearst newspaper areas, will retain several executives and will work with Hearst's newspaper and new media divisions.