Once a laughing stock, home shopping is now regarded as a huge potential money-spinner, and many large US retailers are setting up home shopping operations. It is the harbinger of a social revolution that will be instigated through interactive television. The battle to dominate this market-place is already joined.
Although the teleshopping service made the headlines, less attention was paid to a recent bid by QVC to buy Paramount. And QVC is not the only interested party. Last month, Viacom, a major supplier of programming to the cable and satellite industry, put in an dollars 8bn bid.
The logic behind these bids is the importance of 'software' in the rapidly developing electronic entertainment market. The term 'software' used to refer only to a computer program; now it denotes any sort of creative material that can be stored - films, videos, music, books and so on. Eventually, as entertainment systems become more sophisticated, all this software will be stored digitally. Once it is digital, all the material can be manipulated and transported with ease around electronic networks.
Paramount has enormous film and television programme libraries, is one of America's leading book publishers and, of course, makes films and televison programmes. Viacom, best known in Europe for its MTV music channel, has a raft of successful cable channels in the US. The company operates cable services for 1.1 million people and makes programmes such as the high-rating Roseanne for the major television channels. It also has significant television archives.
The US entertainment industry is entering a new era of interactive television which will result in a demand for extra software.
Interactive TV gives viewers a greater choice over what to watch. Already there are cable systems in the US offering up to 150 channels. In Florida, the giant Time Warner conglomerate is building its Full Service Network, destined to be the most advanced cable system in the world. Using fibre-optic cable and digital signalling technology, it will offer services such as video on demand (VOD).
With VOD you decide what film, documentary or programme you want to watch and, seconds later, it appears on your screen. But VOD systems require vast amounts of software. If customers are able to dial up The Maltese Falcon, they will also want to watch The African Queen. If the first series of Star Trek (one of Paramount's strongest television properties) is available, why not the latest episode? With VOD and, at least in the medium term, dozens of conventional channels to fill, access to software in depth is essential.
But the need for software properties goes even further. Teenagers are already believed to be spending more on computer games than on music. Many pundits see this as a precursor to a television world dominated by computer games, interactive TV-based education and entertainment. Home entertainment systems such as CD-I will also entice people away from conventional viewing.
Consequently, both Paramount and Viacom are approaching interactive entertainment seriously. Paramount is established as one of the country's leading providers of computer software for schools and is building on this work. It recently set up the Paramount Technology Group to 'leverage' its properties into 'digital formats'. This means either utilising its library in other ways (for example, it will release 50 films on CD-I discs), or using properties it owns, such as Star Trek, in new formats such as computer games and interactive television adventures.
The recognition that entertainment technology is changing is a major factor behind the proposed merger.
Viacom is already undertaking some interesting hi-tech work. In conjunction with AT&T, it is building an advanced cable television test system in California that will offer VOD, video telephony, an interactive Star Trek game where you play against a real person who is also on the cable system, and much more.
Interactive home shopping is a logical development of these ideas, and so it is no coincidence that the second major player to offer for Paramount was QVC, the largest home shopping operator in the US.
The QVC bid may appear unlikely. It is offering about dollars 9.5bn, although its profit last year was only dollars 55m. But QVC has a close relationship with TCI, the largest American cable company; and with 10 million customers, TCI will be hungry for software.
The real force behind the bid, however, is Barry Diller, QVC's chairman and a former chairman of Paramount Pictures. Diller left Paramount in 1984 to help Rupert Murdoch set up the Fox Network. With Fox a well-established success, he resigned to look for a business to run. At the end of last year, to industry astonishment, he sank dollars 25m of his personal fortune into the QVC home shopping operation, which he believes could spearhead the interactive television revolution.
Home shopping could indeed provide the key to many of these services. With so many possibilities, the problem for customers will be how to find the products and services they want.
Time Warner last week announced a joint venture with Spiegel, a major US catalogue company, which will create a fully interactive shopping channel to be launched on the experimental Florida network . In this 'video shopping mall' customers will be able to enter any catalogue 'store' and choose products to view in full video glory.
The idea of the virtual shopping mall is potent. Using a home video link, you could go shopping 'with your friends', visit a record shop and listen to some CDs together, or buy clothes. Alternately, you could go to a virtual cinema and watch a film together.
But the shopping mall could also become an important interface for other services. Many organisations are looking at modelling familiar environments such as offices, factories, banks and schools inside computers to help untutored users find their way to common services.
Paramount is an attractive marriage partner and the suitors are lining up. Many companies in the interactive entertainment field are showing interest and the lawsuits are already flying. Whatever happens, Paramount, given its fondness for dabbling in emerging technologies, looks set to boldly go where none have gone before.Reuse content