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Discovery Wants to Monetize Ideas

Discovery Communications Inc. has recently patented a process that it said could change the way people watch television, and that may have ramifications for many industry players-from advertisers to cable operators to program-guide vendors.

The title of the patent, "Card for a Set-Top Terminal," is pretty vague. But buried within the 89-page document are plans for digital set-top technology that could allow cable operators to offer subscribers a menu-driven program guide, or something along the lines of Microsoft Corp.'s "Windows" operating system for a TV.

The patent, which turned up in a recent search of the U.S. Patent and Trademark Office database, also lays out blueprints for a "polling" system that apparently would allow cable operators and programmers to track every channel and program that a subscriber views.

Discovery founder and CEO John Hendricks is listed as the lead inventor on the patent, which was issued on Jan. 30.

It seems unusual for a cable programmer to delve into the intellectual-property world. But Discovery has 13 U.S. patents, and about 100 patents pending, including intellectual property for program guides, interactive television and electronic books.

The company also has 50 international patents and about 400 patents pending in international markets.

DCI executives said the company may soon form a stand-alone unit to license its intellectual property or may partner with another company to begin cashing in on some of the patents.

"We're really taking a serious look at this portfolio and figuring out how to monetize it," said John McCoskey, general manager of Discovery's intellectual property division, which he said was formed quietly in 1999. "How do we turn this into a business, and do it in a way, frankly, that supports our cable partners and distribution partners?

"In the next year, you'll see us make some kind of announcement of how we're going to monetize this asset."

McCoskey is the former senior vice president of Your Choice TV, the program time-shifting service that was shut down by Discovery and its partner Liberty Media Corp. in 1998. The company spent several years trying to develop a service that Hendricks thought had huge potential.

Many of the patents in DCI's portfolio were spawned from ideas originally tied to Your Choice TV, McCoskey said. Discovery began developing the portfolio in 1992, when compression technology advanced far enough to allow the cable industry to begin anticipating a 500-channel universe.

In the recent patent, DCI discusses the idea of "personalized television," and finding a means to help subscribers navigate cable systems with hundreds of channels.

"The concepts of interactive television, high-definition television and 300-channel cable systems in consumer homes will not sell if they are not packaged, delivered and presented in a usable fashion to consumers. The problem is that TV programming is not being delivered and presented to consumers in a user-friendly fashion," DCI wrote in the patent document.

The patent details a menu-driven guide that would allow subscribers to access menus for program genres, "ranging from hit movies to sport specials to specialty programs."

When a subscriber turns on the set-top, he would see an introductory menu that could include both messages from the local operator and ads. The subscriber could then access a series of sub-menus, which would display programs by genre and offer access to other services, such as interactive TV and pay-per-view movies.

Subscribers could also access billing information directly from the introductory menu, and skip directly to particular sub-menus by punching a number on the remote, according to the patent.

McCoskey agreed the patented technology could eventually benefit competitors to Gemstar-TV Guide International Inc., which has a lock on the interactive-program-guide market.

PRIVACY CONCERNS

But he said DCI isn't concerned about lawsuits from Gemstar-which has sued several other companies for patent infringement-because it only plans to license the technology to manufacturers.

What looks like one of the more intriguing aspects of the recent patent is a polling feature that would allow operators to track every program a subscriber watches.

A channel-surfing log would be stored on the set-top and sent to cable headends via the upstream of a cable network or through a telephone return path, according to the patent.

That information, coupled with marketing databases that track buying habits in communities according to ZIP codes, could allow advertisers to send ads targeted to individual households, McCoskey said.

Polling could offer advertisers valuable information, but it "scares the heck out of privacy advocates," noted Forrester Research Inc. analyst Josh Bernhoff.

But if operators decide to offer monthly cable-bill discounts to those viewers who agreed to be polled, there might not be much subscriber opposition, he added.

Discovery also could counter privacy concerns by grouping information it culls from set-tops into large blocks that wouldn't isolate individual households, DCI's McCoskey said.

"If the operators and programmers and advertisers don't take it [privacy] seriously, the regulators will," he added.

Advertisers, local cable operators and programmers could boost revenue through the technology, McCoskey emphasized.

"It's kind of a win-win situation for the advertiser, because they reduce their waste," he said. "The cable operator can charge more for local ads that are targeted, and the cable networks can charge more for national ads that are targeted."

Discovery won another patent in 1998 for set-top technology that would suggest particular shows to subscribers based either on their viewing habits or responses to surveys about the programs they like to watch.

A hardware manufacturer could combine technology from both patents to create a system that would offer subscribers a menu-driven program guide that would suggest shows they may like, based on the data culled from the polling technology, McCoskey said. That sounds similar to a popular feature used by online retailer Amazon.com to suggest books or music based on previous purchases.

Discovery had preliminary talks with some hardware manufacturers about licensing the technology, including leading set-top vendors Motorola Inc. and Scientific-Atlanta Inc., McCoskey said. But the talks haven't advanced beyond the exploratory phase, he said.

Reaction from Motorola and S-A officials could not be obtained by press time.

"I don't think there's anything holding it back, other than us deciding the direction we're going to take with this portfolio," McCoskey said.