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MSOs Push IPG Consolidation

The MSOs backing the TVGateway interactive program guide consortium are attempting to drive consolidation in that sector by negotiating separate deals with Diva Systems Corp. and Source Media Inc., sources from two TVGateway member companies said last week.

TVGateway was formed last summer by WorldGate Communications Inc. MSOs Comcast Corp., Cox Communications Inc., Charter Communications Inc. and Adelphia Communications Corp. are backing the initiative.

Though Comcast and Charter have announced plans to deploy the IPG in certain markets, TVGateway still lacks distribution and an intellectual-property portfolio. The deals the TVGateway member companies are crafting will help the venture on both of those fronts, sources said.

TVGateway is negotiating a pact with video-on-demand vendor Diva to acquire some of that company's U.S. patents for IPG-related technology, sources said. The deal would also give TVGateway about two dozen Diva engineers that have been developing the company's IPG, though not all of the employees may be retained by TVGateway, a source said.

Comcast cable-unit president Stephen Burke is leading the negotiations with Diva, a source said. Diva spokeswoman Karen Snow declined to comment, aside from noting, "There's no transaction to announce at this point."

Source Media officials didn't return calls last week. Officials at WorldGate, which manages TVGateway, declined to comment.

Burke — who recently showed two Multichannel News
editors that he has TVGateway running on a TV in his office — could not be reached for comment.

It's not clear how soon an agreement with Diva might be reached, sources said.

Insight Communications Co. CEO Michael Willner is leading the negotiations with Source Media, a source said. Insight is an investor in the company, which is in severe financial trouble, and owns 50 percent of a joint venture that owns the SourceGuide IPG.

Insight has deployed SourceGuide to more than 100,000 subscribers, but the MSO is the company's only cable affiliate. On June 1, Source defaulted on a $5.3 million interest payment.

The TVGateway partner talks with Source Media could end up with the consortium acquiring SourceGuide, giving it the Insight subscribers that use the guide, sources said. Insight might also become part of the TVGateway consortium, the sources added.

But sources cautioned that the talks with Source were volatile and a deal might not be reached.

Several companies are vying to distribute interactive program guides, including some new players such as iSurfTV.

Sources within the TVGateway consortium said the companies want to see the market develop into two players: Gemstar-TV Guide International Inc. and TVGateway.

"The goal of the consortium is to clean up the marketplace so there are two players," one source said.

Gemstar has downplayed the emergence of the TVGateway consortium, insisting that it hasn't had an impact on its business. The company also boasts that it has been able to reach long-term deals with Charter and Comcast since the TVGateway venture was formed.

Likewise, Gemstar co-president Peter Boylan suggested last week that the Diva and Source Media talks aren't a significant event.

"We have had numerous opportunities to buy both companies [Diva and Source Media] and their patents, and have passed," Boylan said in an electronic-mail exchange. "In fact the price has declined each time, and we have still passed."

Gene Feroglia, CEO of iSurfTV, said his company has also talked with both Diva and Source Media, but decided to pass on both for various reasons.

"They're a server-based solution, and we're a client-based solution. It may make sense for other people, but not for us," Feroglia said.

iSurfTV, which is marketing a multimedia based IPG, has a hunting license with the National Cable Television Cooperative but hasn't announced any cable distribution deals yet.

WorldGate plans to demonstrate a new version of the TVGateway IPG this week at the National Show, a source said.

TVGateway's Version 1.8 will allow subscribers to order pay-per-view programs through the guide and other improvements that will make it more competitive with TV Guide Interactive, a source said.

Although the company has only announced significant distribution deals with Charter and Comcast, a source said TVGateway also has long-term deals in place with Adelphia, Cox and municipal overbuilder Tacoma Power's The Click! Network in Tacoma, Wash., a source said.

And last Thursday, TVGateway announced a distribution deal with AT&T Broadband's Headend In The Sky platform. The company didn't announce commitments from HITS affiliates, but sources said the deal should make it easier for the affiliates to deploy the IPG.

AT&T itself won't be able to launch TVGateway, as it has an exclusive agreement with Gemstar.