Two cable firms to try Microsoft TV software

By Dina Bass
Bloomberg News Service

SEATTLE — Microsoft Corp., which is trying to unseat Gemstar-TV Guide International Inc. in the market for television programming-guide software, said Comcast Corp. and Time Warner Cable Inc. will try its software.

Comcast and AOL Time Warner Inc.'s cable unit, the No. 1 and 2 U.S. cable-TV companies, both use Gemstar's software to deliver television programming guides to cable customers, said Ed Graczyk, Microsoft TV marketing director. Microsoft hopes the trials will lead them to purchase the software, he said.

Microsoft, based in Redmond, Wash., last year decided to revamp its ailing TV software business by entering the market for programming guides, which is dominated by Gemstar. So far Microsoft's product has only two U.S. customers, both small Oregon cable providers. Microsoft is determined to stay in the TV software market, despite several years of failed products, analysts said.

"Gemstar is a veritable monopoly, and Microsoft hasn't had a lot of traction for their product yet," said Matt Rosoff, an analyst at Directions on Microsoft, a market research firm based in Kirkland, Wash. "But there might be some vulnerability there because Gemstar's product is very basic."

Microsoft Chief Executive Steve Ballmer yesterday announced the trials in a speech at a cable-TV industry conference in Seattle.

Gemstar spokeswoman Christine Levesque said Microsoft lags Gemstar by a huge margin.

"They have a couple of tests going on, and we're deployed to 11 million subscribers," she said. Additionally, Microsoft licenses Gemstar's patents, so it must pay Gemstar a royalty on the software it sells, both companies said.

The agreement also shows the "trickling down" of a truce between AOL Time Warner and Microsoft, Rosoff said. The two companies in May settled AOL's antitrust suit against Microsoft, with Microsoft paying $750 million. The companies began talks before the suit was settled, and the settlement made it easier to complete the deal, Ballmer said.

Microsoft can help cable companies boost their sales of on-demand video and other services, Ballmer said, by making it easier to tailor programming to viewers.

"Cable companies are about making money and taking care of customers," he said. "I think we can help the operators there."