Interactive TV Has Arrived
By Edward W. Desmond

(FORTUNE Magazine) – Get this, TV-aholics. This spring, those of you who get cable and live in certain cities across the U.S.--Chicago, Los Angeles, and St. Louis among them--will see a small revolution onscreen. If you have one of those new cable boxes that TCI, Charter Communications, and other cable companies are rolling out, there will occasionally be an icon in the corner of the screen on NBC, CNN, MTV Networks, ESPN, and other channels. Click the remote, and up pops a small menu of information. From CNN, you can look at the top headlines, even as Christiane Amanpour reports live from Baghdad. From ESPN, you'll be able to get sports scores or participate in a poll: Did Dennis Rodman deserve that technical? From MTV Network's VH1, you'll see a list of available Sting CDs as he sings "Every Breath You Take." Just click to buy, no 800 number to call. Impulse shoppers, beware.

The company working the magic is Wink. The 85-employee startup based in Alameda, Calif., has signed up 13 networks to provide Wink-enabled programming; so far eight cable companies have agreed to integrate Wink into their services. By year's end, Wink expects to have 1.5 million U.S. households in its orbit--a small percentage of the 65 million households with cable. But Wink and its partners believe the company's technology will spread fast because Wink is easy and free for consumers, comes cheap to networks and cable companies, and might create more business upside too. Richer offerings--like video on demand and Web browsing--are in the works for cable television, according to TCI Chairman John Malone, the industry's top promoter and visionary, but Wink is interactive TV today. "It's a natural extension of the way people watch TV," says Eugene Quinn, an executive at MTV Networks. "We think of it as a low-risk, high-impact partnership with someone who has a good idea."

Wink uses a small 128K software application that the cable company downloads to your set-top box. The network and the cable company can then pass down tiny applets--typically about 10K, containing sports scores, weather, etc.--through what's called the vertical blanking interval, an empty bit of bandwidth in an analog TV signal (or in the data channel of a digital MPEG2 video signal). If a network is sending a Wink signal, an icon appears on the screen inviting the viewer to click for more information. If the viewer buys a CD or joins a poll, Wink sends back notification (though not yet in real time on most systems) to the cable company's servers--via a technology used to collect billing records for pay-per-view TV. A server operated by Wink at the cable company handles orders and billing. "What we're about," says Brian Dougherty, Wink's founder and chairman, "is simple interactivity to enhance an already powerful medium."

Wink's business plan offers a lot to its partners, which is why the company has signed up so many in less than a year. Networks can add more to their programming--like local weather on the Weather Channel or more jokes during Jay Leno's monologue on the Tonight Show--and delve into areas like interactive advertising. Chrysler, for example, would pay to know who clicked for more information on the new Dodge Durango. "We're hoping that Wink will draw in viewers and connect them with sponsorship opportunities," says Tom Rogers, president of NBC Cable.

Cable companies, too, get to sell interactive advertising. The interactivity may make it easier to sell pay-per-view programming. Jerald Kent, president and CEO of Charter Communications, is eager to launch Wink because he already knows that in the few areas of his system where a defunct interactive system called Qube still operates, his customers are three to four times more likely to sign up for that Holyfield fight.

As for Wink, it plans to make money first from licensing its software to networks and cable companies, and later by processing all the transactions taking place over Wink-enabled systems. Wink will take a cut of those transactions, just as companies that provide 800-number services do today. A big win would be to partner with a home-shopping channel like QVC, but Wink will have to get into a lot more homes first. Wink's best assets, as it tries to sign up more cable companies, are its simplicity and low cost--virtues that have a way of recommending themselves.

INSIDE: Victory for the Baby Bells, page 136... Teleconferencing that works (sort of), page 137... Discount rockets, page 140... Alsop's letter to Chairman Bill, page 145