Americans love to vote — on which beer tastes better, which candidate won the debate, which talented young thing should be the next American Idol. We love to shop and gamble from the privacy of our own home. We love to get a discount on our next purchase and be offered a chance to win a new whatever — no purchase necessary. We love to order pizza while watching the ballgame with our buddies and get one extra topping absolutely free.

And we love to do all this without getting up from the couch.

Broadcasters know this — so TV ads are full of entreaties to "Pick up the phone!" "Go to our website!" and "Order now!" But broadcasters also know that only a small percentage of viewers will actually get off their butts, walk to the computer, click the mouse and start voting, shopping or ordering online.

Which is why the interactive-TV software developed by Portland-based Ensequence — a 5-year-old startup led by alums from Intel's home products division — is potentially so powerful.

Ensequence, which landed $22 million in private financing last year (the biggest pot of VC funding reported for a private company in our Big Deals list for 2004), is now in major growth mode. After spending several years getting its interactive TV (iTV) tools ready for prime time, the 63-employee company is aggressively pursuing clients from offices in Portland, New York and London. Dalen Harrison, Ensequence's 39-year-old CEO, logged 60,000 air miles in the first eight weeks of 2005, talking up his company to analysts and demo'ing cool new iTV shows to media executives.

"Raising money isn't the issue for us right now," says Harrison. "This is about taking advantage of the market in the United States."

Harrison won't reveal Ensequence's revenue figures, but he expects the company to be profitable in 2005, helped along by the launch this spring of iTV programs developed for EchoStar's DISH satellite network. Ensequence is also working on iTV applications for cable channels including Disney, Discovery, MTV, TV Guide and Showtime, as well as advertisers such as Adidas and Hewlett-Packard.

In Europe, where interactive TV is already widely deployed, Ensequence has been putting iTV shows on the air for more than three years for German television, the BBC and Rupert Murdoch's BSkyB satellite network. With 7.5 million viewers, BSkyB has generated $800 million a year in new advertising and subscription revenue using iTV, according to Harrison.

Here's an example. One of the most successful deployments of iTV on BSkyB features soccer star David Beckham. The viewer clicks on the remote control to surf from an Adidas ad, to a separate Adidas channel that shows Beckham goofing off and taking shots on goal. With another click of the remote, the viewer can look at Adidas products that Beckham endorses. The viewer doesn't need to go to a computer to surf the Web, or pick up a cell phone to call in — all the interactivity is done via TV remote control.

And what could iTV ultimately do on your TV? The possibilities are wide-ranging. As the nightly news reports on the latest suicide bombing in Iraq, you pull up maps of previous terrorist acts. You run unlimited instant replays during the NCAA tournament, switch camera angles, then vote for the MVP. You watch Kramer's blooper clips during Seinfeld and download video clips of gruesome mob hits during The Sopranos. You flip from a music video to the band's music catalog, download a track to your cell phone, then enter a drawing to win a new iPod.

Interactive TV isn't yet widely available in the United States. Jupiter Research found in a 2004 survey that iTV reaches fewer than 20% of American households — most of them subscribers to satellite TV. And those households don't have many iTV shows to watch, since cable and broadcast channels have been slow to embrace iTV programming.

But that's going to change, predicts Joseph Fogg of New York-based Westbury Partners, the lead VC firm in Ensequence's 2004 investment round. "When we made the investment, some of this was a bit of a leap of faith — that it would come to the United States," says Fogg. "Now it's happening. Satellite companies, cable companies, advertisers, producers — they're all scrambling to get ready with interactive content."

BUT WILL THE AMERICAN PUBLIC embrace iTV the way Europeans have?

Jupiter Research analyst Todd Chanko, who is based in New York, has been following iTV trends for more than two decades — ever since people began ordering up video on demand. He says that some shows have been very successful driving viewers to respond. One example he cites is American Idol, which solicits votes by phone, asking viewers to call or send a text message.

But Chanko is skeptical that TV viewers want to go much beyond that limited experience of interactivity with their TV.

"Americans primarily view television as a lean-back medium instead of a lean-forward medium," he says. What that means is that we like our television experience to be passive. When we want to interact, we go to a PC and log onto the Internet. Chanko says that gambling — the one iTV application that could get some traction here, as it has in Britain — wouldn't be legal in most of the United States.

Chanko is quick to point out that Ensequence has as good a chance to succeed in iTV as its main competitors — Los Angeles-based GoldPocket Interactive and emuse of Dublin, Ireland. He's just skeptical that anyone will.

Dalen Harrison is sure iTV is coming to American TV, and sooner rather than later. "It's an exploding force," he says.

The assertion is being borne out at media trade shows, says David Poulshock of red door films in Portland. Poulshock was at the National Association of Television Programming Executives (NATPE) conference in Las Vegas this winter to generate interest in a new reality show for foodies, The Head Table, that aired a pilot last November on the Portland Fox affiliate. He's exploring adding interactive applications to the show, such as a way for viewers to download recipes.

"People are flipping out," Poulshock says. "Everyone's talking about video clips being downloaded to cell phones and about creating shows where the viewer can determine the ending. The merchandising potential is incredible.

"But you can also sense this fear," he adds. "There's a whole system of how content and advertising is sold, and now the people who produce programming are going out and selling product placement and advertising."

THE COMING iTV REVOLUTION holds tremendous potential — and danger — for broad-casters and advertisers. Cable has already fragmented audiences into narrow slivers: There are channels for home improvement junkies and cartoon freaks and '70s-show groupies. TiVo (the leading digital video recorder, or DVR) has made the experience of TV even more individualized — allowing viewers to fast-forward through ads, as well as choose which shows to watch, and when.

Todd Chanko thinks this is one reason iTV might not catch on. "Most Americans don't like commercials," he says, "even the funny ones. So explain to me what would prompt a viewer — who has already voted to fast-forward with a TiVo — to watch a longer commercial using iTV technology?"

"The advertisers shouldn't be freaking out — au contraire," insists Ensequence investor Joseph Fogg. "If you start putting on interactive content, people will start watching the ads that they've been TiVo-ing through. You TiVo a Lexus ad if you don't want it. But if you can see features, buy a ticket to get into a lottery to own one, then you're going to watch that. It's a tool to counteract TiVo-ing."

Still, iTV clearly holds the potential of fragmenting the audience to the ultimate degree, as each viewer picks and chooses which storyline or interactive tangent to follow using his or her remote control in the privacy of his or her own living room.

And therein lies iTV's awesome potential. For the first time, advertisers will be able to communicate back and forth with consumers. They'll be able to ask questions — and get answers — right now. They'll be able to inform, engage, entice, measure impressions and build brand loyalty.

Plus, with Ensequence software, they'll be able to do all this without making consumers budge an inch from the tube.

"Interactive TV brings what TV's lacking — the ability for the viewer not just to watch, but to participate," Dalen Harrison says.

"The Internet's incredibly powerful, but it reaches one consumer at a time," he continues. "Television is a mass medium. We're melding the Internet, cell phone, remote control, whatever, with the TV. And the TV's at the center. If it's entertainment, everyone expects to interact."

[SIDEBAR]
What's iTV?
What makes TV interactive is that it gives the viewer the ability to send messages back to the broadcaster, and to make choices about which stream of video or information to watch, among several choices offered on a given channel. The primary tool for surfing iTV programs that are created by Ensequence is a standard-issue TV remote control. But interactive features can also be accessed via computer or cell phone.

In mid-March, for instance, the Food Network aired a two-hour special in which a couple had their wedding catered and broadcast. During the show, love notes submitted by soon-to-wed couples streamed along the bottom of the screen. Wannabe lovers could send their amorous text messages via cell phone or the Web. An online quiz kept viewers tuned in.

The creator of the Food Network's iTV application was GoldPocket Interactive of Los Angeles, a prime competitor of Portland-based Ensequence. GoldPocket president Steve Leonard says the goal was to increase the "stickiness" of the show for advertisers. "As the viewer is texting in their message, they're waiting to see it displayed," Leonard explains. "They'll stay longer watching the show, rather than just passing it by."

Of course, many American TV viewers already have a few basic tools of interactivity at their disposal. A digital video recorder (DVR), such as TiVo, attached to your set-top box, allows you to fast-forward through ads and record programs or scenes to watch later.

But with the upcoming rollout of iTV, the viewer's choices will expand dramatically. Want to check out the performance of the sports car that just outran the cops in a high-speed chase? Use your TiVo to pause the show, then watch a short infomercial brought to you by BMW. Click on "options" with your remote and build your own dream car on-screen. Then sign up for a chance to win the car.

There are downsides to iTV, though. When you interact, the network or advertiser can track your consumption and viewing habits. This opens up a Pandora's box of concerns about privacy invasion and inappropriate marketing, especially for young viewers.

"Nickelodeon, 4KidsTV, Cookie Jar — they're all watching kids' play habits," says David Poulshock, who produced several of the Wee Sing kids' music videos. "They're watching how the 'tweens, the 8- to 11-year-olds, multitask — watching TV, chatting, e-mailing, talking on the phone and listening to music all at the same time. TV programming is becoming like wallpaper, and the goal is to bring content into the play space to grab the kids' attention."

[SIDEBAR]
Ensequence's game plan
A key aspect of iTV is that the interactivity can be inserted at any point in the creative process. So potential customers of Ensequence range from the makers of Will and Grace, Pimp My Ride or the latest Super Bowl ad, to CNN, ESPN and ABC, to Comcast, DirecTV and the other cable and satellite services that together reach as many as 90% of homes in America.

Ensequence claims two key advantages over its competitors. First, the iTV it creates (using software called on-Q) can be navigated exclusively with a standard TV remote control. "People in front of a TV don't want to engage in a computer environment, they don't want to have a keyboard or a mouse," explains Ensequence CEO Dalen Harrison. "We make it as intuitive as changing your channel."

But competitors have rival models. Microsoft is deploying software that delivers interactivity on TV via the Internet. GoldPocket Interactive's iTV tools, meanwhile, get viewers to interact via a cell phone or the Web, not a TV remote.

Second, Ensequence says it creates iTV programming that will work on any digital set-top box — no reprogramming by the cable or satellite guy required.

Jupiter Research analyst Todd Chanko says he's skeptical, given the dozens of different set-top box systems that are in use across the United States.

Meanwhile, a spokesman for the BBC in Britain says that none of the iTV authoring tools on the market currently supports all three digital platforms in the U.K., meaning that none is ready for prime time yet.

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Copyright 2005 Oregon Business magazine