Video-On-Demand System Matches Ads To Viewers

Content comes from Warner Bros., Sony Pictures, NBC Universal, 20th Century Fox Television and Disney.

DVD, DVR and VOD are old school. Meet ZillionTV. The company, backed by several major Hollywood studios, is set to introduce Wednesday an ad-supported video-on-demand system in which commercials are tailored to viewers, who can't fast-forward through them.

ZillionTV enables viewers to choose the categories of advertising that are most interesting to them, and commercials fitting the bill are inserted into TV shows and movies that are streamed via broadband onto TV screens.

Content comes from Warner Bros., Sony Pictures, NBC Universal, 20th Century Fox Television and Disney, all of which are equity stakeholders in the new company. Forty other partners also supply content, and discussions are under way with Viacom and CBS.

ZillionTV operates through a device it calls ZBar that it supplies for free. Users must, however, pay a one-time activation fee of up to $100, said CEO Mitch Berman, a TV industry veteran who helped found E!

The system's technology was created by Peter Redford, well known for helping to develop the computer mouse and the Macromedia Flash player.

ZillionTV won't launch to consumers until the fourth quarter, when such TV shows as "30 Rock" and "Smallville" and movies like "The Dark Knight" will be available on demand. By year's end, ZillionTV will have rights to 15,000 titles, Berman said.

BUY-NOW OPTION

Users maneuver through the ZillionTV interface with a motion-sensing remote similar to a Nintendo Wii controller. "The whole screen on your TV becomes interactive," Berman said.

The remote has a "Buy Now" button so that advertised items can be purchased on the spot through a virtual store operated by Visa, the credit card company that also is a ZillionTV stakeholder.

The system also features a rewards program: The more commercials watched, the more points earned.

"Hulu has shown there is a market for TV shows on demand," Ross Rubin, of marketing research firm NPD Group, said of the online TV service from NBC Universal and Fox. "That said, it remains challenging to convince the consumer to put another box in their living room."

"It's a radically different model," Berman said. "You're rewarded for watching TV."

Berman said the model includes a revenue share among ZillionTV, the content providers, advertisers and even the participating Internet Service Providers.

Users who wish to shun ads can buy or rent content in a fashion akin to iTunes and Apple TV.

ZillionTV, though, is for streaming only, so purchased content is stored via Internet "lockers," not on a hard drive in the ZBar.

The studios have been down this sort of partnership road before with Movielink, an Internet VOD service they eventually sold to Blockbuster for a fraction of the amount of money they spent to build it up.

This proposition is different, Berman said, because it's a TV offering, not a computer service.

"We're living in a tornado," Berman said. "You can't pick up a newspaper without reading how popular Internet video is. We bring it to TV."

Others -- most notably TiVo -- do likewise, but with fewer than 2 million stand-alone TiVo boxes capable of transferring Internet content to television sets, there's plenty of room for others.