Don't Touch That Dial!
WebTV Brings the Web to Your Living Room

by Don Hamilton (

Copyright © Don Hamilton 1996. All rights reserved.

We Asked Steve Perlman, CEO and Founder, a Few Questions

WebTV is about to hit living rooms all over the country. One-thumb Browsing™ and one-button setup and connection. You cruise the Web with the remote control. It's so easy every couch potato will be jumping online.

The Web population undoubtedly will take a significant jump just after Christmas, as WebTV will bring the interested-but-not-computer-savvy on board. This group includes from 50 to 100 million families. If you subdivide that group to those able to afford a $300 set top box, and further divide down to the ones that would pay $20 dollars a month to be online, we come to a number that is at least double the current 30 million online. My guess is that you should run to your computer, get online, and find out how you can be involved in all the money that is going to be made on this in the next couple of years.

Can you imagine your kids not watching junk on TV, and instead looking something up for their history class on the CIA site? No more need for encyclopedias. Your kids can cruise the Internet for the knowledge they previously gleaned from printed material. And how about their school books?

The Television community will hate WebTV because it takes their audience away from them and costs them money. If they think about it, though, they will realize they should try to take advantage rather than fight it. I can imagine in the near future being able to watch an advertisement on television, then clicking a button to order without credit cards or other information required. Trust me; it will happen.

On top of everything else, you'd better hurry because WebTV has sold out the entire production to retailers for the fourth quarter. If the retailers have it right, the price in Web interest will fuel demand. Your store may be out before you have completed Santa's list.

I was in Fry's Electronics yesterday and saw the WebTV demo system setup and a crowd of people looking at it. The first five minutes is the most important when viewing it for the first time. Without a little help, the average person out there will struggle with the start-up. (By "struggle" I mean spend about two or three minutes.) Once you use it just a little, it is intuitive—maybe even somewhat trivial for the power Web users.

Now you people who have been browsing the Web for the last year or two are not going to be completely happy with the WebTV version of cruising the Internet. On the other hand, you can appreciate not having to work out all the protocols required to get online and to get your mail up and running. This product is for the inexperienced who have not learned to surf yet. For instance, Dr. Diana Greenwood, our online veterinarian, wanted to know where to enter a URL. Once she figured it out, she decided to look for something: the Mercedes SLK, a new-but-not-out-as-yet sports car with a folding hard top. She was able to find the German-hosted Mercedes pages and cruise pictures and information about the car within about two minutes. Not bad for a newbie!

WWWiz: When did you first have the idea of putting the Web on TV?

S.P.: That particular thing occurred to me at the beginning of 1995. January, February, that kind of thing. I was cruising around the Web, and I noticed a lot of consumer-oriented sites. I think the epiphany came when I was looking at the Campbell's Soup site, and they had meal-planning tips, and I thought, here's something that's not necessarily of interest to people cruising the Web today, but if we could bring this information within the reach of the average consumer, it would be huge. So I went down to Fry's Electronics, got a few thousand dollars' worth of parts, and I built a prototype of the system in about three days.

The key issue, of course, was that the Web content was designed for computer monitors, not for a TV set, and I had to figure out a way to produce a very high-quality image, and I couldn't believe the quality of the image that I got.

WWWiz: After doing that, did you also right away develop some sort of browser to work with it?

S.P.: I started by using Netscape, and I just used the images from Netscape. For me, the interface just wasn't appropriate for television. But nonetheless, you could see all the images and all the text, so I knew that by designing a browser more suited for the average person to use in his living room...

WWWiz: So after having the idea, you bought the parts the same day and within three days you had an operating device?

S.P.: Yes, because I had an idea about how to do the image processing, the graphics, how to get a sharper image. To tell you a little bit about my background: I was at Apple six years, and I designed the underlying multimedia technology, with video and graphics and stuff, on the Macintosh. I was a general manager for about four years, and I designed their second generation communicator system, including a new CPU and digital signal processing capability, and then I founded a company called Catapult Entertainment, that made something called the X-Man video game.

So I'd done a lot of multimedia work before, and in particular I have a lot of familiarity with video technology, and I'll tell you, when I started building that thing, I did not think it would work very well, but it seemed like so compelling an opportunity if I could get it to work, that I figured I would try. As soon as I got it working, I called over Bruce Leak [now WebTV's chief operating officer and executive vice president of engineering], and he came over and took one look at it and said, "What'd you do to the TV set?" I said I didn't do anything to the TV, it's what I did to the signal going into the TV, and I sat down with a piece of graph paper and showed him what the wires did and everything, and he said, "Let's start a company." And that was that. About two days later we filed a host of patents.

WWWiz: So how'd you pick the rest of the people?

S.P.: Well, Phil Goldman [now WebTV's senior vice president of engineering and supervisor of hardware and software system integration], Bruce and I were buddies from the Mac. The rest...we started looking around and talking to people, and found people who were as passionate about what we were doing as we were. They're the best in their fields, and also really great people to work with.

WWWiz: Did you three initially invest in the idea, or did you find someone right way who wanted to put some money into the idea?

S.P.: Well, even before we formed the company, we were just running it out of our bank accounts and our houses. In fact, it was pretty funny. We'd have these big executives from Japan or something, and I'm in a housing development, so this big limo would pull up, the dog would be barking, and you'd see these guys walk out. They'd go upstairs to bedroom where I had the demo set up, and sit around. So, yeah, we were definitely working out of our own houses and our own funding.

The thing is, when I was at Catapult, one of the people who bought the company was Marvin Davis, a billionaire down in L.A., and he made so much money at Catapult...I said. "I want to start a company and I need to fund it, but I don't know what I'm going to do next," and he said, "I don't care what it is..." So I called him up, the guys came up and I gave them a demo, they were really excited, and they wrote us a check. It didn't take too long to fund the company.

WWWiz: Great. Who do you think your competition's going to be?

S.P.: Well, the competition that's been announced...I mean...there have been a lot of prototypes and a lot of announcements, but we haven't seen any products. All of these companies were supposedly going to ship as early as last January, but I think when it actually came time to make the product work, it was a more difficult problem than they thought. The other thing that they don't realize, and I wish I could somehow warn them, is we have so many basic patents in this area, and they predate any other companies by at least a year. We don't know, anyway, if someone else could build a product like this and not be infringing on the patent. Since there's no product out there, there's not much we can do about it. I don't see any real competition at this point.

WWWiz: I don't, either. I just wondered what your opinion was.

S.P.: You know what our real competition is? Other users of television. Things like cable companies, etc. The way we're dealing with that is we're making WebTV more TV-like, more integrated with the TV- watching experience.

WWWiz: How many people do you think this system's going to attract to the Web in the next year?

S.P.: Well, it's hard to say. It's anyone's guess. It's not just a new's a new product category. Sony's doing everything to meet the demand, but there are a lot of stores that haven't seen any yet, just because the big stores have gobbled them up. Circuit City did a full-page ad on the back of USA Today, and so on, so we've been doing all we can to keep up with users, customer service people, etc.

WWWiz: Do you have an idea yet about how many units you're moving, that sort of thing?

S.P.: We can't really announce that kind of information because it's a new product and we're still trying to research how people use it, and everything else, and the other part of that is...we don't know. [laughs] The reason is, we're not the ones who sell the product. It's really Sony that sells it, and they've got a fairly arcane distribution system. The truck has to have a certain number of units on it before it leaves the dock...we've seen product serial numbers that we knew were in the factory, and it was eight weeks before they actually went, but then we've seen other ones that get there in two weeks. They probably won't have everything tallied up until about January, so we've just got to sit back and wait.

WWWiz: I looked at a unit at Fry's, and I watched several people interact with it. No one was there to explain it, and I know it's easy to use the system, but I watched a couple look at it and become a little confused and walk off. I was just there a scheme for the introduction other than making it available with a phone line to it in places like that?

S.P.: Well, there is. Fry's is an unusual retailer. They're considered a boutique retailer, because although there's a lot of them throughout the valley and Los Angeles, they're not that widespread. The big accounts are places like Circuit City, The Good Guys, that kind of thing, and at those stores, they do have the product set up at the point of purchase, and we've done training with the salespeople, but you did bring up a good point. Even with all that, we're concerned about the merchandise, and our feeling has been that they don't know what it is yet. The dealers just haven't figured that out yet, and we're being advised to deploy more merchandising people, to make sure the TV's not adjusted in a weird way, etc. I mean, I called up a Circuit City recently and asked them, "Do you have WebTV?" and they said yes, and I asked them, well, what is it? And they said, "It's the Internet on your TV." What's the Internet? "Well, it's something you send email through." What's email? "Well, it's like regular mail, but you don't pay for it." [laughs] And I'm like, okay, well, what else does it do? "It has USA Today on it." Do you know what I'm saying? The guy was being completely sincere and innocent, very enthusiastic, but it is a void. We kinda dropped a bombshell on them, with a product that's like nothing they've ever seen before, and it's going to take a little time before they get used to it.

WWWiz: Are you going to allow people to build their own Web page, have a home page, things like that?

S.P.: Yes. There are two things. First is the personal communication thrust that we're pursuing. They'll be able to create their own personal home page, sort of like your own personal information page like on America Online, except you'll be able to include HTML links, direct messages to each other, chat and more. So those two areas, personalization and community, will be coming about.

Did you know about the 1.1 release that's coming out in a couple of weeks?

WWWiz: No.

S.P.: You know about how the box updates itself?

WWWiz: Yes.

S.P.: We have what are called tune-ups, and the next tune-up is scheduled for the end of this month, around Thanksgiving. And we basically support every audio format. And we've significantly improved the performance by further optimization of the caching. It takes 10 seconds less time to connect when you first turn it on, you have background music you can turn on, a whole list of features. So one day you'll turn on your box, it'll ask you if you want a tune-up, you'll click on it, and it starts downloading.

WWWiz: That brings up another question. You guys have kind of an aggressive caching scheme in order to bring the sites up fast. If a person has a regular site that they want to look at, that's refreshing constantly, can they do something about that at their set?

S.P.: Our caching deals with that. What it does is it goes and checks on your site. Suppose you have an ad you want to rotate. What it does is it figures what things on your site have changed. When we go and serve up your site, we tag the things that are changing, or have changed, so when you pull up the page, it'll pull up the page, except for the ad, and then we go get the ad from your site, which might equate to a faster response for the other stuff. And there are some sites which say absolutely do not cache me, and we respect that.

WWWiz: And how about local providers, you know, the local providers in an area, is there some way that they can participate in this?

S.P.: Yes. In fact, we have lots of local providers that are participating right now. We have four national providers, and dozens of local providers that blanket the country. We cover more local calling areas than any Internet service provider in the United States. When you turn on the box and dial the 800 number, it uses something called automatic number indication, so when you dial into our server, we find out what number you're calling from, and we look it up in a data base and find all of the phone numbers for all the ISPs which we have a relationship with, that cover that particular area, and usually there's more than one. Then what we do is we download the phone numbers that can be used, and at which time of day, and get a phone number, depending on the circumstance. So an ISP that handles mostly business users, we try to use that in the evening, and one that caters to home users, we try to use during the day, and in the case of one that fails for some reason, or is busy, then we may not use the obvious one, but we will get you through.

As an example, we were down in Phoenix giving a demo, and there were a bunch of other people there also giving demos, and a lot of them were using concentric network, and the Phoenix POP went down, and all those guys were scrambling trying to figure out how to get their boxes hooked up again. What WebTV did is we dialed in, got a phone number, got hooked up, and that was that. So it took us 30 seconds longer than usual to get hooked up to the Internet because the POP was down. The person doing the demo didn't even know what was going on. He didn't even realize there was a problem until he found out everyone else was down, then he called up our service people to see what had happened.

But for example, in Spokane, Washington, or somewhere just outside, there is no national ISP, but there is a regional ISP, so if you happen to be in that little suburb, what happens is our server directs you to dial into that one. There are some areas where there is no local or national ISP connection available, and there's nothing we can do about that, but we have managed to cover about ninety-five percent of the U.S.

WWWiz: How are you guys going to handle things like pornography on the Web?

S.P.: We don't censor anything, but you can set up an account for your use of the unit, which has SurfWatch. So if an adult wants to make the main account, he can put it under his password, and set up an account for the kids, which has SurfWatch on it.

WWWiz: Are you going to be selling sets internationally? Are you going to be providing some kind of language crossover if and when you do that?

S.P.: Yes, we are, on both. We showed the Japanese the unit in Tokyo in September, and the response we got was entirely encouraging. The system was designed, actually, Japanese. The trick to making WebTV work in Japanese was to add Japanese fonts to it. As far as language localization goes, what we do is just when it logs in, just by country, we actually download the appropriate interface. So as we introduce these other national systems, you'll be able to download the foreign language of your choice. One of the beauties of the Internet is that it is international, so we designed the system to be international.