Bill Gates’s love affair with the ‘Interactive TV’ that never happened

In an early 1993 interview with Bill Gates he could see the power of connecting consumers over a massive digital computer network—He was just driving Microsoft down the wrong ‘information superhighway’

Note to readers: This interview with Bill Gates was referenced in my recent post ‘Dear Zuck—Your Bill Gates’ moment has arrived!’ Larry Ellison of Oracle was also also running down the 2-way cable highway at the time too. It just demonstrates that even the smart folks who might have pioneered the previous innovation wave, don’t always get it right. Enjoy an interesting moment in technology history below.

Foreshadowing the Internet, Bill Gates told Red Herring in September 1993, ‘Everybody is planning to be a big player in interactive TV! The holy grail of this revolution will be to provide consumers with two-way communications into the home through a new device we call the TV/PC.’

STALKING BILL GATES
By Anthony B. Perkins
From September 1993 issue

Minutes before hopping into my car to catch a plane to the European Technology Roundtable Exhibition (ETRE) in Barcelona, Spain, we held a hastily organized editorial meeting. When the discussion got around to whom we should interview for our interactive TV (ITV) issue, Technology Editor Zack Herlick piped up and said solidly “Bill Gates.” Up to that point, Zack had spent more time than any of our staff researching the ITV market. His research led him to believe that Mr. Gates will have more of an impact on this emerging market than any other player. “He’s our ultimate interview candidate,” Zack said. I didn’t yet know the specifics of Zack’s research, but who was I to argue that Bill Gates isn’t going to dominate anything. As I organized my briefcase one last time, and started for the door, I remember telling Zack that a Gates interview would be great, but he has been granting fewer interviews lately so it was going to be a long shot. I suggested that Silicon Graphics’ chairman and founder, Jim Clark, one of the nation’s top technology visionaries, might agree to be interviewed.

Jim Clark would soon leave the first company he founded, Silicon Graphics, and join 21 year old University of Illinois student Marc Andreessen to launch Netscpae, the first commercial Internet browser.

Fourteen hours later, I was sitting in Terminal 3 at the Heathrow Airport in London, waiting for the Iberia Airline’s shuttle to Barcelona. Waiting for the same plane was Fred Gibbons, founder and CEO of Software Publishing. Fred pointed to a disheveled looking young man checking in at the counter to board our flight. “Look who’s here?” he said. It was Bill Gates, of course, the feature speaker for the ETRE conference. As we boarded the plane, adrenaline began rushing through my system. “I can’t believe it!” I thought, “I am about to spend an hour and forty-five minutes on the same plane as Bill Gates! What a perfect time to get his opinion on interactive TV.”

The pressure was on. I was grappling with a difficult decision. On one hand, I’ve always had a deep respect for the personal time of public figures. As a rule, Red Herring never writes about or publishes information concerning the private lives of business people or even politicians. We also prefer to pre-arrange interviews, rather than accost people at public forums. On the other hand, I had a vision of the troops back home. The folks I have been preaching to over the last several months about the virtues of “capturing information directly out of the mouths of the most powerful players in technology.” There was no way I could let them down.

As I settled into my seat, I noticed that The Man was seated just a few rows in front of me. The stress must have been written all over my face. As I was waiting for the plane to fly, and the seat-belt sign to turn off, the two elderly English women on “holiday” sitting next to me began giving me some strange looks. To ease the tension, I leaned over to the two women, lowered my voice, and said, “Want to hear some gossip?” Obviously adventurous by nature, the two women perked up and said that they certainly did! “Two seats in front of us is the richest man in America,” I informed them. The women giggled like teenagers. While they weren’t quite sure if they had heard of Bill Gates before, they were pleased to be in the presence of someone who was wealthier than the Queen. When they learned of my mission, they became part of the conspiracy. They nudged and poked me until I got out of my seat to close the deal. Embarrassed, I got up and slunk over to his seat, only to find him horizontal. Yes, he was laying across three seats, dead to the world!

Eventually, Mr. Gates woke up, I got the interview, and my two new friends had a good story to tell their grandchildren. It was a good thing too, because I later learned that Jim Clark was on sabbatical. So, Mr. Clark, if you’re back yet, we would still like to talk to you! Maybe I’ll catch him on my next flight out of town.

Bill Gates Interview—The Once and Future King of the Information Superhighway

Barcelona, Spain, September 10, 1993
William H. Gates III, Chairman & CEO of Microsoft Corporation, talks exclusively with Red Herring editor-in-chief Tony Perkins about his company's plans to be a major player in building the information highway.

The network build-out to the home which aspires to convert our living rooms into an interactive TV nirvana will take billions of dollars and the cooperation of hundreds of small and large companies. To complete the job, giant switches and set-top converter boxes must be built, fiber optic cable must be laid, and, as Bill Gates reminded The Herring this month, "tons and tons of software needs to be developed." And it shouldn't surprise you to learn that Microsoft's founder and CEO also told The Herring "Whenever there's a lot of software needed in a certain area, Microsoft likes to be there to make its contribution." We don't doubt that Microsoft will be there, substantially, when the interactive TV revolution hits home. That's why we felt that this special issue would be incomplete without the first-hand insights on the fledgling roll out of interactive TV from the American Gladiator of Software himself.

Perkins: Is Microsoft planning on being a big player in the interactive TV market?

Gates: Isn't everybodyplanning to be a big player in that business? (Laughs). The holy grail in the consumer market will be to bring new applications into the home. Chief amongst those applications will be software that will provide two-way communications through a new device we call the TV/PC. The TV/PC will be like a TV in that it will be fairly inexpensive, fit in your living room, and will be operated by a remote control device. But inside, will be chips that are much more powerful than today's PCs. Users will be able to select from a broad range of programming and services, from education and entertainment services, to ordering movies and pizza. You will also be able to hook up your keyboard or printer and do PC-like applications. For some time now, we have had a group working on software for the TV/PC. We're betting that there's going to be quite a breadth of applications and that those applications are going to need a lot of depth, which means a lot of software. You'll need a very rich software infrastructure to operate the switch, servers, and the box that's going to sit on top of your TV and run the applications. Software is the glue that will hold the entire information highway together, and whenever there are huge software requirements, we like to make a contribution. So we'll just have to see if we're right.

Perkins: Are we going to be running Windows on our TV sets?

Gates: No. The user interface on your TV will have to be very simple to use. I don't know exactly what it's going to look like, but I can guarantee you that it is not going to look like a computer. It won't be Windows on your television. It will take a new genre of software. This will not be a canned package, either. The technology and intelligence in the operating system will learn what you like and present options to you that take into consideration your preferences.

Perkins: Is Microsoft biased toward any particular network option?

Gates: We are network neutral. We are committed to solutions that work together across different and disperse networks, whether cable or fiber-centric. In order for everything to function properly, we will have to deliver an open system solution.

Perkins: How much money are you spending on R&D in the consumer area?

Gates: About $100 million a year.

Perkins: Some analysts are predicting that the cable companies will run out of cash trying to build the infrastructure to play in the ITV market.

Gates: No, no, no! Come on -- it's all debt financing! All you have to do is prove how the monthly revenue stream from service subscriptions can cover your loan payments and you're in business! I think that even when you include the converter box, the fiber infrastructure, and the switch, the home build-out will end up costing less than two thousand bucks per home. All you have to generate is fifteen to twenty bucks a months per subscriber, and you can easily make up for that expense. The revenues that will be generated by the initial interactive services, such as movies, shopping and video conferencing will justify the big capital investment. I think that the cable companies will be able to get as much debt financing as they need.

Perkins: Paul Kagan Associates projects that there will be over four and a half million converter boxes sitting on TVs by the end of the decade. What do you think about that projection?

Gates: Random. It's a random number. It's all finance! Demand means nothing! It's some market analyst spewing out numbers because he's supposed to! Once you prove that the revenue stream is there, you can borrow the money you need to build the network which runs the applications that create the demand. It's all finance. No one can project what the numbers are going to be by the end of the decade. It's random!

Perkins: How long is it going to take for this new segment of the consumer market to develop?

Gates: Nobody knows exactly how the information highway is going to unfold. Even the most optimistic people say that it will take four to five years for the home market to develop. We're going to have to endure years of speculation and posturing by companies that may or may not bring products to market. It's going to take a lot of cooperation between companies. We will be partnering with chip manufacturers; the RBOCs; the consumer electronics companies for their expertise in marketing and manufacturing; and the cable companies, who will provide the bandwidth to make it all possible. And, most important, will be the content companies. Clearly, the profits generated by interactive TV will be split among many companies. No single company is going to dominate the new information highway.

Perkins: How is Microsoft going to work with the content providers?

Gates: It's essential that we work closely with content providers. When we deliver the operating system, and the information highway becomes a reality, it will be very important for the content providers to be right there- ready to turn their systems on. Microsoft will also provide the tools so that the content people can create interactive programming relatively easily, cost-efficiently, and quickly.

Perkins: For all its hype, the information highway doesn't yet exist. What do you think will be its different stages of development?

Gates: In the beginning, I think we'll see many of the new consumer applications available on public kiosks. Today's cash machine will become an information network terminal which provides public access to multiple services. That's how this new industry segment will be bootstrapped. In the end, I think that these applications will be plugged into your home. Traditional channels will be replaced by menus of topics and services displayed on your screen.

Perkins: It seems as if everybody is jumping into this market. How do you see the competitive environment shaping up?

Gates: Right now everybody is "working" with everybody. We see ourselves as simply one of many companies working together with phone companies, cable companies, and content companies to build these new types of applications. There will be some really wonderful pilots that will be demonstrated in the next two years. There will also be some terrible pilots. It's only when we expose this two-way highway in a rich form and encourage the same kind of software developers that fostered the PC phenomena that we'll be able to develop applications for the broader market. For this to happen, we must draw on everything we know, everything the computer industry has developed in the last ten years.

Perkins: So, are we all going to end up being couch potatoes?

Gates: (Smiles) We're right at the center of the true information revolution. As these information tools become pervasive in business, on the road, and in your home, the way we will live our lives and conduct commerce will be revolutionized. I think that the idea of information available at your finger tips and instant global communication is realizable. It will happen substantially over the next four or five years. As a result, we may end up suffering a little from information overload, or spend a little more time on the couch, but I see that as a symptom of our success. Everything we've been talking about is going to create incredible opportunities for software companies like Microsoft that are even larger than we can imagine. And, frankly, I'm very excited about it!

The last Steve Jobs and Bill Gates joint interview—2007