Issue date: January 27, 1999
By LOIS MILLER
A Menlo Park startup company called DIVA Systems Corp. is the world's first supplier of video on demand service through cable TV, according to Paul M. Cook, the firm's CEO and also the founder of Raychem Corp.
The three-year-old business offers OnSet, a service that enables cable customers to rent, watch, and control videos right through their televisions, without videotape or VCRs, he says. Viewers can fast forward, rewind, and pause, while their selections remain available for 24 hours.
OnSet uses existing cable lines to provide "two-way communication just like a telephone, but at extremely high speeds," Mr. Cook explains.
Hundreds of movies and other video programs can be rented through OnSet, for a monthly subscription fee of $3 per cable customer, plus a charge for each selection. New releases cost $3.95 per rental, older movies $2.95, and children's programs as little as $1.
Available since fall 1997, OnSet is installed at four East Coast cable companies, and there are agreements to install it in the Seattle area and Marin County, Mr. Cook says. Suburban Cable in Pennsylvania is expanding its offering of OnSet from one location to other sites in that state as well as in New Jersey and Delaware.
While DIVA has no agreement with Bay Area cable providers yet, the firm "will try to work with the Palo Alto Cable Coop at some point," he says. "But they're quite small, and we have to go after the bigger ones first."
DIVA splits the revenues from its service with the cable companies on a 40 percent-60 percent basis. And the cable providers agree to retain the service for seven years.
The company has rights to offer about a thousand video programs from major movie studios, independent film makers, children's videos producers, sports networks, and special interest media. Some of its newest agreements are with ESPN Inc., Bravo Networks, and Playboy TV.
The potential market for video on demand is huge, Mr. Cook says. The home video market is $16.5 billion, and there are 65 million cable subscribers in the United States.
"We're trying to sell the cable companies on deploying our system to as many of those as we can."
Gathering steam
It was Mr. Cook's vision that led the OnSet technology from laboratory to commercial reality. A Woodside resident, Mr. Cook is chair of DIVA's board and a member of SRI's board, which he chaired from 1993 to last July. He was CEO at Raychem for 33 years.
Through his efforts, a supercomputer that was too expensive and complex for most cable companies became part of an inexpensive, outside service that operates under contract to cable providers.
"It's a very sophisticated technical system ... and we felt we could make more money by offering it as a service in which we owned, installed, and operated the system ourselves," he says.
DIVA has no direct competition as a supplier of video on demand service to cable companies, according to Mr. Cook. A few other firms are "beginning to try to make" hardware for video on demand. "But nobody's developing the whole end-to-end system that we know of."
But getting to this point wasn't exactly an entrepreneurial hop, skip, or jump.
"We haven't talked about what we've been doing for several years because it's been a very difficult development," he says. "It's taken us longer and much more money than we thought it was going to take."
Mr. Cook created DIVA in 1995, after a previous company, Sarnoff Real Time Corp., failed to attract investors for its idea of selling just the supercomputer to cable companies.
Called the Sarnoff Video Server, the supercomputer was developed in the early 1980s by New Jersey-based Sarnoff Corp. to test color TV tubes. Formerly RCA Labs, Sarnoff is a pioneer in color and high-density television, as well as broadcast satellite technology. It has been a wholly owned subsidiary of SRI International since 1987.
Though DIVA is housed on the SRI campus and headed by the former chair of SRI's board, it is a spinoff of Sarnoff, not of SRI.
Full speed ahead
What's available through OnSet now is "just the beginning of what can be done" over cable lines, according to Mr. Cook.
Timeshifting will be a reality this July, he says. By then, DIVA's technology will capture live programming, such as sports and other events, for storage on the server, he anticipates. In as little as "eight seconds later than real time," the server will be able to deliver it to viewers.
"And then you could pause that and you could rewind that." Coming soon, Mr. Cook says, will be interactive educational programs that let viewers learn at home, at their own pace.
Through cable lines, TV viewers will access the Internet for information such as stock quotes. Video games will be downloaded directly into play stations. And magazine articles will be downloaded right to the printer, he says.
Also in the offing by the end of this year is DIVA's planned move to Seaport Center in Redwood City, Mr. Cook adds. With a staff of 300 "technologists, cable people, and Hollywood types working in a World War II Army building" behind SRI, he says, "we're running out of space."
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