I. Introduction

My name is Michael Jeffress. I am the vice-president of business development for a small company in Pennsylvania called Television Host, Inc. Along with my partner Andrew Harkavy, I developed this computer program called "Electronic TV Host."

Electronic TV Host is an electronic television guide. Like a printed television guide that you would purchase at the grocery store checkout, it gives television viewers up-to-date television listings. Users can update the listings in 1 of 2 ways: (1) from a direct computer connection over a telephone line, or (2) from our Internet website. But our product is a lot more than just television listings: It allows viewers to search all cable, satellite and broadcast television listings instantly -- by actor, category, title, or any other criteria you can think of. It also allows viewers to customize and save searches, to view listings in a variety of formats, and to print out personalized viewing and recording schedules.
So, for example:

1. If John Wayne is your favorite actor, you can use my product to make sure you won't miss any of his movies.

2. If you like to cook, you can tune into every program demonstrating the categories of recipes of interest to you.

3. If your children like horses or sharks, you can find all related programs.

4. Or, if you are like my wife and I -- who take an active role in what our two girls watch on television -- you can use Electronic TV Host to make sure your children are watching wholesome television programs. For example, my program allows you to filter out programming listings for certain inappropriate subject matter, television stations, or time slots.

Our product has been widely recognized as the best computer program of its kind. The world's most prestigious computer makers have sold it with their computers. But our product's future is now in jeopardy because Microsoft has decided to bundle its inferior electronic television guide -- called "WebTV for Windows" -- on the same disk as Windows 98.
II. Personal History

Let me begin my telling you about the development of Electronic TV Host.

Back in 1989, I was working as a Programmer Analyst and Project Manager for Marriott Corporation. But I dreamed about starting my own company. So I quit my job at Marriott, and started to work for myself.

It took me years to come up with the idea for Electronic TV Host. My inspiration finally came from my wife. Every week she would go through the printed cable guide we received in the mail with a yellow highlighter to mark what programs we wanted to watch on television. This would take a lot of time, and we would always end up missing some programs.

I developed the idea for Electronic TV Host from this personal experience. For about the next year and one half, I worked with my business partner to develop the product. He had also left a position at Marriott as Technology Director to devote his full-time to this venture. At first, most people thought the idea of an electronic program guide was crazy. There was nothing else like it on the market; only printed television guides were available. But we believed in the idea, and we stuck by it. It was a huge risk -- we paid for everything out of our personal savings. But the risk paid off.

In 1994, we showed our product to TV Host, Inc. At the time, TV Host sold exclusively printed television guides. TV Host liked our idea, because it recognized that electronic television guides were the wave of the future. My partner and I have been working with TV Host ever since. Although TV Host still sells its printed television guides, it expects its future to lie with our electronic television guide.
III. Success of Electronic TV Host

By many measures, Electronic TV Host has been very successful. The most prestigious computer manufacturers in the world -- Compaq, Sony, Gateway 2000 to name a few -- have all sold my product with their computers. As late as last year, we were in high-level discussions with Gemstar -- which is a leading provider of VCR and interactive television technology -- to purchase our electronic program guide technology and business for $8M. At one point, even Microsoft wanted to buy us. Some of you may be aware of Internet web sites that provide electronic television guides for free. For example, TV Guide has a website. You may be wondering how I can sell my product, when these competing products are available for free.

The main difference is that my product is a computer program, and is therefore stored on a user's home computer. In contrast, these free websites require Internet access -- which many people don't have. Also, because these other free websites are on the Internet, they are many times slower and more tedious to use than Electronic TV Host. Electronic TV Host is faster, and provides the user with many more options and features.

Before Microsoft began to offer its competing television guide with Windows 98, the only other electronic program guide that competed directly with Electronic TV Host was a product offered by Intel called Intel Smart TV. Even though Intel offered a worthy product, and has more established relationships with computer manufacturers, and even though Intel has greater money and other resources than we do, we managed to successfully compete with Intel. We offered a better product and better service. All the major computer manufacturers -- Gateway, Compaq, Packard Bell, Phillips -- chose Electronic TV Host over Intel Smart TV.
IV. Interactions with Microsoft

At one point, we nearly sold our product to Microsoft. In January 1996, Microsoft invited us to its Redmond campus. It told us it was interested in acquiring Electronic TV Host and in hiring our employees. We understood that Microsoft would continue to offer our electronic television guide as a stand-alone computer program. We were excited. We shared our technology with Microsoft, and all our hard-earned insight about the industry. We even shared our business plan.

Then, negotiations broke down over price. Microsoft wanted to purchase us for less than half the price we offered. Microsoft told us that if we didn't sell at its price, Microsoft would compete directly against us. Of course, Microsoft could compete against us very effectively: it has the resources, and it has our hard-earned knowledge.
V. Microsoft's WebTV for Windows

We first learned that Microsoft was planning to offer its electronic television guide with Windows 98 early last year. I immediately called one of Microsoft's top executives to see if there were some way we could work together. His message to me was clear: there would be no future for Electronic TV Host. He gave me examples of other companies who had learned to "adapt" in different ways when Microsoft had bundled these companies' computer applications with the Microsoft operating system.

It is well recognized in the industry that Microsoft's electronic television guide is nowhere near comparable to Electronic TV Host. We have 10 days of program listings; Microsoft has 2. We have 200-250 searchable categories of information; Microsoft has about 30. We allow users to customize the format of their program listings; Microsoft offers only a fixed format. We allow users to print out their customized television listings; Microsoft has not print feature. The list goes on.
VI. Damages

All of our hard work, and all of our hard-won successes, are now in jeopardy because Microsoft is competing unfairly with its inferior electronic guide.

I mentioned that Gemstar had nearly purchased TV Host last year for about $8M. Our negotiations were interrupted when Microsoft began its own negotiations with Gemstar. Of course we could not compete on Microsoft's level. Although our product is unquestionably superior, we cannot offer distribution with Windows 98. After Gemstar made a deal with Microsoft, it no longer wished to talk to us on the previous terms.

Our relationships with computer manufacturers are also threatened. These manufacturers all want to know why they should pay for our Electronic TV Host, when they can obtain Microsoft's electronic television guide for free with Windows 98. Before Microsoft's announcement, we had been negotiating a very favorable contract with one of the top computer manufacturers. That negotiation was frozen for months after Microsoft announced that it would bundle the Microsoft television guide with Windows 98. Only within the last 2 weeks has the computer manufacturer shown renewed interest in our contract. I don't know if all the attention we are getting in the press or with governmental authorities has had any effect on this negotiation; I only hope that we are able to compete on fair terms and offer our superior product to television viewers.
VII. The Future of Electronic TV Host

It is impossible for me to say what future lies in store for Electronic TV Host. Analysts predict that there will be an enormous market for electronic television guides over the next several years. If Microsoft were forced to compete with us fairly, I am confident my product would continue to be very successful. However, because Microsoft has chosen to bundle its product into every copy of Windows 98, it will be the only computer TV guide the majority of busy consumers will ever see. As it is plain to see, as things are now, our future is uncertain.