Founded in 1998, GoldPocket Interactive develops and supports ITV applications for such high-profile clients as the Game Show Network, AMC and A&E. The company has also been at the forefront of an initiative to develop open XML-based ITV production standards. GoldPocket co-founder and CEO, Scott Newnam, recently talked to [itvt]'s Tracy Swedlow about how the company's work in ITV originated in its focus on what he calls "mass-participative communication," about why it made business sense to give away a million dollars, about why he decided to move the company from Boston to Los Angeles, about his priorities for the coming year, about why he is convinced that cable operators are finally starting to embrace ITV, and more.

[itvt]: Could you tell us a little about your background?

Newnam: I'm from Danville, a small town in southern Virginia which very few people will have heard of. I went to Davidson College for my undergrad, and I was an economics and political science major. In fact, I was pre-law at one point. I decided instead to go into business, after having worked at the US Attorney's office for a while.

[itvt]: Were you interested in media at the time?

Newnam: At the time, I think I was primarily focused on classic economic theory, on how companies work, more than on entertainment and media. I was interested in how you create value in organizations, in government as well as in the private sector--I've always followed politics and government quite closely. I ended up going to the University of Chicago Business School on a fellowship. I was what was called a "Chicago Business Fellow."

[itvt]: How long were you there?

Newnam: I went for a term on this fellowship and decided to defer going back for a few years, because I was really young at the time-- 20 years old. I decided I'd go to Wall Street, so I worked on Wall Street...

[itvt]: Doing what?

Newnam: I was an investment banker at Merrill Lynch. I covered private equity and the technology companies. I had a very strong technology background, but I also understood business and finance. I enjoyed what I did, but I really wanted to get into a corporation where I could see that, on a daily basis, what I was doing was creating an impact. And so I left Merrill Lynch and went to work for The Irvine Company.

[itvt]: Is that related to the Irvine Foundation?

Newnam: Yes, it's related. The Irvine Company is a multi-billion- dollar real estate company in southern California. It's based in Newport Beach. I went there to work at a company called IAC. It was a spinout that became a publicly traded company. I worked on fundraising and corporate strategy, figuring out ways to leverage its properties--basically doing the same thing I've always focused on, which is answering the question, "How do you really create value somewhere?" I ran the strategic planning group, and I eventually became treasurer of the company. As part of the strategic planning, we spent a lot of time analyzing how people communicate--communications are an important part of the real estate business. I ended up doing a lot of work with a system from Citrix Systems. It was a fabulous technology that allowed many, many users to interact on one server. And really the economics behind it were quite clear: you could save enormous amounts of money by using it. It began to solve the problem of how you enable people to communicate in a way which is both on a one-on-one basis and a mass basis. It was quite clear to me that these technologies that make it possible for a lot of people to communicate, that enable what we call "mass-participative communication," would be an extremely powerful thing in terms of changing the economy and changing the way that people interact with each other. When you and I talk, for example, it's a very active communication: there are 2 people speaking, and we can respond to each other. But when you look at something like television, it's generally a broadcast medium in which nobody's interacting or participating: you're reaching a lot of people, but it's not active. And the question for me was: could you achieve both? Could you have many people communicating with each other in an active way? And my belief is that you can. So after working at The Irvine Company, I attended Harvard Business School, and I went there knowing that I was going to start this company. My goal was to find the very smartest and most talented people I could possibly find between MIT and Harvard to start it with me. I realized that there were some things I brought to the table, but I also wanted to put together the ultimate team to build what I was conceptualizing at the time.

[itvt]: Did you conceptualize it as a TV company?

Newnam: Well, the focus was on what I would call "mass-participative communication." But clearly entertainment was going to be a large usage of it. It was clear that the ability to have people interact in a fun way, whether through gaming or through things like buddy lists and instant messaging, made entertainment a huge value proposition. So, yes, I knew from the beginning that entertainment was going to be a key piece of it, but television itself was only a subset of the capability of the system that I was envisioning. Anyway, I sought out people from all around the world to bring together the best team. The team started with Izet Fraanje, who's our CTO. When I was at Harvard Business School, she was considered one of the brightest people there. She had worked on the smartcard development in Europe, and had really done some quite amazing things--an article in The Wall Street Journal listed her as "your classic 200 IQ." I ended up switching into her study group to see if she was as smart as everyone said. And she was brilliant. I approached her with the idea and she said, "This is great. It fits my background perfectly. Let's build the team." And so what we did at the very outset was that we set out to build what I would call "a team of excellence." We brought in people from all around the world. And what happens is that when you build really strong technology or engineering organizations, people go because of who else is there. Izet had an amazing reputation, and that would bring in other people. We had--and still do have--testing for anyone who comes into the company, whatever their role. The tests were always extremely tough, and they've gotten tougher over time. As I said, once you start to build a really, really great team with very smart people, that attracts other smart people. So we tried to build a team that had all the characteristics we were looking for: passionate, very, very smart, and with everyone contributing an expertise.

[itvt]: What drives your interest in mass communications?

Newnam: Well, I've always been interested in public policy and other things like that. I've always been oriented towards being involved with something that has an impact on as many people as possible. And, with the emergence of the Internet and other new technologies, we're at a new point in history in which the ability to communicate has fundamentally changed, from being a one-on-one telephone call or a mass television broadcast, to being the ability for a lot of people to communicate and achieve a common goal. So if you really think about where communications technology will go in the future, you can imagine things like--even though it may sound sort of silly--using it to solve world hunger, or to solve some unbelievably difficult mathematical problem, or to put someone on another planet, and so on. Because everyone is participating in the solving of a problem and everyone is interacting, it was clear to me that new communications technologies, and the ability they have to impact people, were among the most important developments in history--certainly in our lifetimes.

[itvt]: Was your original idea to create something that would compete with the Internet or that would work with it?

Newnam: Something that would work with it. Everything changes a little bit as you go through time, but most of what GoldPocket does today is a vision we had back in 1998 and 1999. For a long time, we were very silent, and we watched a lot of companies come and go within ITV. We were sitting in our garage space, cranking away at hardcore technology for a year-and-a-half or 2 years before anybody knew who we were.

[itvt]: So you were familiar with Spiderdance and some of the other companies that were developing 2-screen applications? Were you creating your EventMatrix system back then?

Newnam: Yes, we were creating the EventMatrix, and it didn't really matter to us at the time if it was for 2-screen apps or for set-top apps. Because, back when we were originally creating the system, the concept of 2-screen vs. set-top didn't really exist. This was back before the various 2-screen and set-top companies--Spiderdance, Mixed Signals, etc.--were producing anything, or even existed, for that matter. We were simply creating a core technology that would allow us to do what we wanted to do. And we had to have enormous patience. But we believed that we had the right people from around the world, who could build something that without those people could not be built. So we decided to take our time and build it right. We weren't thinking in terms of 2-screen or set-top. We were thinking, "How do I let these people interact? It may be over a set-top box, it may be over a PC, it might be over a wireless device, it might be over a console." But we were determined to enable people to communicate in an extremely robust fashion and on a scale that no one had achieved before, and on an automated level that no one had been able to do before.

[itvt]: What year did you start GoldPocket?

Newnam: I started it in 1998, and it was incorporated in 1999.

[itvt]: Where did the name come from?

Newnam: It was from a focus group. The focus group basically showed that "GoldPocket" had an initial feeling of neutrality. It wasn't a "hot" name, and it wasn't a "dull" name--and, over time, it would give you a feeling of trust and excellence. It would give the feeling of remembering your grandfather pulling a gold coin out of his pocket and giving it to you when you were a child.

[itvt]: Were there other names that you considered?

Newnam: There were, but I can't even remember what they were. It became clear that this one was going to be it. At the time, you had so many "hot" names--the dot-com boom was just starting--and what we were focused on was the exact opposite. We didn't want a "hot" name. We really wanted a name that people could trust.

[itvt]: So when did you emerge from stealth mode?

Newnam: At the beginning of 2000; we believed we had come far enough along and had built enough that we needed to actually begin running not just tests (because we had done plenty of tests), but large productions on the system. We needed to get out there and do it. But what we didn't want to do was go get a customer and not deliver great product to that customer. You've recently done interviews with several of our different customers, and I think one of the things you may have taken away from them--and it's something which we pride ourselves on--is that we want people to look at us as a customer-service-oriented company, a company of excellence. We didn't want to work with someone before we had run something. So we created and ran a show called "Live Trivia" on the Internet. And we gave away a million dollars on the show. What we wanted to do was to have everyone we could get in the country to come and interact with this show simultaneously. That's when it became pertinent whether we were doing 2-screen or set-top: at the time, there just weren't enough set-top box deployments to get a reasonable test on the system.

[itvt]: Where did you get that million dollars? Was it from your initial funding?

Newnam: Yes, it was. You see, with technology it's generally fairly easy to build something small. However, as you start to get bigger--let's say you want to handle 5 times as many people as before: it's not merely 5 times as tough to do it, it's exponentially tougher. So it's, say, 25 times as hard to build something that will handle 5 times as many people. But, because of that, what happens is that when you start to get involved in these extremely large-scale, complex developments, venture capitalists and others recognize the value. And one of the other things they recognize the value of is production experience. So, while it may have seemed ludicrous to give away a million dollars in order to get people to interact, what became very clear was that this was the best way to drive enough people to really show this thing off. So we did this at the beginning of 2000, and a woman from rural Missouri--a fabulous woman--won the million dollars. We immediately got called by Good Morning America and CNN, and the next morning I flew to New York, and went on TV to talk about the scale of this thing. We had done a press campaign and other promotional activities around it, and an enormous amount of people in the country had participated. However, the winner had used a 28k modem, competing against people on faster modems, and she had been on a home-built computer. It really demonstrated what we wanted to see: that we could level the playing field.

[itvt]: How many people participated?

Newnam: Well, over the entire period of time, around half a million people took part, which is a tremendous, tremendous number of people to have all participating in one game. But what was particularly interesting about it to many technologists, what was different than anything that had been done before, was that this game took place on geographically distributed servers. So, if you think about Web servers, you can put out a Web server and maybe have 5,000 or 10,000 people click on that server before you have to go to another Web server. What we needed to solve was that we had people in Washington, DC, people in Alaska, and people in Hawaii, all interacting at the exact same time and on servers that were geographically close to them. And yet the servers had to replicate data with each other so that it would, in fact, be one game, as if all these people were all on one server. Conceptually what we're doing is we're taking, say, 100 servers, all distributed around the country, and having them act as one server. You can imagine the server, bandwidth, and protocol issues that you have to solve to do that. But it is quite amazing to watch it happen.

[itvt]: This was an Internet application. How did you make the move into television?

Newnam: Immediately after "Live Trivia" took place, we were contacted by 6 or 7 networks that said they wanted to run interactive shows. Turner's "Dinner and a Movie" was one of the first network shows to use the technology. A lot of our focus had been on how you build interactivity in a way that's scalable and fast and also easy to use--and those 3 qualities are key to successful ITV applications.

[itvt]: So the broadcasters actually contacted you?

Newnam: Well, we got a lot of press after the launch of "Live Trivia." In fact, I went on almost every major news show with the woman who had won it. I was on CNNFN and MSNBC, and the Wall Street Journal did an article about it. So we were contacted by a lot of players, and we chose 2 or 3 to launch with, and it just took off from there. What became clear is that there were a lot of other uses for the technology. One of the big ones, obviously, is multi-player gaming. So we had a big decision to make; it was a fork in the road for us: should we go into multi-player gaming, or should we go into ITV? We decided that we could make the largest impact initially in the ITV industry--because it was a nascent industry and medium, and we believed we could help grow and structure the market. But we had a fundamental flaw: we were in Boston, and the television industry was headquartered in LA and New York. So we made the decision to move the company from Cambridge, Massachusetts, to Los Angeles. We did this in the middle of the recession--it was actually on Thanksgiving Day, 2001. We chose to move on Thanksgiving because we needed to move on a day that wouldn't impact our customers. Most of our people were not from Boston, but had been brought in from around the world: we had specialists from Japan, China, Korea, Argentina and the UK, and a bunch of people from the Netherlands and Germany. We told them that we wanted to move 3000 miles across the country so that we could be at the heart of television, and that we were going to impact this industry in a way that no one has ever done before. And, 6 weeks later, we moved the entire company. Almost everyone in the company moved with it--which is, I think, a statement of how great the people are here.

[itvt]: You subsequently acquired Mixed Signals? What made you decide to do that?

Newnam: Well, part of the reason we moved out here was that we knew we had to consolidate the space. There were a lot of small companies in the space and there was a lot of fragmentation. We believed that we would be able to have a very positive impact if we could bring a number of companies together. This would enable us to have economies of scale, and to provide a common technology to do what we were doing. And this would enable creatives and producers to produce a lot more on an economically viable model. When we came out here, we knew we would be doing acquisitions and growing our space. So one of the first things we did after we moved here was to purchase Mixed Signals. Mixed Signals had focused 100% on the set-top box market. And even back when we were launching "Live Trivia," we recognized Mixed Signals as being technologically one of the best companies we knew of in the ITV space. They were hardcore engineers with great technology. But a major issue they faced was that they were just set-top-focused, and you really need to hit all platforms to satisfy the networks. Networks wanted to be reaching 2-screen and set-top users at the same time. So we brought the companies together and we integrated all the technologies, and it was a home run from all perspectives. In fact, it was far more successful than we even thought it would be.

[itvt]: So what kind of company have you created by combining the original GoldPocket with Mixed Signals?

Newnam: I'd characterize it, as a "company of excellence." When you interact with people here and you see the culture here, people are here because they want to be around people who have really high aspirations, goals, and capabilities--people who demand excellence of each other. It is a very fun culture, because everyone has made an enormous commitment to be here: among our most recent hires are people from Britain, Argentina, and India. We seek out people who desire the same sort of culture that we have. We've been hiring quite a few people recently as we've been growing, and we've increased the amount of testing we do: I probably couldn't get into the company today myself, the tests have gotten so hard! But it's one of those amazing things: when people take the tests, they come out and realize, "Wow! They really are looking for great people!"

[itvt]: What are your top priorities right now?

Newnam: Well, the enhanced TV business, as you've seen from the recent announcements from our customers, has grown pretty significantly this year, and continues to do so. So I actually spend very little time on that, because the team has it down and they know how to deliver great product for customers. That business is growing by itself. Instead, I focus very much on the strategic side, on how we should grow this business. When you look at our business, success for us is generally success for everyone else in the value chain. In other words, if we're doing well, if we're doing more business, it's helping, for example, the middleware players like Liberate or OpenTV, because more stuff is running on their platforms. So we're in a unique position in which our success is generally good news for everyone in the industry. My focus is to make sure that we continue to deliver great product that continues to generate success. One thing this focus led to was the acquisition of Moeo, which was a wireless company. So what you're going to see this year are a lot of wireless launches which are going to be fully integrated with ITV; and you truly will not know the difference between something that's running on a set-top box, a PC, or a wireless network. I'm also focused on the creative side of production, on questions like how we can make things easier and faster to produce. Earlier this year, we announced deals with both Avid and Final Draft in which we integrated our tools with them. We continue to look at every part of the puzzle and to ask, "How do we make it faster and better so that the end-user experience will be great and so that the value proposition is extremely high?"

[itvt]: So what kinds of deals are you currently pursuing in order to ensure that ITV elements are easier and faster to produce?

Newnam: We are integrating with virtually every player in the chain today. So whether it's in the broadcast center or in the production suite, whether it's production tools, scriptwriting software, or whatever else, we are integrating with it. And, I don't know if you remember the ITV Production Standards that came out that we helped lead--those have simplified a lot of this, because now there's this open-source XML that everyone can look at. In fact, I believe there's another version of it which is going to come out soon.

[itvt]: I was going to ask what was happening with those standards.

Newnam: There was a version that came out in November, but I think the bigger version is going to come out in January. In any case, what's interesting about it is people are beginning to integrate with it themselves. I have spent a lot of time in Europe, looking at opportunities there. There are a lot of people who are actually using the ITV Production Standards in Europe today--they've just gone out and started using the open XML spec, because it streamlines a lot of things. Europe is ahead of the US in terms of digital penetration today; however, as a general rule, I think there's a lot of opportunity for automation and things like that within Europe, and a lot of people over there are interested in doing some of the highly interactive things we're doing here. One of the things that differentiates the US from Europe is that in the US so many 2-screen applications have come out, it's forced people to deliver extremely robust interactive systems--for example, the EventMatrix. Whereas in Europe, where ITV started with set-top boxes, you didn't need as interactive a system to pull people in.

Going back to your question about priorities: when we work with the networks, one of my goals--and I look at it more from a strategy and product design standpoint--is to figure out how we can make a hassle-free experience. Because, while television production is in and of itself very creative, it's a lot of work. How do we make sure that the behind-the-scenes technology and the handoffs and transitions and all those things that have to happen in order for us to do block programming or to make advertisements interactive during a show--how do we make all that hassle-free? That is a focus of mine that I never swerve from: we have to continue to make it better and better.

By the way, one thing that I think you'll start seeing soon are Hollywood shows that are built from the ground up for interactivity, that will be interactive from the start. The first couple of shows we're going to launch in 2003, will signal a big change for the ITV industry in the US. For the first time, you'll have shows on national television that will open by saying, "Please interact. Here's how."

[itvt]: What are you telling cable operators, broadcasters, and advertisers, in order to get them to realize the potential you see in the ITV space?

Newnam: Well, one thing that has clearly happened is that the advertisers have gotten it first. Not all of them have, of course, but we started to see many advertisers move in in 2002, and start putting significant dollars behind ITV--simply because they want to figure out better ways to reach the end-user. The networks have been the next group to move in. If you look at some of the networks which launched ITV applications in the past, you're now starting to see them add more and more. And obviously they're only doing that because it's proven successful for them. We're also starting to see numbers now: i.e. how many people are participating, what the growth rate for participation is, how many people have been interacting with ads, how long they interact with them. Over the past 2 or 3 months, we've started to put out those types of numbers and let people start tracking them. The numbers have all been quite positive, and so we take them with us to the operators. And I think in the past 4 months, we have started to get more operators contacting us saying, "I'm ready to do ITV now. Here's what my plan is. How do we make sure it gets rolled out?" That's a very good thing--most seem to be thinking of having launched these ITV elements around 12 to 18 months from now. So, while 2002 might have been the year of VOD for the cable industry, you're also starting to hear cable operators asking, "How do I make my local ads interactive?" Taking into account the fact that some operators are slower than others, my guess is that it will end up being around 12 to 20 months before we see significant deployments.

[itvt]: What kind of resistance do you meet with, what kind of counter-arguments do you hear from operators, broadcasters and advertisers when you pitch them on ITV?

Newnam: You know, we're not so much running into walls of resistance as finding that the process of persuasion just takes time. People have to analyze the numbers and they have to see case studies. There are so many great case studies out there now--for example, the Game Show Network.

[itvt]: Do you have any plans to enter the European ITV market?

Newnam: Good question. I would expect that we will be a participant in the European market at the appropriate time, but we haven't really said when this will take place. I do spend a lot of time over there, but what's interesting is that, in the past 6 months, many more opportunities have come up in the US--or let's say North America in general--than I would have thought. So we now have producers in LA saying, "I want to make this show fully interactive." We probably would have moved into Europe faster, had things not popped so fast in the US over the past few months.

[itvt]: What about Asia?

Newnam: I think Asia will come after Europe. Certainly the technology value is there in Asia and they have the capabilities there, but from a business standpoint it just takes a little bit longer than Europe.

[itvt]: So why has it "popped so fast" here in the States?

Newnam: It's a lot of things. As far as the producers are concerned, they simply want hot shows. TV people in the US track what's happening in Europe very closely. What they see in Europe is that, about 2 years ago, they started to have shows--Big Brother and so on--where interactivity played a key part. Those shows became highly successful, largely because of the interactivity. And, if you look at something like "American Idol," it was effectively an interactive TV show, even if people interacted over the phone as opposed to over the set-top box. So I think at the producer level, they're interested in ITV because they want to build a hot show and build a relationship with the end viewer. At the same time, the networks look at ITV and see 3 value points: the first is that it helps build viewer loyalty, the second is that it increases advertising dollars when they make the ads interactive, and the third is that it helps with distribution to the operators. The operators are starting to say, "If you bring me shows which are interactive or a channel which is interactive, that's a value to me because it will reduce churn and keep people upgrading to digital." The operators are also starting to be aware of the potential of making local ads interactive, which adds value for them.

[itvt]: So the operators are, from your perspective, starting to embrace ITV?

Newnam: Yes, I think it just takes time. In fact, I was on a panel at the Western Show with Mark Swan of Comcast, and he said something along the lines of, "Look, we have this in our plan. It just takes time." I think we're seeing that with all the operators. 9 months ago, it wasn't clear to the operators what the path was--I think there's been a lot of shaking out with Wall Street, and a lot of things happening--for example, the EchoStar and DirecTV merger--that have kept the focus elsewhere. But I think all that's beginning to settle down, and we're starting to hear from people who are saying, "How do I provide a better customer experience," and "Let's get these networks running interactively"--which is a great thing.

[itvt]: Are the big MSO's talking to you, like Comcast and Time Warner?

Newnam: Yes. Every MSO and every satellite operator.

[itvt]: Are they more interested in 2-screen or single-screen ITV?

Newnam: Well, they're all interested in single-screen. They want to begin enabling people to click on interactive shows. And the data's pretty clear: once viewers start doing that, they don't want to change providers. But what's interesting is that oftentimes the operators are saying, "What I want to do is get the 2-screen immediately. I want to get a broadband version up on my broadband portal, and then I'm going to use that to drive people to set-top box interactivity as I begin rolling that out." So that's an interesting phenomenon that we would not have anticipated, but that we have seen happening.

[itvt]: You said earlier that you have some upcoming ITV projects that will utilize the technology you gained through your acquisition of Moeo?

Newnam: Yes. They're really going to be fun. Some of the stuff we have running on handhelds now is quite amazing. Some of the new phones are the equivalent of having a PC in your hand. You can watch a game show or a reality show and interact with it, as if your wireless phone is a little remote control. And the graphics are amazing. What's interesting is that the wireless carriers are moving quite rapidly to get all this out: that's part of why the operators have decided to move a little more aggressively. The wireless carriers move quite fast.

[itvt]: Do you think that ITV will have a significant impact on the culture in your lifetime?

Newnam: Yes, it most certainly will. We had this technology boom and then it subsided and everyone started saying, "Well, maybe it was a bust." Yet the reality is that today--in 2002 and 2003--we're seeing the real benefits that people thought they were going to see in 2001 and 2002. We're seeing technologies reduce cost, we're seeing them add value. And there is no question in my mind that when you interact with one of our shows--the first time someone is able to chat and interact with people through a TV show, to vote on the show in real time, and see their name on television--it changes the way you interact and communicate. It's just very, very big. I don't know exactly all the directions in which ITV will go, but you can imagine it getting beyond just entertainment into allowing people to learn together, work together, and more.

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