| 'I think AOL TV just got an adrenaline shot in the arm. It’s now a formidable player.' |
is about to go mass market
Major sign-up push from Web TV as well
By Alan Breznick
Get ready for Bugs Bunny, Daffy Duck and Elmer Fudd to start peddling interactive TV to the masses.
This "Looney Tunes" scenario is quite possible now that America Online plans to take over Time Warner and use its vast programming assets and largely upgraded cable lines to jumpstart the growth of interactive TV.
By the summer, AOL intends to launch AOL TV, its answer to Microsoft’s four-year-old WebTV service, in living rooms and dens around the nation.
Like WebTV, the newfangled AOL TV will let folks watch TV shows and surf the internet on the same screen.
For a subscription fee of perhaps $10 to $15 a month, viewers will be able to check their e-mail, chat electronically with friends and family, get weather updates, order products, play games, respond to polls and find out the latest news headlines, sports scores and stock prices while watching their regular TV programs. About the only thing they absolutely won’t be able to do is tune out the commercials.
"AOL TV looks a lot like WebTV," says Josh Bernoff, principal TV analyst for Forrester Research in Cambridge, Mass.
But AOL, which just unveiled the service at the winter Consumer Electronics Show in Las Vegas three weeks ago, hopes to stand out by also offering such unique features as instant messaging and buddy lists and more seamless switching between TV shows and web sites.
For advertisers, this means the development of a major new forum for pitching to consumers, assuming that Madison Avenue can master the new medium.
Forrester estimates that interactive TV services will generate up to $20 billion in annual revenue four years from now, with ad sales accounting for the lion’s share.
"As an advertising medium, it will rival the internet in three years," Bernoff predicted in a major study last summer.
The upcoming launch of AOL TV will also set up a major duel for the potentially lucrative interactive TV business between AOL and Microsoft, the two titans of the computer industry.
Both have now lined up the biggest cable and satellite TV operators in the land as distribution partners, with Microsoft locking up AT&T and EchoStar Communications and AOL lining up Time Warner and DirecTV.
WebTV currently leads the interactive TV race with just over 1 million customers, thanks to its four-year head start. In the recent holiday shopping season alone, consumers snatched up 100,000 copies of DishPlayer, the company’s new dual satellite/interactive TV set-top device with EchoStar.
Plus, at least two major cable operators, AT&T and Canada’s Rogers Communications, will introduce WebTV in selected cable systems later this year.
But AOL, which lacked a cable partner until it agreed to buy Time Warner two weeks ago, now seems poised to catch up quickly. DirecTV intends to roll out the service in its 8 million satellite homes this spring with an aggressive promotional campaign largely funded by AOL.
Time Warner, which has 13 million cable customers and has been upgrading most of its systems to digital technology, could follow suit within the year.
"I think AOL TV just got an adrenaline shot in the arm," says Michael Harris, president of Kinetic Strategies , a consulting firm based in the Phoenix area. "It’s now a formidable player."
Even before the Time Warner deal, AOL had big ambitions for its forthcoming interactive TV service.
Using both DirecTV and standalone set-top boxes to distribute AOL TV, it intended to sign up at least 1 million customers this year, mostly by focusing on its growing universe of 20 million online subscribers.
Now, with Time Warner in its camp, it may shoot even higher.
Given AOL’s popularity among computer Web users, few analysts are betting against its interactive TV service anymore. If anything, many now see Microsoft’s entrenched WebTV as the underdog.
"AOL has distinct advantages," says Cynthia Brumfield, principal analyst of Broadband Intelligence, a Bethesda, Md., consulting firm. "It knows how to mass-market the internet.
-Alan Breznick
covers cable and technology from Washington.