AOL Jumps Into Race to Deliver Net on TV
The race to deliver the Internet to consumers’ television sets heated up Tuesday as America Online Inc. announced it is joining Philips Electronics, DirecTV Inc. and two other firms to develop an interactive TV service.
The agreement, whose terms were not disclosed, is aimed at breaking through to the 60% of Americans who are not frequent Internet users. AOL also hopes to counter archrivals Microsoft Corp. and AT&T; Corp., which recently have grabbed big stakes in cable firms and wireless phone companies in hopes of providing speedier and more convenient Internet access to consumers.
The AOL TV product is still in the design phase and won’t be released officially until sometime next year. But company officials say they hope to develop a TV set-top box that will allow subscribers to, among other things, retrieve sports statistics from the Web and chat or order merchandise online while watching a sporting event on the new TV service.
“We anticipate that AOL’s powerful brand will drive the acceptance and value of interactive television,’ said Barry Schuler, president of AOL’s Interactive Services Group, in a statement issued Tuesday.
Although several analysts praised AOL’s new interactive TV vision, some noted that the product won’t arrive in time for the important Christmas shopping season and will trail a similar technology due to be offered this summer by Microsoft and satellite TV operator Echostar Communications Inc.
“This is a good win for AOL because it gives them a toehold in the interactive TV space--an area where AOL has heretofore failed to put together much of an effort,” said Seamus McAteer, director of Web technology strategies at Jupiter Communications, a New York-based Internet research firm. “But it may be a little too late. . . . It’s unfortunate it won’t be ready in time this year for Christmas.”
In heavy trading Tuesday on Wall Street, AOL shares rose $13.13 to $141.44. The company’s shares had fallen 17% last week amid concern that competition from AT&T; and Microsoft’s cable deals would hamper AOL’s ability to offer its subscribers high-speed Internet access.
Although the Internet is one of the fastest-growing consumer services in history, only 37 million Americans were using the worldwide computer network from home on a daily basis in 1998, according to a study by the Strategis Group. And experts say even Internet devotees complain about the cost and difficulty of getting online.
“Faster access will help, but there needs to be a change in the design philosophy of the computer industry,” said Kevin Werbach, managing editor of Release 1.0, an influential New York-based technology publication. “To get to VCR-level penetration, you need to think more in terms of consumer electronics and build devices that are going to go in the living room, the kitchen and so forth.”
AOL’s TV product will come in two flavors: a satellite version delivered by DirecTV and a broadcast TV version. Both services require customers to have a dial-up telephone connection to the Internet.
General Motors Corp. subsidiary Hughes Network Systems will design and build the set-top receiver for the AOL TV service offered over DirecTV’s network, and Philips will produce the AOL TV device for dial-up Internet users watching regular broadcast TV.
For El Segundo-based DirecTV, the alliance with AOL is one of several partnerships designed to compete against cable operators and the bundles of services they are beginning to offer, including digital packages that allow e-mailing and Web scanning at high speeds over TV. Network Computer Inc., a privately held company, backed in part by Oracle Corp. and AOL subsidiary Netscape Communications Inc., will provide the software for the AOL TV service.
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Times staff writer Sallie Hofmeister in Los Angeles contributed to this report.
