Interactive TV a Likely Reality with AOL-Time Warner Merger

After the coming merger of America Online and media giant Time Warner was announced, the Washington Post ran a cartoon in which a man comes home to find every item in his house telling him "You've got mail!" AOL hasn't connected to the toaster yet, but may soon have its hooks in that other staple of American household appliances, the television set.

The concept of interactive TV has been discussed, toyed with, and attempted in trial markets without success for many years, but the merging of AOL and Time Warner brings the reality of it closer than it has ever been. Now AOL, with the aid of TW, plans to launch an interactive service to be called, predictably, AOL TV. The service will compete with a similar offering from Microsoft.

"AOL TV should be rolled out this summer," according to Merrill Lynch analyst Henry Blodget, who has seen a preview of the service. (AOL conducted demonstrations of AOL TV at last month's Consumer Electronics Show in Las Vegas.) Set-top converter boxes from Philips Electronics will be sold online by AOL and through affiliated retailers for $200-$400, and the service will be billed to consumers for a monthly fee of $5-$10. Blodget said AOL TV will be "a profoundly important next step in the development of the medium and AOL." If AOL TV were "to become the dominant consumer interface to interactivity," Blodget said his group "would regard it as analogous to Microsoft's control of the PC operating system." Costs will be minimal to AOL subscribers, another analyst said.

Is AOL TV going to be like the Shopping Channel on growth hormones? Is this a case of high technology serving a silly purpose? What will AOL TV subscribers get? Here are a few of the possibilities:

Participation: the opportunity to vote on questions presented to the audience on talk shows. Interactive features will let viewers respond to—and possibly affect—the content of talk shows like Oprah, Larry King Live, and Politically Incorrect.

Programming ease via an electronic program guide similar to those offered by cable providers and direct-broadcast satellite services. To make navigation easier, the guide will sort channels into groups of similar subject matter, such as news and sports, and will also interact with VCRs.

Multitasking: Users will be able to watch television while attending to e-mail, visiting chatrooms, or using instant messaging. "When writing e-mail, the TV is reduced to a smaller one-quarter-screen size," according to Blodget. A translucent AOL logo, similar to the network logos now visible on many programs, will appear in the upper left-hand corner of the screen to remind viewers who is really in control. Blodget estimates that as many as 30 to 50% of AOL households will sign up for AOL TV. Why anyone would want to use the service probably won't be clear to most quality-conscious home theater fans, who need to be reminded that no one ever went broke underestimating the gullibility of the consuming public. Blodget is "bullish" on AOL stock, according to a CNET report.