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AOL to start Interactive tv in some markets
(By Derek Caney)
NEW YORK, June 19 (Reuters) - America Online Inc. (NYSE:AOL - news) (AOL), the world's largest Internet services provider, said on Monday that it would start offering interactive television features, such as an online programme guide, chat features and e-mail, through set-top boxes.
The initiative marks the official launch of the long- awaited AOLTV strategy to combine elements of the Internet with television.
The new service will be offered in selected markets on a set-top box made by Philips Electronics using software made by Liberate Technologies Inc. (NasdaqNM:LBRT - news).
``The potential for AOLTV is immense,'' said Wit Soundview analyst Jordan Rohan. ``The reality is that it will take a while to build the service into something consumers want. We've been hearing promises of interactive television for years, which is why I'm taking a wait-and-see attitude.''
Programming for the service will come from such cable television stalwarts as E! Entertainment Television, QVC, The Weather Channel and Court TV, as well as newer names like Oxygen Media
The service will first be offered in selected markets including Phoenix, Sacramento and Baltimore for $14.95 a month for AOL subscribers and $24.95 a month for non-subscribers.
AOL Interactive Services President Barry Schuler told Reuters last week the accompanying set-top box would cost $200 to $300.
The set-top box and wireless keyboard will only be sold at Circuit City Stores (NYSE:CC - news) and through AOL itself starting in mid-July, the company said in Monday's statement.
Last week, AOL announced TiVo Inc. (NasdaqNM:TIVO - news), which sells a VCR-like box that uses a computer hard drive to record TV programmes, would offer AOLTV subscribers the ability to create their own TV schedule and customise live television shows. Under the terms of the deal, AOL will take a $200 million stake in TiVo.
Purveyors of interactive television have been trying to gain traction in consumers' minds for years, while leaving some with various degrees of scepticism.
``If any company can do it, AOL-Time Warner can do it,'' Wit Soundview's Rohan said. ``But the big questions are how big is it going to be, how popular will it be and how much are people going to be willing to pay for it.''
One of the highest profile failures in interactive television came in the mid-1990s courtesy of AOL's bride-to-be Time Warner Inc. (NYSE:TWX - news), which experimented with a system in Orlando, Fla., that provided services like video-on-demand, online shopping and video games via a television and cable TV converter box.
The offering failed to capture a wide consumer following and chilled interest in the technology for several years.
``What AOL and many other companies are doing is taking baby steps on the path to combine the ubiquity and instant nature of the Internet with the telegenic impact of television,'' said Joe Mandese, editor of the Myers Report, a media insider's newsletter.
``But the technology is not quite there yet,'' he added. "So companies have to exploit what they have. What AOL has is the greatest online penetration of anybody -- 23 million members, a great brand to leverage and these interim technologies.
The next step, he said, will be to exploit the assets of Time Warner, which include the Turner Broadcasting cable channels such as CNN, TBS and among others.
One of AOL's stiffest competitors in the market is Microsoft Corp.'s (NasdaqNM:MSFT - news) Web TV, which offers many of the same services that AOLTV is announcing, but has yet to catch on with consumers.
``The main problem with Web TV is that many people try the product, but few people stick with it,'' Rohan said. ``In consumers' eyes, it's often seen as an introduction to the Web. AOLTV will need to differentiate itself