AOLTV launches, with much bravado

Schuler says set-top offers chance for new revenue streams

America Online will launch the first product in its AOLTV service this week: the cable companion box produced by Philips that the Internet giant believes signals the start of a new era in television.

"It's going to take some time, but we've seen many industries get transformed by the technologies of the Internet, and we think the television business is teeing up to be next in line," said Barry Schuler, president of AOL Interactive Services Group.

The new product includes a set-top box, keyboard and remote control. It sits between the television and the current cable set-top box and will allow users to access AOL services, the Internet and even control VCR or disk-based recorders with an electronic program guide. It will also allow two members to access the same account simultaneously. The cost is $249.99, with AOL members paying $14.95 a month for the service (others pay $21.95). It will be available in Circuit City stores next month; an official launch comes this fall.

"The biggest issue with interactive TV is it's too esoteric a concept for consumers to understand it," says Schuler. "But over 20% of our audience is already multitasking, 'co-watching' TV."

Schuler knows interacting with Web pages on a TV is not an optimum experience. "We think a new layer of the Internet is going to emerge, and that is content designed to be on the TV," he says. "It's designed to work with the TV playing at the same time or streaming audio and video to set-top boxes, therefore opening a whole new source of video programming to the TV."

In addition, AOL is looking for broadcasters to enhance the interactive experience. "We have channels that we create, but we also have reserved an interactive channel for every broadcaster, cable network, cable MSO and local affiliate that is out there," says Schuler. "This is an enabling platform, and we really want to unleash the creativity of the community out there and open new revenue streams from e-commerce on TV."

Schuler says there are two paths to that. The first is to embed ATVEF-compliant links into the signal that would link to Web site content, and that doesn't require a relationship with AOL. The second way brings the content closer to the viewer, allowing for an on-screen, interactive experience. "If you're ABC and you want to program around, say, Millionaire, you enter a relationship with us, and that space is yours to program. In the beginning, when there are no real economics or audience, we're just asking for an exchange of value. We'll provide the real estate and tools, but we'll want them to promote it on-air, just like with our keyword service."