Fool.com: Manic Monday at AOL [News] June 19, 2000

Manic Monday at AOL

By Dave Marino-Nachison (TMF Braden)
June 19, 2000

There's a good deal of news coming out of online services giant and Rule Breaker America Online (NYSE: AOL) this morning. First up is the launch of AOLTV, "the first interactive television service for mass-market consumers."

AOLTV, as described by the NOW 50 component, lets you watch television using your existing signal and supplements that with e-mail, instant messaging, chat, and a digital program guide. It's accessed through a set-top box using either a keyboard or a remote control. The service is being launched in Phoenix, Sacramento, and Baltimore, and sold through AOL and Circuit City (NYSE: CC) stores. It's $25 per month; AOL subscribers get a $10 break.

Dutch consumer electronics giant Philips (NYSE: PHG) made the boxes, which can also be bought through certain Hughes Electronics' (NYSE: GMH) DirecTV packages.

It's not clear exactly how much demand is out there. AOLTV's closest competitor is probably Microsoft's (Nasdaq: MSFT) WebTV, though there are certainly differences between the two services. WebTV's user count, at approximately 1 million, is considered to be well short of critical mass. Neither Microsoft nor AOL seem a sure bet to dominate the space.

The Internet-on-TV services shouldn't be confused with the Smart TV services, which allow users to record television programs digitally and watch them at their leisure, discussed here last Wednesday. AOL plans to integrate TiVo's (Nasdaq: TIVO) "Personal TV" features into AOLTV, but Microsoft has ideas of its own: The software giant has developed Ultimate TV, a similar service that has Web and satellite TV access and a recorder that can store up to 30 hours of video on its hard drive.

It's a crowded and confused space, and the fact that Web-enhanced television services have been slower to catch on than expected has confounded many observers -- though continually falling PC prices probably haven't helped. A PC is still useful even when the Web isn't "on"; WebTV-like devices less so. Perhaps that's why Microsoft is currently selling WebTV with what could amount to a year of free Web access if you agree to a three-year contract.

Further confounding the matter of what's the best use for a television's input plugs is the move of game console makers to get their systems online for multiplayer gaming and other features. Virtually all next-generation home video game machines will have dial-up access at the least.

Heck, even Microsoft is expected to launch a game box of its own next year. In the near-term, AOLTV only seems to muddy the picture.

Among the other interesting tidbits floating around the news websites is the nugget that AOL is apparently ready to open its instant messaging (a free download) standard to other companies, something that might well create a global standard for online chat. AOL had defended its turf fiercely for some time but appears to have loosened up. With both domestic and European governments reportedly set to take long looks at the AOL/Time Warner (NYSE: TWX) merger, this may turn out to be a bone the companies are throwing to antitrust officials.

But while AOL was battling to keep interlopers out of its messaging network, its rallying cry was "security" -- as in that of its subscribers. Though that contention met with some skepticism, just last week news broke that hackers gained illicit access to several hundred user accounts with virus-bearing programs that targeted company employees. Maybe there was something to that after all.

Related Links:

  • America Online website
  • America Online discussion board
  • TiVo Takes Off, Fool News, 6/14/00
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