America Online Inc. announced plans last week to launch its new interactive-television service, "AOLTV," in eight test markets next month, including such secondary cities as Baltimore, Phoenix and Sacramento, Calif.
Philips Consumer Electronics Co. will supply the first stand-alone AOLTV set-top boxes, which will retail for $249.95, including remote control and wireless keyboard.
AOLTV will charge a monthly service fee of $24.95 for new subscribers who don't take the AOL online PC service. Current AOL customers will pay an additional $14.95 per month for AOLTV.
AOL and Philips plan to co-promote the service through television, infomercials, radio, print and a heavy dose of online ads, Philips vice president of set-top-box marketing John Strobel said.
The companies are launching a controlled retail trial in mid-July to ensure that they have the correct-and consistent-consumer messages both in their advertising and at retail point-of-purchase displays.
Because the set-top boxes are software-upgradable, AOL can download updates as it measures consumer response to the initial products, Strobel said.
Initially, the AOLTV hardware will be sold exclusively at retail through Circuit City Stores Inc. consumer-electronics stores or over the Internet at CircuitCity.com or AOL.COM.
A Circuit City spokesman said the retailer also plans to help market AOL services for mobile phones and handheld devices in the future as part of the company's "AOL Anywhere" strategy.
The first AOLTV model comes equipped with a 56-kilobit-per-second modem and requires a connection to a telephone line. Also built in is a universal-serial-bus port for future services that could connect to cable or digital subscriber lines, the company said.
DirecTV Inc. has already said that it plans to introduce an AOLTV service later this year that takes advantage of broadband direct-broadcast satellite television delivery.
Separately, DirecTV's sister company, Hughes Network Systems, is in beta-tests for an "AOL Plus" service delivered via satellite to PCs through HNS' "DirecPC" hardware.
Current DirecPC models use a telephone-return path. Hughes Electronics Corp., DirecTV's and HNS' parent company, has plans for two-way broadband-satellite services, starting with DirecPC later this year.
Earlier this month, DirecTV announced it would also team up with Microsoft Corp. to deliver a combination DirecTV/WebTV Networks set-top box with a built-in digital-video recorder under the brand name, "UltimateTV."
The product will also include a second DBS tuner, allowing viewers to record one channel while watching another.
Although DirecTV's first AOLTV boxes are not likely to include digital hard drives, future generations are expected to include TiVo Inc. personal-video recorders.
TiVo has separate relationships with Philips, DirecTV and most recently with AOL, which announced earlier this month that it would invest up to $200 million in TiVo.
Microsoft will likely extend the UltimateTV brand to future generations of Echo-Star Communications Corp.'s "DISHPlayer," WebTV senior director of marketing Rob Schoeben said.
Executives at WebTV "have been pleased to see over the past several months the increased interest in enhanced television," Schoeben said, adding that WebTV was introduced nearly five years ago.
Microsoft, which purchased WebTV several years ago, currently offers two service platforms, "WebTV Classic" and the more robust "WebTV Plus." The company is currently promoting free WebTV hardware to new subscribers in exchange for three-year service commitments.
The promotion is not a direct response to AOLTV's plans to enter the market, Schoeben contended, but rather a means of creating consumer excitement in the typically slow summer months.
In the future, Microsoft may offer special benefits to WebTV customers who also subscribe to Microsoft's Internet-service provider, MSN.
There's still much debate over what the ideal interactive-television service should look like and how big a role the Internet should play in TV.
For its TV-based service, Excite@Home Corp. plans to pay close attention to the user interfaces that allow viewers to navigate between broadband content such as animation, video games and streaming media, director of set-top products Kent Libbey said.
"The objective is to avoid delivering a static and silent Web page to the TV," Libbey said. "People have 40 or 50 years' experience with their television, and they bring certain expectations."
AOLTV not only plans to offer its popular buddy list, e-mail, chat and "You've Got Pictures" functions from its online service over the television, but also to add television-specific features such as electronic programming guides and help with recording on VCRs or digital-video recorders.
Television networks will also be able to deliver enhanced content such as actor biographies, sports statistics and electronic-commerce offers.
Liberate Technologies provides an open software platform that allows cable programmers such as E! Entertainment Television, The Weather Channel and Oxygen to create content for AOLTV that could also be ported over to other interactive-television platforms.
Although AOLTV did not grant exclusivity to Liberate, the software provider hopes the AOLTV endorsement will help to bring broad acceptance of its technology as it becomes widely deployed, Liberate vice president of marketing Charlie Tritschler said.
Liberate encourages programmers to join the company's "Pop-TV" program, which allows content providers to create to a single standard, rather than rewriting content for each new interactive platform. "Using open standards allows you to deploy quickly," Tritschler said.
Starz Encore Media Group LLC is among the programmers working with AOLTV.
"From everything we've seen, their objective is to make it very TV-centric and consumer-friendly," Starz Encore director of business development Tom Wenzel said. He expects the AOLTV platform to help enable subscription video-on-demand through its navigational interface, he added.
Starz Encore also plans to back up its movies with more in-depth information, some of which it may repurpose from its Web sites, to give viewers a behind-the-scenes look at the actors starring in each film, for example.
Home shopping programmer QVC Inc. plans to integrate the best of its television programming with the more detailed information on its Web site into its AOLTV content. "We have to make the content so rich that viewers want to check us out on a regular basis," QVC vice president of broadcasting Tim Megaw said.
Even on-air, QVC is already rich in text and graphics because "we want our viewers to make informed purchase decisions," he noted.
A certain amount of QVC's enhanced-television content will be cached in the AOLTV box, Megaw said. Because using the enhanced-television service will be quicker than dialing up an Internet connection and searching for a Web site, such repurposed content can speed consumer reaction time, he added.
Courtroom Television Network senior vice president for research and market development Galen Jones said the network already encourages its viewers to go online to its Web site as they watch the channel.
He added that the Web site's strong audio and video components make it a natural for transitioning content over to the television.
"If we were a Web site that was much more text-driven and didn't have a video component or a network partner, this probably wouldn't be a particularly meaningful thing to do," Jones said. "It just so happens that from a content perspective, we're ideal."
QVC and Starz Encore executives said they have not yet finalized e-commerce revenue-sharing models with AOLTV. Jones said Court TV has no current plans for e-commerce.