Viacom Intl. and AT&T will join forces to create a high-tech operation that would funnel hundreds of movies, varied educational services, videogames and shop-at-home capabilities to homes linked with Viacom’s Castro Valley, Calif., cable system.

At a news conference here Wednesday, Viacom Intl. senior VP Ed Horowitz said the companies have begun developing the interactive services for testing by the end of the year. The first actual services will come on line in the second quarter of 1994 for an 18-month test that will involve at least 1,000 homes.

Viacom chose the Castro Valley system, which is 20 miles southeast of San Francisco, because it deploys fiber optics and digital-compression technology, which “are needed because the interactive services require a lot of channels,” said David Carter, general manager of AT&T’s consumer video services unit.

In a demonstration of what the Castro Valley subscriber would be capable of, an AT&T executive, using a remote-control device, called up a movie through Star Sight, the electronic on-screen programming guide in which Viacom owns a 23% interest.

The guide allows a viewer to scroll through scores of movie titles cross-referenced by various categories (star, genre, chronology, etc.), select the title by touching a button on the remote and “start watching the movie within seconds of ordering it,” said Horowitz.

The price Viacom would charge a subscriber for the movie is still to be determined. One of the main purposes of the test, Horowitz said, “is to determine what the right price point should be,” not only for movies on demand but for items ordered at home from video catalogues, or for videogames that a subscriber in one house could play with a subscriber in another part of town. He said the subscriber could pony up a fee for each game or buy a videogame channel on a monthly basis.

Horowitz said Viacom would also draw on its wholly owned basic-cable networks (MTV, Nickelodeon/Nick at Nite and VH-1) and its pay networks (Showtime, the Movie Channel, Flix and SET Pay Per View) as resources for all sorts of interactive services. For example, with a flick of the remote, an MTV fan could order the latest Bruce Springsteen album after watching the video of one of the songs.

Wall Street reaction was positive, sending Viacom’s stock up $ 2 to 51 1/2, a new 52-week high.

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