Time Warner, TCI, US West and other communications giants are spending billions on interactive TV test runs and pushing politicians to lift regulatory restraints. But Tara Hardwick is making their efforts look like Edsels on the infopike.

Tara is a fictional character on a new kind of serial called “The Spot,” which debuted June 7 on the audiovisual area of the Internet called the World Wide Web. A text-and-graphics blend of “Melrose Place” and “The Real World,” the serial focuses on the lives and loves of a group of hip Santa Monica beach-house dwellers.

Online visitors to “The Spot,” which can be accessed at the address http://www.thespot.com, chat live (via typed text) with perky film student Tara, download cheesecake photos of bikini-clad Michelle, and follow the romantic adventures of stud Lon – all of it updated soap opera-style daily.

As highly paid “new-media” execs – mostly recruited from old media – speak of content in terms of “applications,” the grass-roots onliners are already creating shows and building new audiences. Signalling audience interest in what’s online, the L.A. Times has begun a daily programming guide to the various online services.

“While the interactive TV companies are fighting technical and regulatory hurdles, the Internet is a consumer medium right now,” says Adam Schoenfeld, editor of Online Marketplace.

Already doing it

Indeed, the Internet, along with commercial services such as America Online, CompuServe and Prodigy (soon to be joined by Microsoft), is already delivering news, weather, financial services, reference, games, video, E-mail and voice communications – all on interactive TV’s wish-list.

Many cablers and telco execs are hoping the Internet proves to be a fad, like the CB radio craze of the 1970s. But they are nervous. “Nobody predicted the explosion of the Internet,” says Bill Swegles, US West VP of new media. “Nobody predicted this forum for technocrats would become a burgeoning forum for information and entertainment.”

Netshows like “The Spot” are averaging 40,000 “page hits” a day – the number of times onliners log-on to the site. Another example is “Letters from ABroad – or Two.” Originating in the U.K., the series features Doreen and Birdie, best friends from a secretarial pool. Netlurkers are invited to “hack” into the girls’ mailboxes and read the latest exchanges of private correspondence.

Other episodics on the Web are produced by commercial sponsors such as MCI’s “Gramercy Press” soap opera, an extension of its TV spots centering on the intrigues within a fictional publishing house.

Popular web sites such as HotWired are charging sponsors anywhere from $5,000 to $15,000 a month.

Perhaps the most unique entertainment feature being offered via the Net is Worlds Chat, a three-dimensional environment in which visitors can see and move among 3-D representations of themselves and those with whom they converse in real time through typed-in text. A version of the service is being piped to hospitalized kids through the Starbright Foundation, co-sponsored by Steven Spielberg.

One of the few Hollywood studios to recognize the potential of online is Paramount, which last week announced its new Paramount Digital Entertainment division (see story, page 30). Paramount Digital will be creating original Netshows as well as promotional programming for TV and film properties generated by the Viacom-owned studio. The division is aimed at revenue-producing projects, and has already lined up Bristol-Myers as a commercial sponsor.

Across the infopike in the interactive TV lanes, traffic is moving more slowly. Seven months after its much ballyhooed launch, Time Warner’s super high-tech FSN system in Orlando, Fla., offers movies on demand, limited shopping for home furnishings and house-wares – on fewer than 100 screens.

News-on-demand and GoTV, an entertainment news service offering music, film reviews and clips, are yet to be added. Time Warner says its goal of 4,000 customers will be reached by the end of the year. A billion dollars will be expended on FSN over the next five years, in partnership with US West and Toshiba.

But aside from interactive video games, nothing resembling TV-style entertainment – shows with characters and story – is yet available, or even on the boards at FSN, according to programming head Hal Wolf.

Time Warner is developing cutting-edge interactive programming, but not on the cable or studio side of the company. The publishing division has established Pathfinder, a popular Internet service. Beyond providing Time, People and other publications online, Pathfinder recently launched “Modus Operandi,” an online mystery serial, and “SPQR,” a Myst-like 3-D game that takes viewers into Roman landscapes.

Like Time Warner’s interactive TV unit, Howard Stringer’s Tele-TV isn’t in the creative business either. Stringer, CEO of the new venture created by NYNEX, Bell Atlantic, and Pacific Telesis in partnership with Creative Artists Agency, says, “It’s still a bit early. We need to get viewers first.”

Stringer regards the Internet warily. “It’s hot at the moment but the question is how long will that last? Like the hula hoop.” He admits that certain lessons may be drawn from Internet experiments. “The Internet demonstrates that people like to interact with each other, if not necessarily with machines.”

Nevertheless, Stringer says, Tele-TV is hewing to a conservative interpretation of interactivity. “The interactive programming we’re doing is fairly straightforward: video-on-demand, games, shopping.”

GTE Main Street’s senior VP of programming Bob Reagan takes the Internet’s challenge seriously. “I think the concept of people wanting to communicate is one that we should look at more.”

A premium service carried by cablers, GTE Main Street offers its 4,000 subscribers repurposed game shows such as “Joker’s Wild” in which viewers can add their participation to the re-run competition.

GTE has begun production in a new “virtual studio” on new, live versions of the game that will include home audiences in real-time play, and Reagan is optimistic. “I think the TV and the computer are going to live long and work well together,” he says. “TV is going to get smarter and do things the PC can’t do and vice versa.”

High-quality live video is not presently possible on home computers because the wires linking them to the Internet are too skinny to carry the fat bundles of data required to assemble full motion video onscreen. And while two feature films have been transmitted over the Internet – First Look’s “Party Girl” and “Cyberstalker,” from Reel Movies – the technical feat was negated by the eyestrain.

Another hitch is the modems used by most PC owners, slow devices that make the reception of even still graphics like “The Spot” something you do while culling a snack from the kitchen.

Those problems are potentially solvable as technology advances; bigger flat-panel screens, faster modems or newly introduced cable modems that use the coaxial pipeline’s greater bandwidth are already making new kinds of programming available on PCs.

Says Larry Plumb of Bell Atlantic: “The information highway is a combination of paved roads, dirt roads, phone lines, cable lines and the Internet.” At the point when high-definition television is commercially possible, says Plumb, the TV set will compete with the PC in carrying text and high-quality graphics.

Will they compete?

But down the infopike, some wonder if the interactive TV companies will have the production capability and the insight into interactive entertainment to compete with those already creating such content today. Another question: Will talents and sensibilities diverge in the same way that TV branched off from film as a creative medium?

“The Web is a lively proving ground for interactive behavior on the part of consumers,” says George Kopp of the Interactive Marketing Newsletter. “You can experiment on the Web because it’s so cheap and virtually disposable.”

By contrast, “It is going to take interactive TV a long time to reach fruition because of the phenomenal investment decisions,” says Emily Green, an analyst at Forrester Research.

Fierce competition

Of the 20 million home PC users with modems, close to 7 million subscribe to online services such as America Online, CompuServe and Prodigy. The Internet currently has a worldwide audience of 40 million. With Microsoft building its own network into the new Windows 95 PC operating system, industry analysts expect competition for subscribers to be fierce.

No wonder that cable veterans are gravitating to the online arena; Edward A. Bennet, former CEO of Viacom’s VH-1 and overseer of the Comedy Network launch, is now president of Prodigy Services. MCI’s Internet strategy is spear-headed by Scott Kurnit, former chief of Viacom’s Showtime Event Television and Viewer’s Choice. Ironically, Kurnit was also VP of production for QUBE, the first interactive TV trial rolled out in 1970’s by Warner Communications.

While there is no evidence yet that online viewing has cut into TV viewership, that idea is already a working assumption for online honchos.

As America Online president Ted Leonsis said recently, “I’m not worried about Microsoft. I’m looking at ‘Seinfeld.'”