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AOL pacts with DirecTV for interactive service

America Online took a big step toward offering an interactive television service Tuesday when the company announced partnerships with satcaster DirecTV and several electronics and computer companies to help develop AOL TV.

The partnerships were finalized a day after AOL named former TV producer Robert Harris its exec producer for “broadband” content, another step by the leading Internet access company toward extending its franchise into television.

Details of AOL’s interactive TV service are yet to be released, but it appears it will be similar to Microsoft’s WebTV service, offering both Internet access through the TV set and interactive information wrapped around existing TV programming.

Double the fun

Customers watching a sports event will be able to call up the AOL service on part of their TV screen to get statistics on the players, an AOL spokeswoman said. The product is “designed to enhance the television-viewing experience,” AOL said.

E-mail and e-commerce functions will also be available, AOL added.

“This is the epitome of convergence of the Internet and the TV set,” said Lehman Bros. analyst Brian Oakes.

AOL, which now claims 17 million subscribers for its Internet service, will offer AOL TV as a separate subscription service for an undisclosed monthly fee. AOL expects its existing subscribers will be prime candidates for the new service, a spokeswoman said.

“Getting on the TV set … is probably where their biggest growth curve will come from,” Oakes added. AOL stock soared $11.37 or 9% to $139.68 in response to the news.

Added attractions

WebTV Plus has attracted 500,000 subscribers with its service, which lets viewers watch TV and surf the Internet simultaneously, print Web pages and go to Web sites related to program subjects by selecting an on-screen icon.

WebTV inked a deal with satcaster EchoStar Communications in April to release a DishPlayer satellite receiver that records programming through set-top boxes, while offering the Internet, as well. Sources said AOL TV may also offer recording services in the near future.

AOL president Bob Pittman described the partnerships unveiled Tuesday as “major building blocks” for AOL TV. Hughes Electronics’ satcaster subsidiary DirecTV will offer a combined DirecTV/AOL TV service, while its sibling company Hughes Networks Systems will design and build “dual purpose” AOL TV/DirecTV set top receivers.

Consumers who subscribe to cable TV will need to get a set top box specially designed for AOL TV from Philips Electronics. That may be a shortcoming of the system, as it will require subscribers to get a second set top box.

Software

The fourth partner announced Tuesday, Network Computer Inc., will provide the software for the AOL TV system.

Although no financial terms were disclosed, AOL and DirecTV will share revenues from the service.

Details of pricing and timing of the service’s rollout are yet to be announced, although an AOL spokeswoman said Tuesday it would be launched sometime next year.

Meanwhile, AOL is developing content for high-speed Internet services which will become increasingly available as the “broadband” communications lines are offered to more consumers. “Broadband” — industry jargon for the bigger “pipe” offered by cable systems and high-speed telephone lines — can fit more Internet data than regular phone lines used by most Internet subscribers currently.

Earlier this year AOL announced partnerships with Bell Atlantic and SBC, two Baby Bells, for high-speed Internet phone service. AOL plans to create special content for consumers who use these services, which are likely to use more video programming than slow-speed Internet services can offer.

Harris, a former Universal Television exec, is charged with “spearheading all development activity” for these broadband Internet services, AOL said.