by Gareth Powell
America Online has indicated it sees its future as a television company. It plans to invest in TiVo, a creator of personal television services. It will also work with TiVo to expand its interactive TV business.
TiVo allows users to create what is effectively their own television programming. A box sits on the TV and uses something like a very large hard disk drive to record programs in advance. It will then play them back in the order the viewer wants. It is possible to skip bits such as advertisements.
America Online is not the only believer in the concept. Among the TiVo backers are Microsoft co-founder Paul Allen, NBC, CBS, Philips Electronics, Disney and Cox Communications.
This is an important development because it takes America Online forward from personal computers into television sets and portable devices. Within the company this is known as the "AOL Anywhere" initiative.
America Online is under pressure in the Internet market because it is being attacked on several fronts. Internationally it has not done very well at all. Every time it arrives in a country it gives the existing Internet service providers a short, sharp shock – never in itself a bad thing – and they circle the wagons to repel the unwelcome invader.
Back in the United States and Canada the rate of expansion of AOL, while still high, may not be as high as other independent ISPs. It still is massively the leader of the pack. America Online added 5.1 million members in the last year alone and now has more than 17 million subscribers. But its share of the Internet access market is no longer growing as it once was. In fact, its market share may be going backwards.
AOL’s nearest competitor is probably MSN from Microsoft and that has less than two million members. (MSN is in seriously desperate straits, with no apparent increase in penetration over the past year. In the next few months Microsoft intends to launch an advertising blitz to try and change this. Its past track record suggests this will not work.)
Even though AOL has this massive lead, pretty well all the research firms agree that America Online’s figures are not moving the way they did in its glory years.
At the same time AOL is still locked in a battle with AT&T and others over access to cable lines so it can offer high-speed service. True, it has made deals with some of the Baby Bells to have access by way of ADSL, but that is not the same as cable because it does not have nearly the same amount of bandwidth.
AOL has also invested $US1.5 billion in Hughes Electronics which is the parent company of satellite TV and Internet services DirecTV and DirecPC.
If AOL is going to be a once and future television company it needs access. TiVo is part of that battle. AOL and TiVo will collaborate to bring consumers interactive events by combining TiVo’s personal television service with AOL’s interactive television offerings. And future versions of TiVo’s personal video receiver are expected to provide access to America Online.
This service will be AOL TV and it will offer members AOL’s interactive service on television.
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