AOL makes interactive TV move - deal with TiVo

America Online wants to be big in broadband and interactive TV, analysts say. That's why its TiVo deal is so important.

Internet Goliath America Online took what analysts are calling a necessary step Tuesday when it inked a deal with personal TV appliance maker TiVo.

"If AOL is really going to do a thing on your set top box, they need someone like TiVo," said Lou Mazzucchelli, senior analyst with financial firm Gerard Klauer Mattison & Co. Inc. "TiVo gives them a way to store content and cookies. That let's users view content offline and makes possible other -- e-commerce -- services as well."

Based on the alliance, AOL and TiVo will develop a way for the California company's users to access AOL TV, a service that will include AOL services and features designed to enhance television viewing. In addition, AOL will also take a minority stake in TiVo. Financial specifics were not released.

TiVo's service allows consumers to download hours of television signals onto a hard disk, which they can watch at their leisure. The company said future versions of the TiVo player would be capable of receiving the AOL TV service. "While our roots are television, the next step is the integration of new services that provide interactivity. We take AOL as an interactive services and online community expert," said Morgan Guenther, vice president of business development at TiVo.

He said AOL will allow TiVo users to interact with what they're watching on TV. For example, football fans could watch a game and chat with other viewers using AOL's Instant Messenger technology, he said. "Another example may be watching 'Oprah,' and there's a book review. Maybe you could click on that book and purchase it automatically. Those types of services are what we're talking about," Guenther said.

TiVo has some other big backers. CBS, Walt Disney, ComCast, and Cox Communications, among others, signed on to back the company last month. AOL offered fewer specifics, however. "(AOL TV is) not fully defined," said Guenther. "We are still working through the terms. We will probably see something toward end of next year (2000)."

AOL has already announced plans to work with DirecTV, Hughes Network Systems, Philips Electronics and others on AOL TV in June, and has signed a deal with interactive TV software maker PowerTV Inc.

AOL's goal is to get TV viewers to interactively access data during programs, or even harder, to stop watching to go online. TiVo's ability to pause a program and let viewers get sports scores or order a CD online, make it much more likely that they will do so. That's a key to America Online's strategy, said Gerry Kaufhold, principal analyst with market researcher Cahners In-Stat Group, who stressed that the deal is not about putting the Internet on TV. "Seventy percent of AOL's subscribers do not go onto the Internet," he said.

"AOL is setting themselves up to be the first national TV network of the Internet," said Kaufhold.

Margaret Kane, ZDNN, contributed to this report.