"Headline News" borrows page from Web

A new version of the show, launched earlier this month, follows other news programs in offering a wide range of data in multiple screens along with the traditional anchor desk.

Gordon Castle, senior vice president of strategic digital systems at "Headline News," said the overhaul is part of CNN's ongoing effort to appeal to younger audiences raised on the Internet. The redesign "is about how people's lives have changed," he said. "If you compare TV to a Web browser, you now get boxes of information."

The significance could be more than aesthetic, however. According to sources close to the company, the new format offers an early design prototype for interactive news programming--one of several high-level initiatives under way within AOL Time Warner to merge its traditional media businesses with the Web.

"All the systems in place used to put ("Headline News") together could easily be folded over to be interactive," said a CNN executive who requested anonymity. "Technology-wise, the hooks are there."

AOL Time Warner did not immediately return calls seeking comment.

Big media companies have long touted interactive TV as the next phase in home entertainment, envisioning couch potatoes clicking their remote controls and buying memorabilia while watching "E.R." or pulling up player statistics during the Super Bowl. Progress in developing commercial interactive TV services has been slow, however.

Last year, AOL Time Warner launched AOLTV, a set-top box with a phone hookup that lets people send e-mail, exchange instant messages, or surf an on-screen program guide. The company has not released information about sales of the system, but some analysts estimate sales of fewer than 100,000 units.

Back to the future
Entertainment and technology giants alike are trying to stake claims to the TV set of the future. Microsoft, which owns the recently renamed MSN TV, launched UltimateTV, a set that offers interactive and satellite TV, a digital video recorder, and Internet access.

Meanwhile, media and entertainment competitors such as Walt Disney, General Electric's NBC and Viacom all have plans to create interactive programming. Disney went so far as to aggressively lobby regulators to impose restrictions on America Online and Time Warner before the companies' merger, fearing that the combined company would favor its own content over competitors' on its high-speed cable network or interactive TV system.

Although interactive TV remains an unproven market, AOL Time Warner is under significant pressure to justify its January union, a deal that wedded the world's largest online service with the world's largest media company. Finding ways to merge traditional businesses with the Internet has been a top priority, with Chief Executive Gerald Levin in effect ordering online and offline divisions to work together closely to develop new businesses.

At the same time, the company has been forced to retrench, partly because of a weak advertising market that has raised worries among analysts about whether the company can hit its financial projections for the year.

Executives have said they expect to hit $40 billion in revenue and $11 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) for 2001 as a merged company. They've also emphasized that the company's mixture of businesses makes it resistant to the effects of an economic slowdown. Though AOL Time Warner has not suffered as greatly as some of its competitors in the media world, the slowdown seems to have taken the wind out of its sails.

Shortly after the merger closed, the company slashed 2,400 jobs in an effort to streamline operations. On Tuesday, the company laid off 1,700 people in the AOL division alone and restructured its executive ranks.

Although those moves could hurt ambitious research and development projects such as interactive TV, some analysts said the merger has already created new opportunities for online and offline partnerships within the company's divisions.

"Things like the 'Weather Channel,' 'CNN Headline News,' 'ESPN 2' with their sports ticker across the bottom, all of those things will be handled much better through interactive TV," said Mark Snowden, an analyst at Gartner.

Castle of "Headline News" declined to comment on potential crossover with AOLTV. People in CNN said there are no definitive plans to launch an interactive "Headline News" version on AOLTV.

AOL Time Warner has introduced several partnerships between traditional media and online businesses since the close of the merger. The company has created new units to explore ways to sell advertisements or develop new businesses using elements from different divisions. For example, the recent creation of the Interactive Video unit will take elements from AOL and Time Warner Cable to develop new types of programming for cable TV.

On a smaller scale, the AOL service has offered exclusive promotions for other businesses. The service has hosted events that let members hear unreleased albums, download songs, or buy exclusive concert tickets from Warner Music Group artists such as Madonna, Rod Stewart, Stone Temple Pilots and Sugar Ray.

Nevertheless, the merger and its accompanying push for cooperation between divisions has prompted many changes in the company. The drive to bring divisions closer also marks a period of experimentation in anticipation of the Internet's greater presence in mainstream media.

"The theory is that at some point ("Headline News") could be the model for AOLTV," said one former CNN executive who requested anonymity. "The model to make it clickable on the TV screen, that is definitely part of the plan."