The week in review: AOL's departure

America Online puts the finishing touches on its interactive TV service, an important departure for the online giant.

4 min read
America Online readied the debut of its interactive TV service, an important departure for the online giant.

Joining Microsoft's WebTV in a slowly developing market, AOLTV would extend the company's leading Internet access service to electronic devices beyond the personal computer. Other components of the much talked-about "AOL Anywhere" strategy include a recently created wireless division and an alliance with PC manufacturer Gateway to develop Web-enabled appliances.

Across the board
AOL previewed the service in January and has since been assembling its components. Utilizing TV set-top boxes made by Phillips Electronics and sold to consumers via Circuit City or Hughes Electronics' DirecTV, subscriptions are expected to cost $21.95 each month. Users will have access to email, Web browsing and instant messaging, but will not be able to download files nor get all of the perks of AOL's online service.

WebTV is widely seen as the market leader, but has failed to turn its early presence into notable subscriber growth. Customers have complained for years about slowness in supporting standard Web technologies such as Java and RealNetworks' newer media players.

AOL, Microsoft and others are eyeing the $9 billion in e-commerce and subscription revenues the interactive TV market is expected to generate by 2004. Another $3.2 billion may lie in TV-based online ads, a field that excites broadcasters and advertisers eager to reach highly targeted audiences.

The anticipated release comes as AOL awaits federal approval of its proposed merger with Time Warner, which would unite the world's largest Internet and media companies and help speed the convergence of technology and entertainment. Expected Monday, AOLTV's formal announcement would follow an agreement inked earlier this week between AOL and TiVo, tying the latter's digital recording features into future versions of AOLTV.

All together now
Separately, AOL proposed instant messaging standards that would clear the way for rival services to work together. The company's submission to the Internet Engineering Task Force (IETF) is significant given its market dominance and past battles with Microsoft and others.

In a surprise move, RealNetworks unveiled a licensing agreement with Apple Computer, marking the first time the two companies have cooperated on Web streaming. QuickTime has been regarded as something of a missed opportunity for Apple given the rise of other formats.

With supplies of Palm handheld computers running tight, impatient consumers are turning to auction sites and often paying well above retail price for new and slightly used units. Shortages of LCD screens and other components are limiting the manufacturer?s ability to increase production.

A group of open-source developers has created a new music format they say will be free and will equal or better MP3's quality, in response to worries about steadily rising royalty fees for online music companies. The software will next week be released without intellectual property restrictions. The German research institute that helped created MP3 has been moving to collect on its rights. Separately, MP3.com's chief executive asserted efforts to charge customers several dollars per digital download will not work.

Cashing in
Fears about slowing chip sales, uncertain expansion into China, and the market?s downturn have clipped Qualcomm's wings as the wireless company has slipped to $65 from $200 a share over the past 7 months. In response, Qualcomm plans to begin supporting the world's most popular wireless technology alongside its own standard on a new "dual mode" chip that would power cellular phones on most wireless networks worldwide.

IBM is hoping to narrow Compaq?s early leadership among major computer manufacturers which support the Linux operating system. Big Blue announced high-end servers, laptops and desktop PCs featuring the software as well as the introduction of a software bundle for small businesses and funding for Linux education and certification.

The record industry's legal battle to crush Napster has disclosed the latter?s efforts to cash in on its popularity. According to legal papers filed this week by the Recording Industry Association of America, the music-swapping service and the e-commerce giant have an agreement that will let Napster receive revenues by sending customers to the online retailer's site. While many companies are Amazon ?associates,? most potential investors and partners have been wary to get too cozy with Napster, concerned about being drawn into the legal skirmish being waged by the record industry or of being perceived as a supporter of music piracy.

eToys absorbed much of struggling party-planning site eParties in an all-stock deal valued at $1.6 million. The latter, which launched only eight months ago, had previously laid off much of its staff. eToys separately raised raised $100 million through the sale of preferred convertible stock and warrants. eToys has lost more than $220 million since starting operations in late 1997.

Reel.com laid off more than 200 employees and turned over its e-commerce operations to Buy.com. The Hollywood Entertainment-backed company also licensed its content to its one-time competitor. Separately, Epidemic Marketing shut its doors and laid off its 60-person staff, having burned through the $7.6 million it raised during its first round of private financing. The company gained notoriety by spending $1.6 million on a Super Bowl advertisement.

Employee turnover in the high-tech industry has reached the point where the average employee leaves in just over a year, and many who stay get antsy to quit after a year and a half.

Also of note
Motorola unveiled its first products based on an emerging short-range wireless standard and signed development deals with IBM and Toshiba ? Lucent and Verizon Wireless agreed to network equipment pact that may be worth $1.5 billion ... Nortel Networks entered the application service provider market by acquiring software maker Epicon for $275 million in stock ? Microsoft released Windows CE 3.0 while slashing the price by up to 50 percent in another bid to boost interest in the operating system for appliances.