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AOL unveils TV venture
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May 11, 1999: 3:39 p.m. ET
Deal to boost Internet provider's entry into interactive television
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NEW YORK (CNNfn) - America Online Inc. announced plans Tuesday to enter the interactive television market, signing deals with four technology firms to deliver its Internet content over the DirecTV satellite service.
The agreement with DirecTV Inc., Hughes Network Systems, Philips Electronics and Network Computer Inc. will provide AOL with access to the cable set-top boxes it covets and provide customers with its products through television.
DirecTV will collaborate with AOL on a new service called AOL TV, combining DirecTV's digital satellite television programming with AOL TV's interactive television Internet service. DirecTV currently reaches more than 7 million subscribers.
Hughes Network Systems has agreed to design and build the dual-purpose AOL TV/DirecTV set-top receivers. Both DirecTV and Hughes Network are owned by Hughes Electronics Corp., a division of General Motors Corp. (GM).
Financial terms of the deal weren't disclosed.
Just two weeks ago, AOL expressed interest in collaborating with Comcast Corp. (CMCSK) in its ultimately failed bid for cable giant MediaOne Group (UMG), hoping to gain access to a greater percentage of American televisions through cable-based Internet access.
Tuesday's agreement helps achieve the same goal through a different medium: AOL TV.
"We've always said as different devices and platforms developed, we want to be on them as it becomes available for the consumer," AOL spokeswoman Wendy Anderson said.
AOL shares soared 9 to 137-5/16 in late-afternoon trading.
AOL shares traded higher Tuesday
Philips Electronics, based in the Netherlands, will produce an advanced set-top box enabled for AOL TV. The set-top boxes will connect AOL through built-in 56k modems over standard phone lines but also will be enabled for digital subscriber lines (DSL), high-speed networks being developed by telephone companies.
AOL already has signed DSL agreements with New York-based Bell Atlantic Corp. (BEL) and San Antonio, Texas-based SBC Communications (SBC) to provide high-speed Internet access in their local markets.
Network Computer, a privately held company based in San Jose, Calif., is slated to develop the software platform for the service, enabling the Philips and DirecTV set-top boxes to display a range of Internet-based television services and content. The company also will manage and administer the AOL devices connected to the network.
Separately, AOL also got a boost Tuesday from Morgan Stanley Dean Witter's influential Internet analyst Mary Meeker, who raised her rating of the company to "strong buy" from "outperform." 
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