INTERACTIVE MEDIA & MARKETING;TAKING A SLOW ROAD IN ORLANDO;TIME WARNER TV TEST REACHES FEWER THAN 60 HOMES IN 6 MONTHS

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Unforgiving velocity."

That's the speed at which Time Warner Chairman-CEO Gerald Levin predicted his company's Full Service Network would drive home the lesson of how important it is to be first in the race to deliver interactive TV.

That remark came last December, just before Mr. Levin clicked a button on his remote control and introduced the future of TV. The very distant future, it turns out.

In the six months Time Warner has been testing its Full Service Network, the company has installed only 60 interactive TV boxes in Orlando homes.

At that rate, Time Warner won't reach its stated goal of 4,000 boxes until April 1998. And if you believed Mr. Levin when the project was announced back in 1993, by April 1998 millions of the company's cable subscribers would be interacting with their TVs.

Clearly, much has changed in the digital media environment since then. The Internet has emerged as the place to be, while interactive TV has been relegated to the sidelines. Pioneers like Interactive Network are struggling to stay alive. AT&T has converted its Downtown Digital interactive TV studio in New York to an online development shop. The Interactive Television Association is broadening its focus to woo more members.

Still, one has to credit Time Warner for its perseverance-or maybe its bull-headedness. The Full Service Network is the most advanced interactive TV experiment operating in the world, offering more than 50 movies on demand, an interactive mall, a post office, videogames and an interactive brochure from a single advertiser, Chrysler Corp.

Time Warner is still insisting it will install all 4,000 boxes by yearend, but the longer it takes to ramp up and the more the company's attentions are diverted to the online world the more observers-especially marketers-are wondering if Time Warner is losing interest in interactive TV.

"They have greatly misjudged the marketplace and the ability of getting new technology at a reasonable cost into people's homes," said Gene DeRose, president of Jupiter Communications, a New York new-media consultancy.

Time Warner will accelerate its rollout in the latter half of 1995, an FSN spokeswoman insisted.

"This is how we planned to do it," she said. "It's like introducing a new car. You don't just send 20,000 out on the market; you test it out."

For those who are watching and waiting, it's wise to remember that the FSN has experienced several delays.

Meanwhile, the company is waking up to the online world. At its annual meeting last month, Time Warner announced it was developing a high-speed online service that would be delivered over cable wires. Its Pathfinder site (http://pathfinder.com) is one of the most popular places on the World Wide Web.

Time Warner officials maintain the narrowband and broadband ventures will coexist and, eventually, merge.

"Our experience so far is that people are going to want both," said Paul Sagan, senior VP of Time Inc. New Media.

Time Warner isn't ignoring its interactive TV venture, Mr. Sagan said.

"Nothing leads me to believe that we won't meet that [expansion] goal, unless we meet some technical problems that hadn't been anticipated."

Considering the Full Service Network's poor track record, additional technical difficulties wouldn't come as a surprise.

Among other problems, Time Warner has admitted it's having trouble developing software for the News Exchange, a news-on-demand service.

When it launches later this year, the new service will "stretch the FSN architecture to new limits," said Jeffrey Solari, manager of interactive TV at Ikonic Interactive, San Francisco-based developer of the News Exchange. "It's unusual to have content changing all the time."

News Exchange will feature content from a variety of partners, including CNN, ABC, NBC and several Time Inc. magazines.

Customers will be given the news in its entirety, but they can fast-forward through items they are not interested in.

Other services also have been delayed. A joint venture between Winn-Dixie Stores, ShopperVision and the FSN to develop interactive grocery shopping was expected to begin this summer. Now, officials say it won't be ready until the end of this year, or early next year.

"Our prototype is done, [but] there is software to be developed to work on their specific system," said Sandy Goldman, president of Norcross, Ga.-based ShopperVision.

Shopping has been a mixed bag of success. Seven "stores" occupy the electronic mall: Warner Bros. Studio Store, the U.S. Postal Service, Spiegel, Nature Company, Sharper Image, Crate & Barrel and Williams-Sonoma.

The postal service said it is committed to the FSN, despite the slow rollout.

"We would like to treat it as a retail environment," said Kim Parks, program manager of interactive services. Neither FSN nor the postal service will say how many subscribers have purchased stamps.

Other marketers that flocked to the FSN when it was announced have grown increasingly skittish.

"None of the advertisers are worried about what happens in 4,000 homes," one Time Warner official acknowledged.

Of those that originally agreed to participate, only Chrysler Corp. has a working application.

Chrysler and agency Bozell, New York, spent $1 million to develop the software, which showcases the automaker's products and offers a chance to sign up for a test drive. But Chrysler now is frustrated by the small number of subscribers to the FSN.

"The Time Warner program is good to be involved in, but at the end of the day, we're not going to sell metal from the test," said James Julow, Chrysler's director of marketing operations. "That's not going to happen until there are thousands of homes wired."

Even more telling: A recent Chrysler-sponsored tour of Time Warner's Home of the Future for members of the media was cancelled for lack of interest.

Other marketers have backed off of plans to work with the FSN. Nissan Motor Corp. USA and General Motors Corp., along with Chrysler, were supposed to be part of an interactive new-car showroom that was dropped as expenses mounted.

Holiday Inn said it is still interested in talking with Time Warner, but has no projects in development.

"We have offers from other companies to participate in their interactive trials for free," said Debra Semans, VP-new market development and research. "To cough up $200,000 to $400,000 [Time Warner's original asking price] seems a bit odd."

Procter & Gamble Co., however, is still committed to the test. Its application, an interactive store tied to its Cover Girl makeup line, is expected to go up in a few months, a spokesman said.

Time Warner has tried several times to make amends with marketers. Most recently, Time Warner Cable Programming named Bob DeSena VP of a new digital marketing group that will work on strengthening relationships with advertisers and agencies.

Time Warner promises more advertisers and new services. The Bombay Company and Horchow "stores," pizza delivery (the company involved has not been announced), HBO on Demand, GoTV (a U S West entertainment guide), Omnio (FSN's second navigation system), and CUC International, a computer shopping service offering about 250,000 products, all are supposed to be online by yearend.

After six months, FSN subscribers are itching for more. Some say the novelty has worn off. Time Warner in May began charging for the movies on demand-$2.95 each-but won't say how many subscribers are willing to pay.

In response to critics of the high price of the trial, the company says it expects technology costs to decrease over the next few years.

"We expect the cost of the box to get down to $300 to $500 quickly," the FSN spokeswoman said, down from an estimated $2,000 apiece. Although FSN is a significant investment for Time Warner-it has said it will spend $5 billion to upgrade its cable systems in the next few years-the company values the opportunity to "be the first to gain knowledge of the learning curve on interactive television," she said.

Jupiter's Mr. DeRose takes another view.

"Until it has a full set of services," he said, "it's technology that's stillborn."

Contributing to this story: Scott Donaton, Raymond Serafin and Debra Aho Williamson.

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