AOL Reorganizes iTV and Cable Internet Businesses

AOL Time Warner on Thursday took the wraps off an initiative to beef up its interactive television services, unveiling a new unit.

According to New York-based AOL, the group is aimed at accelerating the growth of media like interactive television content and advertising, subscription services such as video on demand, and advanced technology like cable Internet telephony.

The New York-based Interactive Video division will oversee initiatives involving interactive video and cable access across the company, especially in its Time Warner Cable and America Online units.

“The creation of new interactive consumer businesses was one of the top reasons we put our merger together. We are using the full range of our assets to turn the promise of interactive video into a reality,” said AOL Time Warner chief executive Gerald Levin. “The cable industry is at a critical inflection point with an exciting array of digital and interactive services now at hand. By focusing our company’s combined resources behind this enormous opportunity, we will bring new interactive video services to mass market consumers faster than any other company in the world.”

Heading up the group as chairman will be veteran cable executive Joseph Collins, former chief executive and chairman of the company’s Time Warner Cable division. He will report directly to Levin.

At TWC, Collins oversaw the unit’s conversion to broadband Internet access. Before that, he served as chairman and CEO of Time Inc.’s American Television and Communications cable company, and as president of HBO.

The news comes as major media players like AOL are racing to beef up their capabilities in interactive TV, which is thought to become a big advertising money-maker in coming years: companies envision targeting their ads to specific households, and allowing viewers to interact and buy from commercials. (Other media groups like Viacom and Vivendi Universal are following similar strategies, as are the big ad agency holding companies.)

At the same time, video-on-demand, Internet access and similar subscription services are expected to serve as a way for AOL to bring in sizable non-advertising revenue, providing a buffer to the ad market’s expected weakness over the next several years.

As a result, chief on the Collins’ “to-do” list are facilitating Time Warner Cable’s roll-out of high-speed AOL (beginning in September), and allowing network access to competitor EarthLink. (AOL is required to provide ISP competitors with access to its cable network through an agreement with the Federal Trade Commission, prior to approving the America Online-Time Warner merger.)

The unit will also oversee an upgrade to the company’s interactive TV service, AOLTV, later this year, as well as an expected debut of video-on-demand sometime thereafter.

“Interactive video and television services will be powerful engines of growth and innovation for AOL Time Warner,” said AOL co-chief operating officer Bob Pittman. “This new division will spur the transformation of interactive video to strategically significant businesses that will generate new revenue streams and provide valuable new services for consumers. With [Collins’] clear vision for the future of the cable industry, AOL Time Warner will cement its leadership in interactive television, delivering these long-anticipated services to consumers and advertisers alike.”