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AOL Time Warner Seeks Interactive Pot of Gold

How well is the AOL Time Warner merger unfolding? In other words, are the two cultures blending together in relative harmony?

As the recently announced new president of the Interactive Personal Video Group at AOL Time Warner, Jim Chiddix has a lot on his plate. After spending years as the chief technology guru at Time Warner Cable, the rush is on for Chiddix to address a wide variety of issues.

"I am still assembling a team to work on this in a hurry. We are building an engineering office in Denver, while at the same time, we are pulling together our business staff in New York," says Chiddix. "We cannot afford to miss when it comes to the timing of this opportunity."

Chiddix outlines a three-pronged effort creating a new on-demand, interactive video service; a comprehensive framework for all content -related activity including access; and a new advertising and marketing engine to operate in tandem with this new platform and all the interactive content running over it.

"We know that there will soon be a lot more content available, and we also know that we can be very successful in providing high-value programming to very small audiences. Narrowcast services in aggregate can make up a very valuable offering," says Chiddix.


Analysts and industry observers sense that there is a lot at stake here, too. The difficulties and complexities of the merger cannot be underestimated. And when Chiddix says he is in hurry, the message is pretty obvious.

"Achieving total synergy in the quickest possible way is the purpose of this group. Its primary mission appears to be to maximize the returns from the content and distribution assets owned by the combined company," says Yankee Group analyst Adi Kishore. "This group is not just about putting together properties, but about using the cable network to maximize or pull value from all the other properties simultaneously."

Greg Mesniaeff, a research analyst specializing in cable and telecom infrastructure at SunTrust Robinson Humphrey, says that the selection of Chiddix for this task comes as no surprise.

"Jim Chiddix has a reputation for being somewhat of a technology maverick. And video on demand (VOD) is a hot button right now that he will push aggressively," says Mesniaeff. "I view this group’s mission as being synonymous with rolling out video-on-demand, albeit with a few enhancements."

According to Kishore, the momentum on VOD and other iTV deployments at AOL Time Warner lost considerable steam immediately after the merger, but the formation of this group has helped them address this situation effectively.

"Time Warner Cable made a real commitment to VOD early on, and yet after completing the initial deployments in Tampa, Austin and Hawaii, things had slowed down," says Kishore. "Now, the pace appears to be picking up again. There have been announcements of new VOD deployments, and the company has purchased new VOD servers."

"Lots of information is available as far as the central server model is concerned, and the leverage here is not just VOD. The volume of VOD servers to date is very small, but still very far off the cost curve," says Chiddix. "We may elect to move up to many more streams using generic servers from companies like Sun, HP and EMC, while tapping into transport technology like Gigabit Ethernet at the same time."

Riding the right cost curve is a central theme here. Transport intensity is another key variable: How close to the home does content need to be and what is the best way to move it between headends, hubs and nodes? Chiddix is not concerned with what may or may not happen with DSL TV or telco TV, but he is watching the DBS crowd closely.

"The market is ours to lose," he says.

As the digital video recording platform becomes more mainstream, the number of possible outcomes seems to multiply.

"Cable has a local storage path, and yet we are not constrained by local storage. You can cache more and more stuff as the local storage devices get bigger and bigger. We can do it better, less expensively and in a simpler and more comprehensive fashion with centralized servers."

One of the team’s first tasks will be to reach a conclusion about architecture. Chiddix emphasizes that the goal is not necessarily to come up with some radical new architecture, but simply to find the right solution in a constantly evolving marketplace.

"It is still quite early in the process. There are a number of topologies out there. At a higher level, we need to come up with an approach to balance the complexity and the cost," says Chiddix. "What you need is an MPEG-2 set-top with a graphical user interface and real-time return path; and by the way, that is exactly what we have available today. I am not clear what you gain by deploying a thick-client solution.

"The simplest models involve lots of transport. Whatever you choose to do in terms of storage hierarchy, you still have the challenge of propagation management," he says. "Delivery and storage strategies are just part of the puzzle. In the end, we need to please our viewers, our advertisers and our content providers."