Upstart web companies are breathing a new lease of life into the old media titans as online buying moves into people's living rooms, by Niall McKay

The internet seems to be the worst thing that could happen to the television industry. After all, it is sucking away viewers, creating a new content distribution channel and competing for advertising dollars.

"Wrong," says Marty Yudkovitz, NBC Interactive president. "It's the best thing that ever happened to us." As America Online's recent $140bn acquisition of Time Warner shows, upstart web companies are breathing a new lease of life into the old media titans.

This summer, AOL is preparing for an assault on the media marketplace with the launch of AOL-TV. The new entity will combine Time Warner's programming -a portfolio that includes everything from CNN to Friends with the interactivity of the world's largest internet access provider.

The new media buzzword touted for the move is "t-commerce" (television commerce). Combine the interactivity and the personalisation power of the internet with the entertainment value of TV and you get a world where electronic commerce is not only easy but also compelling.

Does that sound familiar? That is because it is not the first time that media companies have tried to push the brave new world of interactivity on the appliance buying public. In the early 1990s, interactive TV, they said, would allow consumers to shop on their TVs, play games, order movies and even interact with their favourite shows.

The only problem was that there was nothing to buy, the games were rubbish and there were too few movies to order. Today's sales pitch is the same but the landscape is different. For one thing there are now millions of web pages that can be re-delivered in a TV-friendly manner. For another, the public has become used to pointing, clicking and buying products interactively.

Recent studies from the market research company NFO show that the US public is only too eager to point and click and watch TV simultaneously. In fact, more than 8m Americans watch TV and surf the web at the same time. What the US media companies want to do now is convert their viewers into surfers and their surfers into buyers.

According to the investment bank Deutsche Bank Alex Brown, they will be successful. It estimates that the t-commerce market will be worth in excess of $300bn over the next five years. Home TV shopping will be worth $65bn, while interactive advertising will be worth $201bn, music and movies on demand $29bn. Games will make up the rest.

any have begun the process already. Microsoft's WebTV, for example, offers interactive layers to game shows such as Jeopardy and Wheel of Fortune, as well interactive commercials and electronic commerce channels. Yahoo! is building a TV studio and may use it to augment content for its Broadcast.com, although officials refuse to comment. Furthermore, the "Big Four" TV networks, ABC, CBS, NBC and Fox, now run icons in the corner of the screen during commercials where viewers with interactive TV can point and click and shop to their hearts content.

Eventually, viewers will be able to buy the amazingly small sweater worn by Ali McBeal or the amazing big leather jacket worn by Arnold Schwarzenegger simply by pointing and clicking.

eanwhile, the "Big Four" have already bought, bartered and partnered their way on to the internet by doing a series of deals with the portals who, cash-shy but anxious to gain viewers, have exchanged large chunks of stock in exchange for TV airtime.

Now, Disney's ABC has combined Infoseek, ABCNews, the sports site ESPN and entertainment site Mrshowbiz.com among others into one giant internet brand which is listed on the Nasdaq exchange under the Go.com network.

NBC and CBS have a similar strategy. NBC Interactive has taken Xoom and Snap and is now listed under NBCI, while CBS has bundled Hollywood.com, Mark-etWatch, SportsLine and HealthWatch under its own brand. The next stage is to build the value of the web properties by promoting them heavily on TV. Then the two mediums need to be tightly coupled; the net, and whichever interactive device eventually becomes pervasive, can be used as the buying channel.

However, not everybody is convinced that the networks can make a success of their new strategy. "Broadcasters know how to produce and schedule programming and they know how to market brands," says David Card, an analyst with Jupiter Communications in New York. "But they don't know how to collect money from people. They don't know how to create billable services."

"We'll learn," retorts Kevin Mayer, vice-president of Buena Vista Internet Group (Disney). "Because the days of the dumb box and one-way broadcasting are coming to a close."

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