International Business Machines and Time Warner Inc. are discussing an agreement that would link the computer maker's technology with Time Warner's vast library of movies and TV shows as well as its cable TV systems, industry sources said Wednesday.
A venture between the world's largest computer maker and biggest media concern could accelerate what experts view as one of the most important technological and business trends of the 1990s: the integration of home entertainment, computers and communications.
An IBM-Time Warner alliance would take the form of a joint venture in which each company held a stake, the sources told the Associated Press, speaking on condition of anonymity. The sources cautioned that the talks, ongoing for more than a year, aren't close to completion.
Sources contacted by The Times confirmed that talks were underway, but one characterized the discussions as "exploratory."
Spokesmen for IBM and Time-Warner declined to comment.
The venture would rely in large part on technology IBM has developed to send "interactive" video signals over today's cable TV systems, without the need to rewire homes with high-capacity fiber-optic cable. Sources said the IBM system combines large computers that can store and route video information with a high-powered cable TV decoder that incorporates IBM's RISC computer chip.
The result could be "movies on demand," or the ability of consumers to request a movie at any time on their TV set from a huge library; interactive educational programs, in which the viewer could respond to questions posed on the TV screen, and interactive video games, in which a player could compete with someone across the country.
Business uses could include connecting networks of personal computers nationwide without using phone lines, and letting PC users talk to each other through small video windows on the computers' screens, the sources said. The system also could send video such as TV commercials from ad agencies to TV stations.
A number of media and communications companies have been working on schemes to deliver new types of information and entertainment services to people's homes. These projects are made possible by continued improvements in digital technology, which allows moving images to be converted to computer code and then compressed for easy storage and transmission.
Telephone companies are eager to explore the potential of digital movies, and Pacific Bell on Monday announced a pilot project to deliver films to movie theaters via fiber-optic telephone lines.
Lee Isgur, an analyst with Volpe, Welty & Co. in San Francisco, said the IBM-Time Warner talks could be viewed as an effort to compete with the telephone companies.
In addition, several new TV broadcasting services that would enable people to "participate" in the programs via special home computers and communications links are also in the works. Hewlett-Packard Co. is currently building devices for a soon-to-be-launched service called TV Answer.
Cable companies are clearly well positioned to participate in this new arena, analysts say. Time Warner's cable TV system is the nation's second largest, and the company also owns the HBO cable network and Warner Bros. studios.
Time Warner also has a joint venture with video game maker Electronic Arts and the venture capital firm Kleiner Perkins Caufield & Byers. Though details of the venture are closely guarded, the group is believed to be working on a home entertainment device that will link up to cable systems.
Time Warner's cable division is experimenting with a system in New York City that offers 150 channels, the most anywhere. These channels, sent over fiber optic lines, could offer a wide selection of pay movies and interactive services.
"They're thinking about the whole spectrum of multimedia and computers and other electronic media," said one industry executive. "It's very visionary."
Such a venture would mark a rare move into the consumer market by IBM, which has often failed in previous efforts to move beyond its business of selling computers to business.
IBM Vice President Lucie J. Fjeldstad, who heads the computer maker's "multimedia" efforts, told the Associated Press in an interview several weeks ago that the company was looking for ways to combine its technology with that of others. She declined to identify any potential partners.
"We see four industries converging: computers, consumer electronics, telecommunications and media and entertainment, to form a new industry that will deliver a wide spectrum of digital goods and services to businesses and homes," she said.
Among the first uses of the technology will be movies on demand, she predicted. After that will come "movies that you can choose your own ending to."