America Online yesterday forged a deal with compatriot TiVo, a manufacturer of set-top boxes that enable viewers to freeze, pause or replay images while watching live TV broadcasts.

AOL will invest $200m in TiVo, gaining a stake of between 15%-20%, and accumulating additional shares geared to the number of its 22m customers who also take out a subscription to TiVo's service. This could lift AOL’s holding to a potential 30%.

Early next week, AOL is expected to unveil full details of its own interactive television service, AOLTV, signalling the most ambitious mass market attempt yet to turn ordinary TV receivers into interactive sets. The agreement will combine TiVo’s service with AOLTV, although viewers buying the boxes will have to subscribe separately for each company’s services.

The TiVo deal was announced just one day after Microsoft’s MSN portal reported similar plans to link with set-top box maker Thomson Multimedia and satellite TV broadcaster DirecTV.

News source: Financial Times