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AOL puts $1.5B in Hughes
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June 21, 1999: 11:48 a.m. ET
Online service makes investment in satellite TV service
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NEW YORK (CNNfn) - America Online Inc. said Monday it will make a $1.5 billion investment in Hughes Electronics Corp.'s satellite television operations as part of the online service's strategy to take on the broadband market.
AOL is betting that the investment in DirecTV, Hughes' digital satellite entertainment service, will increase the number of subscribers and, consequently, create a larger audience for AOL TV.
AOL TV is the company's interactive television and high-speed Internet service which the Dulles, Va.-based AOL is pushing to enter the broadband area of the Internet, which can offer richer content than ordinary phone modem-based access.
AOL TV is hoping the lure of old school entertainment, namely the 200-plus channels available through DirecTV, will help attract new customers to the venture.
"We are committed to providing our AOL-Plus high-speed service over all broadband technologies -- DSL, cable, satellite and wireless -- as they emerge for the mass market audience," said Steve Case, chief executive officer of AOL.
Earlier this year, AOL announced that it would develop with Hughes the set-top boxes necessary to make this service available.
Also on Monday, Hughes, through its Hughes Network Systems division, announced it will collaborate with Intel on a wide variety of set-top products using Intel microprocessors and other products from the semiconductor firm.
First up for the two firms will be the AOL TV satellite receiver.
Under the complex agreement between AOL (AOL) and Hughes (GMH), AOL will make a $1.5 billion strategic investment in a General Motors equity security, which GM will turn around and immediately invest in a security of Hughes. Hughes Electronics is a division of GM.
Hughes will then turn around and invest that in its AOL ventures. The money will be used toward a variety of initiatives, including approximately $1 billion toward ramping up its services and technology and $500 million toward marketing.
AOL operates two Internet services; America Online, with 17 million members, and CompuServe, with 2 million members.
Hughes Electronics' DirecTV unit has more than 7.3 million subscribers to its digital television entertainment services. 
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