BIZ WATCH

By BERNARD BAUMOHL, JOHN GREENWALD, STACY PERMAN AND JANE VAN TASSEL

TIME WARNER'S BIG TURNOFF

It may have been the most expensive pizza-delivery system ever invented. Last week media giant Time Warner (TIME's parent company) announced that it was pulling the plug on its ambitious two-way cable-TV project, the Full Service Network, launched in Orlando, Fla., in 1994. At that time then ceo Gerald Levin predicted FSN would be "a medium for providing people with unprecedented access to information and entertainment." With just a remote, subscribers could scan countless TV channels, bring up movies on demand, shop at home or order a pizza.

Levin was half right. Consumers are very interested in such access--but many transactions work better on the Internet, just a budding concept in 1994. All that most consumers want from their cable company is TV and movies on demand.

Time Warner invested at least $100 million wiring the 4,000 households in the project, according to industry analysts. The company says FSN will pave the way to bigger and better interactive products, but Levin noted, "I was off the mark, at least in the short run, about the medium."

MICROSOFT SELLS A TICKET TO COURT

Oh, what a tangled web they weave. Last week Ticketmaster sued Microsoft Corp., charging the software titan with "electronic piracy" for offering an Internet link to the ticket agent's Website without permission. The suit rocks the very foundation of the Internet: the unhindered cross-linking of related sites. Microsoft launched the first of a series of local Internet guides to the arts, Seattle Sidewalk, with a Ticketmaster link that allowed customers to buy event tickets via computer, bypassing Ticketmaster's home page. Sales soared, but Ticketmaster was unappreciative. Microsoft ought to add an irony link; it was the Seattle band Pearl Jam that accused Ticketmaster of monopolizing rock-concert ticket sales. And it wasn't too long ago that Microsoft wiggled out of the antitrust docket at the Justice Department. Microsoft chairman Bill Gates knows whom to call to straighten this out. Ticketmaster is controlled by Paul Allen, co-founder of Microsoft.

WALL STREET WALKS ON THE WILD SIDE

NASA may have the "vomit comet" to brace astronauts for space flight. But if you're looking for a real stomach-turning ride, try Wall Street. In a seven-week trip, the Dow Jones industrial average plunged nearly 700 points from mid-March to mid-April, only to suddenly turn full-throttle upward. In one of the dizziest weeks of the year, the Dow closed up 332.22 points to a near record 7071.20.

Uncertainty over interest rates and the economic outlook is behind all the turbulence. Expect more. Consider last Tuesday, when the government reported a slowing in manufacturing activity and, more important, a noninflationary 0.6% rise in labor costs in the first quarter. The news sent the Dow surging 179 points, its second best daily performance ever. A day later, investors applied the brakes on hearing that the economy grew an astounding 5.6% in the first quarter--too fast for comfort. But a closer look at the numbers showed inflation remained dormant. Don't put away the Dramamine just yet. The markets were jolted again on Friday after the jobless rate sank to a near 24-year low of 4.9%. Very inflationary. Later in the day, however, Washington's announcement of a budget deal sent the index soaring.

AND NOW, VIRTUAL PETS

Tamagotchi, the latest toy craze in Japan, arrived last week in a Brink's truck at Manhattan's FAO Schwarz. The egg-shaped pet chick has a virtual life right on a key chain, where it's hatched, lives and dies--virtually. When it beeps, the owner is supposed to pet it by pressing its buttons. The chick even leaves virtual droppings to be cleaned up. It sells on Japan's black market for $500, but the suggested U.S. retail price is $15. The profits are real.