BIZWATCH

By BERNARD BAUMOHL, PATRICK E. COLE AND DANIEL EISENBERG

WHY MTV DOESN'T WANT BLOCKBUSTER

If synergy is the driving force behind media conglomerates, somebody at Viacom Inc. missed a meeting. When the company's MTV and VH-1 video channels recently sought an online-CD outlet, they passed over corporate cousin Blockbuster Entertainment, the video- and record-store Goliath, in favor of a more popular rival, N2K's Music Boulevard. MTV will also contribute news to the sites and promote them over the airwaves. With the $24 million-a-year online-music market expected to grow to $1 billion by 2000, MTV's abandonment is more bad news for the retail chain. Blockbuster has enough problems in the real world, having shut down 50 music stores, a move that contributed to Viacom's $227 million fourth-quarter net loss. MTV insists there isn't any broader culture clash. Says a representative: "We're working on a dozen other projects with Blockbuster. This time Music Boulevard was the best match."

THE HIGH COST OF RATE RISES

Don't say he didn't warn you. For months, Federal Reserve Chairman Alan Greenspan has hinted that he would lift interest rates to head off inflation. Yields on Treasury bonds have been rising in anticipation that he'll pull the trigger on March 25 when the Fed Board meets. Higher rates are bad for the stock market but even worse for consumers. Even a quarter-point hike will hurt. Some 60 million households have "revolving" credit-card debt averaging more than $6,000, at an interest rate of about 17%. An uptick would add nearly a billion dollars in interest expenses. And those holding some $1.2 trillion in adjustable-rate mortgages and home-equity loans would have to cough up roughly $3 billion more. Now that's inflationary. Can we afford higher rates? Credit-card delinquencies are already at recessionary levels, and personal bankruptcies have reached a record pace--20,000 a week. Thus, even a minor rate hike could mean trouble and possibly bring the six-year economic expansion to a screeching halt. Don't say we didn't warn you, Mr. G.

A VIRTUAL NIGHT OUT WITH THE FAMILY

A pocketful of quarters won't be of much use at GameWorks, another Steven Spielberg fantasy come true, opening this week in Seattle. The 30,000-sq.-ft. arcade features a state-of-the-art fighter-plane simulator and other virtual-reality diversions, music videos, a Starbucks, a gourmet-pizza joint, a brew pub, and a floor-to-ceiling game that lets you rise 28 ft. in the air as you score hits against a bad guy called Mr. Big.

In this new playground, each customer converts cash into a "smart card" of, say, $10, which allows you to play any of 200 games, or to buy a latte or a tray of Cajun fries. A typical game costs $1.25 a play. Upstairs there's an Internet lounge where you can surf the Web for 12[cents] a minute or pursue retro-tech avocations such as pinball and air hockey while you sip a beer made at GameWorks' very own brewery.

The venture, funded by Spielberg and DreamWorks, Sega Enterprises and Universal Studios, plans to open 40 locations by the year 2002, at about $10 million a pop, in other U.S. cities as well as far-flung places like Brazil. Next up: an even bigger arcade in Las Vegas, although the GameWorks creators don't like to think of their gaming spaces as arcades. "It's truly a unique social environment, and that's what's missing from the arcade experience," says GameWorks' president, Michael Montgomery. In other words, parents and kids can pursue separate game paths under one roof and call it family entertainment.

--By Bernard Baumohl, Patrick E. Cole and Daniel Eisenberg