
                                                       EXHIBIT 10.3



ONE CNN CENTER, Box 105366. Atlanta. GA 30348-5366
(404) 827-1500

                                        August 15, 1995

Mr. Bruce J. Crowley
ACTV, Inc.
1270 Avenue of the Amedcas
Suite 2401 Rockefeller Center
New York, New York 10020

       Re: LA Project

Dear Bruce:

       Subject to your acceptance of the terms and conditions set forth in this
letter, Cable News Network, Inc. ("CNN") is pleased to permit ACTV, Inc. and 
its wholly-owned subsidiary ACTV Entertainment, Inc. and the Los Angeles 
Interactive Network (collectively, "ACTV") to institute a test of ACTV's 
interactive television system technology utilizing interactive versions of 
certain CNN programs listed on Exhibit A, attached hereto, (the "Programs") 
in the LA Project consumer evaluation (the "Evaluation") being conducted by 
ACTV in no more than ten thousand (10,000) subscriber households served by 
Western Communication's Ventura County Cablevision (the "Test Area"). CNN 
will make the Programs interactive utilizing ACTV technology with all expenses 
incurred in such process being borne by ACTV.

       The purpose of the Evaluation is to more fully understand the commercial
viability and potential applications of the ACTV Programming Technology as it 
applies to the Programs. ACTV and CNN will use the resulting research to 
consider the further development of regional interactive networks.

       In connection with the initiation of the Evaluation, please sign this
letter below to acknowledge your agreement to and acceptance of the terms 
and conditions contained herein and return one (1) fully executed copy to 
me for our files.




<PAGE>
CNN and ACTV agree as follows:

      1.    Background.
            ----------

            (a)   ACTV is the owner of certain interactive television system
technologies ("ACTV Programming Technology"), which includes patents, pending
patent applications, and inventions owned by ACTV, proprietary technologies,
programming methods, a programming language used to achieve functionality in
ACTV programming, software programs used to detect and convert ACTV
programming for display, and other trade secrets and know-how and proprietary
technology relating to the ACTV Programming Technology.

            (b)   CNN is involved in the production and delivery of television
news programs and specifically produces the Programs.

            (c)   ACTV and CNN desire to investigate the feasibility of
delivering the Programs in an interactive format. The Evaluation in the Test 
Area provides a unique opportunity to explore such possibilities.

      2.    CNN and ACTV agree to test the feasibility of producing the
Programs in an interactive format using the ACTV Programming Technology. The 
parties agree to work together to explore and analyze the costs and benefits 
of enhancing the Programs in an interactive format.

      3.    Term. This Agreement shall commence upon the signing hereof by both
            ----
parties and shall continue until December 31, 1996, or unless earlier 
terminated in accordance with the provisions set forth herein.

      4.    CNN Signal and Participation. CNN shall retain exclusive control 
            ----------------------------
over the Cable News Network television signal and the distribution thereof, 
including the vertical blanking interval (the "VBI lines") to be used in the 
Evaluation. Subject to CNN's absolute right of withdrawal from the Evaluation 
at any time in its sole judgment without liability or penalty, CNN agrees to 
make available for the Evaluation those VBI lines necessary for delivery of 
the ACTV Programming Technology The foregoing rights shall be conditional on 
the following:

            (a) CNN agrees to use reasonable efforts to provide notice to ACTV
of the withdrawal of the use of such VBI lines whenever possible; and

            (b) Although the parties intend to discuss the feasibility of 
expanding the distribution of the ACTV enhanced Programs should the Evaluation 
determine that the production and distribution of the Programs in an 
interactive format is feasible and economical, CNN shall have no obligation to 
ACTV to expand the distribution or to continue the delivery to the Test Area 
beyond the term of this Agreement.


                                   - 2 -


<PAGE>
       5.    Editorial Control. CNN shall have complete editorial control over
             -----------------
the Programs and the enhanced information delivered on the VBI lines. ACTV shall
procure at its cost all the necessary equipment for CNN so that CNN may produce
and monitor all such text before and during telecast.

       6.    Program Production
             ------------------

             (a) CNN, with the technical assistance of ACTV, will develop
interactive versions of the Programs. The interactive versions of the Programs 
may be:

                 (i)    enhanced versions of the Programs;

                 (ii)   interactive programs or segments produced 
                        simultaneously with the Programs; or

                 (iii)  originally produced material.

             (b) ACTV shall be solely responsible for all of CNN's incremental
costs incurred in producing the interactive versions of the Programs and 
delivering such Programs to the Test Area. This shall include, but not be 
limited to, the complete cost (salary and benefits) of CNN news staff 
assigned to this project, all hardware and software costs necessary to 
enhance the Programs and all incremental Program delivery costs.

             (c) The delivery schedule and the initial budgets for the 
creation of the interactive versions of the Programs shall be as mutually 
agreed upon by the parties hereto with the parties planning to complete 
design discussions by September 15, 1995. It is the intention of the parties 
that CNN shall initially produce one (1) hour of enhanced Programs, the 
"Phase I" Programs," as described on Exhibit A, seven (7) days a week. Should 
such programming prove successful, the parties, upon mutual consent, may 
expand such programming to the "Phase II" Programs and further to the
"Phase III" Programs, each as described on Exhibit A. The parties will 
consult as to the appropriateness of expanding the number of enhanced 
Programs during each phase. ACTV acknowledges that it shall be responsible 
for all additional incremental costs, including, but not limited to, 
production and delivery costs associated with each additional Program in 
each phase which is enhanced for the Evaluation.

       7.    Cooperation.
             -----------

             (a)  Each of the parties undertakes to the other that it will 
use its best endeavors to cooperate in the Evaluation.


                                    - 3 -


<PAGE>
             (b) Each of the parties undertakes to the other that it will 
promptly, fairly, reasonably and positively respond to the other's request for 
information and assistance and that it will keep the other informed at all 
times as to the progress of the Evaluation and any contingent, anticipated 
or present problems concerns or other matters.

             (c) Each party shall share technical information with the other
concerning Evaluation results and anticipated technical changes which may 
affect the other in the performance of its duties hereunder as soon as 
possible.

       8.    LA Project Research and Regional Network Roll Out
             -------------------------------------------------

             (a) In consideration for making the Programs available and for
producing the interactive versions of the Programs thereof for use in the 
Evaluation, CNN, ACTV will provide to CNN all its research and evaluation 
information concerning the development of the market for the ACTV interactive 
television service and on the reception of the Programs, on a periodic basis.
CNN shall have the opportunity to work directly with ASI Market Research to 
design research relating to the Evaluation and specific to the business needs 
of CNN. This shall include, but not be limited to, CNN's right to submit 
questions for ASI Market Research to include in its research efforts related 
to the Evaluation and CNN shall have access to the results of those questions
(in tabulated and raw data form).

       Without limiting the foregoing, ACTV agrees, to allow CNN to 
participate in focus group testing and have the results of those tests to the 
same extent as the other participants in the Evaluation. In addition, if CNN 
specifically requests, ACTV will use reasonable efforts to work with CNN to 
organize one CNN-sponsored focus group, with the understanding that CNN would 
share all costs associated with the focus groups with ACTV.

              (b) Should the production and distribution of the ACTV enhanced
Programs prove feasible and economical and should ACTV expand the Evaluation 
or a similar service into additional regional networks, then CNN shall 
receive protection until December 31, 1997 in the form of a right of last 
refusal to be ACTV's exclusive provider of national and international news 
to all such networks.

              (c) If CNN decides to participate with ACTV in the roll out of 
regional interactive networks, ACTV and CNN shall agree to negotiate, in good 
faith, a royalty agreement and/or advertising split for use of CNN programming.

              (d) CNN will be given the opportunity to be an equity investor 
in any new regional interactive networks created by ACTV.


                                     -4 -


<PAGE>
       9.    Confidentiality.
             ---------------

             (a) Each of the parties undertakes to the other that it will not 
directly or indirectly at any time make use of or disclose for its own benefit 
or for or to or on behalf of any person, firm or company any information which 
it or they may possess or be aware of or otherwise have acquired by reason of 
this Agreement and/or each party's performance of its respective obligations 
hereunder and relating to the technology processes, finances or business of 
either party or of any other person having dealings with any of them 
("Confidential Information"). Notwithstanding the foregoing, the 
aforementioned restrictions on use and disclosure shall not apply to:

              (i) information developed independently by either party without
     reliance on Confidential Information of the other party;

              (ii) information generally available to the public;

              (iii) information rightly received from a third party without
     knowledge that such information is confidential; and

              (iv) information known prior to disclosure.

             (b) it shall not be deemed breach of this provision for either
party to disclose Confidential Information if such disclosure is compelled or 
otherwise required by law or a court of competent jurisdiction.

       10.   Publication Responsibility. CNN shall procure and maintain, at 
             --------------------------
all times during the production of the interactive versions of the Programs, 
insurance policies of the type customarily procured and maintained by 
producers of original material, including, but not limited to, workmen's 
compensation insurance and producers liability (errors and omissions) 
insurance. ACTV shall procure and maintain, at all times during the production 
of the interactive versions of the Programs, insurance policies of
the type customarily procured and maintained by providers of original 
technology including, but not limited to, workmen's compensation insurance 
and producer's (errors and omissions) liability insurance.

       11.   Technological Responsibility. ACTV warrants that it has all 
             ----------------------------
necessary patents, rights, licenses and consents for all hardware and 
software developed by it for use in the Evaluation and that the use of the 
same will not infringe the rights of any third party. ACTV agrees to 
indemnify CNN against all costs, claims, proceedings and demands in respect 
thereof.


                                       - 5 -


<PAGE>
       12.   Termination.
             -----------

             In addition to any other rights and remedies at law either party 
by giving written notice to the other may immediately terminate this Agreement 
where the other party has failed within three (3) days to remedy a material 
breach of this Agreement of which written notice was given.

       13.   Expenses.
             --------

             (a)   In addition to any other obligations assigned hereunder,
ACTV shall bear all the implementation costs related to the Evaluation, 
including, but not limited to, the master control, headend distribution, 
convertes boxes and basic research.

             (b)   Except as otherwise set forth herein, each party shall bear
its own "indirect costs" in support of creating and producing the interactive 
versions of the Programs. "Indirect costs" as to each party hereto shall 
include, but not be limited to, administrative and general overhead costs.

       14.   Standards
             ---------

       The physical appearance, content, format and overall quality of the ACTV
enhanced information shall be of first class, professional quality equivalent 
to the information reported in the Programs similar to that contained in other 
programs being provided in the Evaluation.

       15.   Copyright
             ---------

       (a)   ACTV expressly acknowledges that the copyright and title to the
Programs belongs to and remains vested in CNN or its parent, subsidiaries or
affiliates.

       (b)   ACTV will at all times act to preserve and protect CNN's 
copyright in the Programs.

       (c)   ACTV shall cooperate fully and in good faith with CNN for the 
purpose of securing and preserving the rights of CNN in and to all CNN 
programming, including but not limited to the Programs. CNN may commence or 
prosecute any claims or suits in its own name or in the name of ACTV or join 
ACTV as a party thereto. ACTV shall immediately notify CNN in writing of any 
infringements or imitations by others of such programming or articles similar 
to those covered by this Agreement, and CNN shall have the sole right to 
determine whether or not any action shall be taken on account of any such 
infringements or imitations. ACTV shall not institute any suit or

                                  - 6 -


<PAGE>
take any actions on account of any such infringements or imitations without
first obtaining the written consent of the CNN so to do.

       16.   Imprints, Corporate Names, Trademarks and Service Marks
             -------------------------------------------------------

       Except as otherwise expressly provided in this Agreement, ACTV shall
not use in any manner whatsoever any logo, trademark, service mark or other 
designation of CNN, its parent, subsidiaries or affiliated companies, without 
CNN's prior written consent.

       17.   License and use of ACTV Programming Technology
             ----------------------------------------------

             (a) ACTV shall disclose the ACTV Programming Technology to CNN
and hereby grants CNN a royalty-free and paid up license to produce and 
distribute programming which utilizes the ACTV Programming Technology to 
enhance the Programs solely for purposes of the Evaluation in the Test Area. 
CNN's license to utilize the ACTV Programming Technology and to distribute 
the Programs enhanced by the ACTV Programming Technology shall commence as 
of the date hereof and shall terminate upon the termination of this Agreement.

             (b) After the termination of the Evaluation, the license granted
in Paragraph 17(a) above shall terminate.

       18.   Assignment. ACTV shall not assign any of its rights or obligations
             ----------
hereunder in whole or in part to any other party, whether voluntarily or by
operation of law, without the prior written consent of CNN, which consent 
shall not be unreasonably withheld. Any purported assignment without such 
prior written consent shall be null and void and of no force and effect.

       19.   Notices
             -------

       Except as may be otherwise expressly provided herein, any notices 
required or permitted hereunder shall be sufficient in writing and shall be 
deemed given if personally delivered or sent by telegram or by telecopy, or 
mailed by certified or registered mail, return receipt requested, at the 
respective addresses of the parties


                                     - 7 -


<PAGE>
hereinabove set forth, or such other addresses as may be designated in 
writing by either party.

     If to ACTV:

            ACTV, Inc.
            1270 Avenue of the Americas
            New York, New York 10020
            Attention:  William C. Samuels
            Telephone:  (212) 262-2570
            Facsimile:  (212) 459-9548

     with a copy to:

            Gersten, Savage, Kaplowitz & Curtin
            575 Lexington Avenue
            New York, New York 10022
            Attention:  Jay M. Kaplowitz, Esq.
            Telephone:  (212) 752-9700
            Facsimile:  (212) 980-5192

     if to CNN:

            Cable News Network, Inc.
            One CNN Center
            Box 105366
            Atlanta, Georgia 30348-5366
            Attention:  Jon Petrovich
            Telephone:  (404) 827-2608
            Facsimile:  (404) 827-3181

     With a copy to:

            Turner Broadcasting System, Inc.
            One CNN Center
            Box 105366
            Atlanta, Georgia 30348-5366
            Attention:  General Counsel
            Telephone:  (404) 827-4390
            Facsimile:  (404) 827-1995

All notices by telegram shall be sent charges prepaid and shall be deemed 
effectively given upon delivery; all notices by telecopy shall be deemed 
effectively given upon confirmation of delivery. Any notice sent as provided 
herein, if by mail, shall be sent


                                     -8-



<PAGE>
via certified or registered mail, return receipt requested or the local 
equivalent thereof. All notices mailed shall be deemed effectively given 
on the fifth (5th) day after mailing.

       20.   Representations, Warranties and Indemnification
             -----------------------------------------------

       (a) CNN represents and warrants that it has the right to enter into this
Agreement and perform its obligations hereunden.

       (b) ACTV represents and warrants that it has the right to enter into 
this Agreement and fully perform its obligations hereunder, and that the ACTV 
information furnished in the Evaluation, except with respect to those portions 
that are supplied by CNN, and any promotional materials for the Evaluation 
created by or on behalf of ACTV, shall not violate or infringe upon the rights 
of any other person or entity or cause CNN to be subject to any liability 
whatsoever.

       (c) Each party hereby forever indemnifies and holds the other and its 
parent, sibling, and subsidiary corporations and all of their directors, 
officers, employees, agents, and assignees harmless from and against and 
releases them from any and all claims, actions, demands, costs, damages, 
liabilities and expenses (including, without limitation, costs of litigation 
and reasonable counsel fees, including an allocable portion of in-house 
attorney costs) resulting or arising from or incurred in connection with any
breach or alleged breach by the other party of any representation or warranty
contained in this Agreement or any material provision of this Agreement, 
provided that the party seeking indemnification gives the other party:

            (i)   prompt written notice of any claim or litigation to which
                  indemnification applies, and

            (ii)  the opportunity to participate in and fully control the 
                  disposition (by compromise, settlement, or other resolution 
                  but excluding any admission of wrongdoing by the indemnified 
                  party) of such claim or litigation.

       (d) Any approvals given by CNN pursuant to this Agreement shall not be
construed as an assumption of responsibility on the part of CNN for the content
of or other matters related to, any item approved and shall not in any way 
limit CNN's right to indemnification hereunder.

       21.   Relationship of the Parties
             ---------------------------

       The status of the parties to this Agreement shall be that of independent
contractors and nothing herein shall create any association, partnership, 
joint venture, or agency relationship between them.


                                    -9-


<PAGE>
       22.   Survival of Representations, Warranties and Indemnities
             -------------------------------------------------------

       All representations, warranties, and indemnities set forth in this 
Agreement shall survive the termination or expiration of this Agreement.

       23.   Headings
             --------

       The headings contained in this Agreement are inserted solely for 
convenience purposes and shall not affect the meaning or construction of 
this Agreement.

       24.   Waiver
             ------

       No waiver or failure by a party to enforce or insist upon strict 
compliance with any provision in this Agreement shall be deemed to 
constitute a waiver of the rights of said party to demand strict compliance with
the terms hereof. No waiver by a party of any of the terms or conditions of 
this Agreement in any instance shall be deemed or construed to be a waiver 
of such term or condition in the future, or of any subsequent breach of said 
provision or any other provision in this Agreement. All rights and
remedies contained in this Agreement shall be cumulative and shall not limit 
any other right or remedy to which a party may be entitled.

       25.   Governing Law
             -------------

       Regardless of the place of execution hereof, this Agreement, all 
amendments hereto, and any and all issues or controversies arising herefrom 
or related hereto, shall be governed by and construed exclusively in 
accordance with the laws and decisions of the State of Georgia applicable to 
contracts made, entered into and performed entirely therein. ACTV hereby 
consents to personal jurisdiction in and service of process by any competent 
state of federal court in the State of Georgia. Additionally, the parties 
hereto agree that the State of Georgia shall be the exclusive forum and 
situs for the resolution of any and all disputes, controversies or matters
arising herefrom or related hereto. ACTV agrees that service of process by 
mail shall be effective service of same and such service shall have the 
same effect as personal service with the State of Georgia and result in 
jurisdiction over ACTV in the appropriate forum in the State of Georgia.

       26.   Severability
             ------------

       If any provision of this Agreement shall be held invalid or 
unenforceable by any court of competent jurisdiction, such holding shall not 
invalidate or render unenforceable any other provision hereof and this 
Agreement shall remain in full force and effect and shall in no way be 
affected, unless to so continue this Agreement would unjustly prejudice any 
party hereto.


                                  -10-


<PAGE>
        27.  Construction
             ------------

        This Agreement shall be construed and interpreted without regard to any
presumption or other rule requiring construction or interpretation against the
party causing this Agreement to be drafted and the parties hereto acknowledge 
that all parties were equal in the drafting and wording of this Agreement.

        28.  Force Majeure
             -------------

        The parties hereto shall not be held liable or responsible for delay or 
failure to take any actions called for under this Agreement occasioned by 
force majeure or any cause beyond the control of the parties including, but 
not limited to, war; civil disturbances; fire; flood; earthquake; windstorm; 
unusually severe weather; acts or defaults of common carriers; accidents; 
strike or other labor trouble; lack of or inability to obtain raw materials, 
transportation, labor, fuel or supplies; governmental laws, acts, regulations, 
embargoes or orders (whether or not such later prove to be invalid); or
any other cause, contingency or circumstance within or without the United 
States; any of which shall release the parties from the performance of this 
Agreement.

        29.  Modifications and Amendments
             ----------------------------

        This Agreement may not be modified, changed or supplemented, nor may any
obligations hereunder be waived or extentions of time for performance be 
granted, except by written instrument signed by both parties.

        CNN looks forward to working with ACTV in the continuance of our 
mutually beneficial relationship.

                                    Sincerely,

                                    CABLE NEWS NETWORK, INC.


                                    /s/ Jon Petrovich
                                    ----------------------------------
                                    Jon Petrovich
                                    Executive Vice President

ACCEPTED AND AGREED

ACTV, INC.

By:   /s/ William C. Samuels
   ------------------------------------

Its:  Chairman, CEO
    -----------------------------------

Date: August 16, 1995
     ----------------------------------


                               -11-

<PAGE>

                               EXHIBIT A

                               PROGRAMS
                               --------

Phase I
- -------

1.     NFL on Sunday
2.     Prime News


Phase II
- --------

1.     Prime News
2.     Sports Tonight
3.     Calling On All Sports
4.     Inside Politics


Phase III
- ---------

1.     Moneyline
2.     Showbiz Today
3.     Talkback Live




                                -12-


