John, I have to agree that in a money battle MSFT is in a much stronger position than AOL. If MSFT wants to lose money for a while in a war of attrition, they have many more reserves than AOL or any other ISP. Everyone would get hurt in the near term, MSFT the least on the money flow side, AOL much more, and lesser ISPs might go out of business all together. ATHM would see their positive earnings turning point pushed out for a few years. On the other hand, even MSFT can not lose money forever, and AOL has established brand loyalty with 18M subs who already have a choice of cheaper ISPs (vs 2M or so for MSFT), but choose to remain with AOL not only because of the access, but because they must like the content and quality they are getting. I also read a part of the MSFT story in which the proposed "free" access would not really be free, but would be tied in to a certain level of purchases online through MSFT. I don't think many internet users want to have to buy something in order to get "free" access. Sort of like a free lunch, it doesn't exist. Nonetheless, this is a good tactical move on MSFT's part to shake up AOL while its stock is down.
JMHO |
