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Technology Stocks : Microsoft Corp. - Moderated (MSFT) -- Ignore unavailable to you. Want to Upgrade?

To: Brian Sullivan who wrote (692)	10/24/2002 4:47:16 PM
From: Brian Sullivan	Respond to of 19790

Microsoft Set for Europe Push Strategy for MSN Service May Provide an Advantage Over Internet Rival AOL The Wall Street Journal Europe Microsoft Corp. today will finally unveil its revamped MSN Internet service at a big event in New York's Central Park. But some of its best chances for growth may lie overseas, particularly in Europe. The new MSN 8 service is Microsoft's latest effort to close the gap on AOL Time Warner Inc.'s America Online unit, which has a commanding lead in the U.S. But its record in Europe is decidedly mixed: Though America Online has significant market share in the U.K., France and Germany, it still hasn't turned a profit in any of those countries. AOL Europe is expected to lose just under $300 million this year, though that's less than its $600 million loss the previous year. MSN, of course, isn't making money in Europe, either. But Microsoft officials think its strategy better fits the market. The new service, which combines a Web browser with features such as a spam filter and photo editing software, is being pushed as an add-on for people who buy their Internet access from other companies. That concept, pioneered by America Online, allows customers to access almost all of MSN's features by paying a separate bill. Microsoft officials believe the "bring your own access" approach will work particularly well in Europe, while they work to glean additional revenue from advertising and other add-ons, such as extra e-mail storage and "premium" information services. MSN doesn't operate its own Internet access service in Europe or overseas markets, though it plans to seek partnerships with local Internet service providers to bundle MSN 8 with their services. By contrast, they argue, America Online is essentially competing with European telecommunications companies with its own Internet access service. In Europe, those local companies offer Internet access themselves and have made it difficult for competitors to break into their markets. After years of lobbying regulators in Europe, America Online has obtained some concessions and is approaching profitabilty in the U.K. But it still facing an uphill battle in countries such as Germany. Competing against local telecoms in Europe is "madness", declares Judy Gibbons, MSN's European vice president. "You'll never make any money." America Online, which released its own new AOL 8.0 version last week, said its strategy has been successful in Europe while Microsoft has entered and left the arena several times. For customers who don't need Internet access, MSN 8 will cost $9.95 (10.17 euros) a month in the U.S. and GBP 6.99 (11.05 euros) in the U.K., where it is scheduled to launch Nov. 26. The service will be available in early 2003 in Italy, France, Germany and Spain; no pricing has been set in those countries yet. Such fees, on top of monthly access bills, could pose a price barrier. But some customers in Europe have traditionally paid a phone company local-calling charges for dialing in and an Internet service provider for access on top of that. Microsoft says its own market research suggests European users would pay for extra services. Ms. Gibbons notes that MSN's European advertising revenue grew 15% last year and believes they will rise 25% this year, thanks to big ad contracts from companies such as Sony Corp. and Ford Motor Co.'s Volvo. To help drum up more business, she and Yusuf Mehdi, MSN's U.S. chief, recently entertained ad-industry guests on a rented yacht at an industry gathering in Cannes. In the U.S., Microsoft also "seems more focused on content distribution" than on Internet access, says Ross Sealfon, an analyst at research firm International Data Corp. in Framingham, Mass. He notes that Microsoft's market share as a service provider was roughly flat for the first two quarters of this year. All of MSN's nearly nine million access subscribers are in the U.S.; America Online has 26.5 million subscribers in the U.S. and 35 million globally. At the launch event today, Microsoft is expected to announce a "price freeze" on the $21.95 monthly price for MSN 8, including Internet access, for a year. America Online charges $23.90 a month for its combined service.