Whatever happened to MSN?

The second-largest online service is relegated to relative obscurity behind Microsoft's Start portal site.

A German newspaper created something of stir this weekend when it reported that online service Primus-Online was taking over Microsoft Network's local subsidiary.

Microsoft clarified that the German deal was not an attempt to sell off its access services abroad but rather was a cobranded portal site effort. Nonetheless, the report raised an interesting question: Whatever happened to MSN?

Once touted as a potential America Online-killer, MSN is still the second-largest online service. However, it has been relegated to relative obscurity behind the latest darling of Microsoft's content efforts, the Web portal site dubbed "Start." The service continues to struggle with its identity--it has been renamed MSN Premier--as well as its place in the increasingly crowded online market.

Microsoft will maintain its member service for now, but it is unclear whether the company plans to stay in the subscription-based online business for the long haul. In fact, analysts note that the software giant has been silent about what it plans to do with the online service as it increasingly shifts its focus toward Start.

"Microsoft's realizing that there's a better business model in Web-based content, like what they're doing with their properties [such as CarPoint, Expedia, and Investor]," said Kate Delhagen, an analyst at Forrester Research. "It makes them less interested in proprietary content."

Indeed, the company's own executives publicly acknowledge the company's online strategy shift. "The real focus is the Start effort," said Ed Graczyk, lead product manager for the interactive media group at Microsoft. "We're access-agnostic...We frankly don't care how you get there. For people who want a nice bundle, we have MSN Premier."

In many ways, Microsoft Network is barely recognizable from its 1995 launch as a closed-community, subscription-based online service. MSN once featured a host of content offerings, including its own shows.

Today, it offers services more similar to those of an Internet service provider: Web access, email, and some Microsoft perks such as a free subscription to Slate and discounts on investor services. Barely carrying any of its original exclusive content, MSN Premier's main game is Internet access. "We don't want to limit ourselves to people who can get to our service only by an ISP," added Graczyk.

For the past year, Microsoft has made a noisy shift in online strategy, switching from an AOL-type proprietary service that charges its members to a Yahoo model that relies on advertising and commerce revenues to offer a free service on the Web. And with the widely anticipated debut of Start, Microsoft plans to unite all its content in one portal site to present a package of online offerings to an open Web audience.

Currently, MSN members are directed to MSN Onstage as their default home page. But when Start is finally launched, MSN Premier probably will more closely resemble a portal bundled with an access provider, not unlike the relationship between Yahoo and MCI Communications or Excite and AT&T WorldNet.

"I wouldn't say AOL is spending a heck of a lot of time worrying about MSN right now," said analyst Daniel Rimer of Hambrecht & Quist. "I think it's spending more time worrying about the Yahoos of the world."

That's a far cry from the days when AOL and Microsoft Network fought head to head for online service subscribers. However, as Delhagen points out, the two companies may find themselves locked in battle again on the Web.

"I don't think MSN is long for the access world. It's a short-term strategy," she said. "They will partner with other ISPs and telcos to get their suite of services as widely distributed as possible. Yahoo does the same thing, and that's what AOL will do too."

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