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AOL shows some ImagiNation

America Online thinks games are another good way to keep users, so it bought an online gaming company.

America Online's announcement that it is purchasing an online gaming company from AT&T gives AOL yet another weapon in its battle to be the most attractive cyberhome away from home.

AOL said today that it bought, for an undisclosed price, the ImagiNation Network, an online gaming concern. Terms of the acquisition were not disclosed.

AOL is banking on the ImagiNation acquisition to establish its position as an industry-leading platform for multiplayer online games. Opened for business in 1991, ImagiNation says it launched the first dedicated online games service, which AT&T bought in 1994.

The company will act as a wholly owned subsidiary when it joins AOL, but its technology will be used to enhance the online service's list of services. Later this year, AOL members using Windows 95 will be able to pop a free CD-ROM from ImagiNation into their computers, log on to AOL, and participate in CyberPark--an interactive, 3D, multiplayer gaming area, complete with bulletin boards, chat rooms, and communities, according to ImagiNation spokeswoman Cindy Wilson.

The added features may keep AOL's members from churning--that is, canceling their online accounts and signing on somewhere else--at a time when Internet service providers are lowering prices, improving service, and adding perks in an all-out fight for customers, analysts say.

"It seems to make a lot of sense," said David Locke, an analyst with Volpe, Welty & Company. "It's one more thing for you to do at AOL. It helps round out their product offering so you have no reason to leave."

AOL is not alone in its pursuit of juicy content to attract and keep customers, especially with the advent of no-frills Internet access offers by telecommunications heavies such as AT&T, said Youssef Squali, an analyst with Laidlaw.

"A lot of Internet service providers on the consumer side are trying to differentiate themselves either with customer service or bundling software-based gaming," Squali said. All ISPs--including private services such as AOL, CompuServe, and Prodigy--"really have nowhere to hide," he added.

But even with all the added pressures and the fact that it has been roundly criticized for crawling at a snail's pace onto the Web access business, AOL still has one thing no other provider has: the most customers.

"They can compete and the reason being is they have 6 million subscribers," Squali said. "They are still by far the largest online service around. The challenge is how will they be able to maintain those subscribers."

Squali thinks that many users won't want to have to go through AOL's back door onto the Web, but not everyone agrees. In contrast with what many in the two-year-old Web industry consider conventional wisdom, Locke of Volpe, Welty said many customers don't necessarily want everything out there.

They want a home on the Web where they can feel comfortable. If AOL can provide the best home--complete with magazines, newspapers, communities, and extras like online gaming--then it stands a chance to maintain its dominance.