Microsoft shifts MSN toward broadband

The software giant unveils "MSN Premium," a version of its Internet service that it hopes will appeal to the expanding ranks of people tapping into high-speed access.

Software
Microsoft is writing another chapter in its saga of trying to become an Internet power.

On Wednesday, the software giant unveiled "MSN Premium," a new version of its Internet service that it hopes will appeal to the expanding population of broadband users. The Internet service will offer new software features such as a digital photo editor, smoother tie-ins between Hotmail and Outlook e-mail software, and enhanced spam-blocking and security features. But despite the changes, MSN Premium remains cosmetically similar to its previous incarnations and continues to be a splashier version of Microsoft's Internet Explorer Web browser.

MSN Premium will not be officially released to the public until the winter, after it undergoes beta testing beginning next week.

The announcement comes shortly after archrival America Online released its own upgraded service, called AOL 9.0 Optimized. The new version of AOL emphasizes multimedia content, such as streaming video and music clips, which AOL hopes will appeal to more people accessing the Internet via faster connections.

MSN Premium arrives amid a sea change in the Internet access business. During the past year, dial-up Internet service providers AOL and MSN--the two largest Internet service providers--have witnessed their subscriber bases crumble. Subscribers are defecting to faster pipes, such as cable modems or digital subscriber lines (DSL), and to lower-priced discount service providers. AOL and MSN have also begun eliminating millions of free and promotional subscribers from their quarterly tally, causing larger-than-expected drops in their subscriber numbers.

In April, MSN reported that it lost 300,000 subscribers, mainly by eliminating special promotional users from its totals. In July, AOL reported an 846,000 member decline from its dial-up base.

AOL and MSN have both responded to these declines by recasting their services to become more focused on broadband. AOL hopes that its bundling of exclusive content features--such as editorial, multimedia streaming and customization--will make a flashier impression on potential customers. MSN is banking on continued enhancements in its software as the key differentiating factor that drives new subscribers.

MSN group product manager Lisa Gurry said MSN Premium will target experienced Web users who want many software services integrated into one product, in contrast to AOL's focus on Internet newbies.

"The greater opportunity lies in the 350 million people visiting our site every month," Gurry said in an interview.

Microsoft plans to market MSN Premium to people already accessing the Internet through broadband connections--via cable modem, DSL or at-work line. MSN Premium will cost $9.95 a month, or $79.95 a year, on top of the cost for one's existing broadband service. MSN 8 has the same pricing structure for broadband users, but it has been marketed as a dial-up service costing $21.95 a month.

Later this year, Microsoft will release lower-tiered version called MSN Plus, which will not include the parental controls or Outlook integration found in MSN Premium. Pricing has not been set for MSN Plus, but it will be less than the $79.95 yearly rate for MSN Premium.

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