Time sues CompuServe

Time magazine today filed a lawsuit against CompuServe (CSRV) to prevent the company from terminating its presence on the online service and force it to pay the remainder of funds owed for a two-year contract.

Time is seeking $3.5 million in payments for the current year and also wants the court to prohibit CompuServe from canceling the contract.

Time left America Online to join CompuServe in March 1996.

"We were the first online magazine when we went on AOL in the fall of 1993. But CompuServe aggressively pursued us," said Nancy Kearney, a Time spokeswoman. "We went with them because we were promised a long-term opportunity and the potential to expand the Time brand." The discussions included bringing online the Time for Kids publication.

Kearney said Time also brought a number of advertising relationships when it moved to CompuServe. The media company had left AOL in November 1995.

But in January, halfway through its contract, CompuServe sent Time a notice seeking to terminate the $7 million two-year agreement "citing its financial objectives for the coming fiscal year," Kearney said.

But CompuServe contends there's a provision in the contract that allows a 30-day notice to terminate service and that it owes $1.5 million to buy out the contract, according to spokeswoman Gail Whitcomb.

She also added that it is only the Time magazine content that will be terminated and the online service will continue to carry other Time Warner publications such as Sports Illustrated and Money.

"Time Online's content had not provided sufficient value to justify payment beyond the initial year," she said, noting CompuServe has already paid $3.5 million to the publication.

Time, however, contends its site is one of the most "frequented areas" of the service. Its forums, for example, host more than 40,000 members, the company noted. CompuServe, which announced last November it would move away from the consumer market and refocus on its corporate customers, reported a third-quarter loss of $14.2 million on revenues of $211 million. The online service has seen its revenues remain largely flat for the past four quarters while it posted consecutive quarterly losses.

CompuServe users enter "Time" into the site's keyword box and are taken to the service's news center. Time anchors that part of the site and offers current and archived information.