Commentary: MSN Direct's timely service

By Charlene Li, Principal Analyst

MSN Direct services on "smart" watches will appeal to affluent early adopters--a small, but key, market to influence. To maximize success, Microsoft must talk up the watches' functionality, make use of the MSN brand and subsidize the watches.

Microsoft on Thursday announced its new MSN Direct service, which will support the fall launch of so-called smart watches from brands like Fossil and Suunto. The service will send the watches one-way data such as news headlines, weather forecasts and appointment updates over unused FM spectrum. With prices of $100 to $300 for the watch, and an additional $9.95 per month or $59 per year for the service, these watches will find a devoted following with affluent early adopters.

To maximize its success with this key group, Microsoft should do the following:

• Emphasize appointment functions over one-way data. Microsoft's goal is to enhance the basic role of the watch, which up to this point has been to tell time. Because data such as traffic reports and sports

		Related story Microsoft: See SPOT run on your wrist The software maker reveals details of its wireless service for "smart" personal objects such as watches.

• Tie the new service closely to other MSN services. The naming of MSN Direct builds on Microsoft's investment in the MSN brand, but the software maker should go further in coordinating the services--like providing consistent content between MSN Direct and MSN.com or MSNBC, as well as offering MSN 8 subscribers discounts to the service.

• Subsidize the watch itself. While the price of the service falls to just $5 a month under the annual plan, it's still unfamiliar and costly for consumers to have to subscribe to their watches--especially after shelling out up to $300 for one. Microsoft should consider offering subsidies on the watch, just as wireless service providers and cable operators do for cell phones and set-top boxes.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.