October 16, 2002 1:25 PM PDT

MSN 8: Worth its weight?

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news analysis Microsoft, eager to gain ground on rival America Online, is still struggling to differentiate its MSN Internet access and MSN.com Web offerings.

The software giant is touting its upcoming MSN 8 software as a potential AOL 8 killer. But based on a copy of the MSN 8 software seen by CNET News.com and some analysts, the majority of online features in the new software are already available for free on the MSN.com Web portal.

More than anything, the similarities between what Microsoft offers for free and what it offers for a fee shows just how dramatic a correction the company has made in its strategy for consumer Web services, analysts say.

"Overall, the package is more evolutionary than revolutionary, but will help Microsoft stay competitive with AOL," said Jupiter Research analyst Michael Gartenberg.

Redmond, Wash.-based Microsoft is expected to usher in the new strategy with MSN 8. Some services initially planned as part of a grander Web services strategy--called .Net My Services--have since been shelved.

Microsoft now hopes that a combination of new services and a revamped MSN Internet access service will drive the struggling operation to profitability. This decision will fall under intense scrutiny later this week when Microsoft breaks out MSN revenue from other consumer products for the first time in the company's quarterly financial report.

At first glance, MSN 8 may be more notable for what it lacks. Of 11 main access buttons--links to MSN Home, Favorites, Search, Mail & More, Messenger, Entertainment, Money, Shopping, People & Chat, Learning and Photos--only one directly leads to services not already available through MSN.com.

According to an MSN.com Web page, the "Money Plus" service is coming soon. Another button opens to photo features bundled into the software, but eventually leads to other services already available through MSN.com.

On Monday, the company kicked off a $300 million ad campaign that uses the MSN butterfly to tout the value of the new online access service and software. More than ever, Microsoft is positioning MSN as an alternative to America Online and a repository for consumer Web services.

But analysts note that the pieces aren't all in place yet, making what little extra value MSN 8 offers as changes simply to the software rather than extra services consumers might expect after paying a monthly fee.

"This puts a hole in their marketing message that this is a great new service," said Directions on Microsoft analyst Matt Rosoff. "It's basically new client software and MSN Internet access."

Bob Visse, director of MSN marketing at Microsoft, said that for consumers, the real value of MSN 8 is the changes made to the software.

"No one would argue that the value of MSN 8 is the value of the software and the software services that are provided," he said. "The place where we spent our $500 million in R&D budget (in) differentiating our product was the software."

Microsoft had planned to deliver consumer Web services on an a la carte basis through an ambitious strategy known as .Net My Services. But the software giant found that consumers simply weren't ready to pay for these services, so Microsoft shifted the majority exclusively to MSN 8 and paying customers.

Under the original strategy, Microsoft would have delivered the majority of .Net My Services through MSN.com.

Microsoft representatives would not provide a copy of the software ahead of the MSN 8 launch on Oct. 24. The Web site BetaNews on Tuesday reported that MSN 8 had leaked out of Microsoft and onto the Web.

Value in software
Among the software improvements, the company has added parental controls, more advanced spam filtering and largely revamped e-mail software that incorporates many features found in Microsoft's Outlook Express. The company also added features from other Microsoft software.

"There are some nice user interface enhancements and the added value of the "Money" and "Picture It!" applications that add value combined with the fact that things like the parental controls work across your system," said Gartenberg.

Most MSN 8 features showcase Microsoft's trademark capabilities in developing software. MSN Messenger buddies, for example, automatically appear in a user's e-mail address book. Microsoft also has added extras to MSN Messenger 5, which will not be available with the stand-alone version.

Parental controls work across all aspects of MSN 8, including the browser, e-mail and instant messenger services. But AOL has long offered parental controls, showing that in some ways, Microsoft is working to catch up to its rival. One feature exclusive in MSN 8 lets two MSN Messenger 5 users surf the Web together, yet from different computers.

Microsoft believes its strength as a software developer and its agility in changing or updating features will be important to wooing customers.

"When you subscribe to this product, we will continually update those services that are part of the MSN subscription," Visse said. "What parental controls you need to constantly update that software...As far as spam control, we need to be constantly monitoring our software and make sure it is doing better job at analyzing spam that's going out to consumers."

Questioning the value
Microsoft's larger problem could be convincing consumers that MSN 8 enhancements and online extras are enough to offset the vast amount of content and services available for free from MSN.com.

Microsoft charges $21.95 per month for dial-up access and between $40 and $50 per month for broadband access. Consumers using another Internet service provider (ISP) could use a number of MSN 8 features for about $10 a month.

"It's a good question, whether people should pay or not," Rosoff said. "Most people will be paying for Internet access. It's a really a client for Internet access. I can't imagine too many people using other ISPs paying for (MSN)."

Still, some consumers might see the merit of paying for convenience. Microsoft's 11 access buttons link to content that consumers might otherwise have to find to hard to find on MSN.com. Some services consumers might have to pay extra for, such as online bill paying services or advanced research features through MSN Encarta, are included in MSN 8 monthly fees.

MSN 8 subscribers also have access to some services that are more robust than those available for free through MSN.com. MSN 8's People & Chat button leads to the same page as the one available on MSN.com. But paying customers get more online storage--30MB using the MSN 8 software observed by CNET News.com versus 3MB for free through MSN.com.

But beyond these few differences, consumers going to MSN.com using a Web browser will largely access the same content and services as using MSN 8.

The MSN 8 Entertainment button, for example, delivers TV listings, movie show times and even online ticket buying customized for a certain geographical area. But an identical page and services is available on MSN.com for free.

Some features do set the two apart. MSN 8's Learning tab leads to an MSN.com Web page, with some services available for an extra fee for Web users. The "Money Plus" service, in another example, is not yet available on MSN.com. MSN 8 subscribers, however, get access to enhanced services such as online banking and bill payment as part of their monthly fee.

 

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