December 18, 2000 5:30 PM PST

MSN pitches Web appliance to its subscribers

Microsoft has expanded its marketing strategy to try to convince MSN subscribers to purchase its Net-surfing appliance known as the Web Companion.

Under a new deal, people who already subscribe to Microsoft's MSN Internet service for their personal computer can now use the same account for the Web Companion.

MSN won't charge subscribers for the extra service until the end of March. At that point, it will cost households that use both a PC and a Web Companion an extra $9.95 per month on top of the monthly base fee of $21.95.

Until now, MSN subscribers would have been required to spend an extra $21.95 per month for the second connection.

Originally, Microsoft targeted its Web Companions at technophobes who had held off on buying a PC. The Web Companion, like other companies' Net-surfing appliances, promised a simplified way to get online.

Instead, Microsoft has become the latest company to begin pitching its Internet appliances to people who already own a PC. Gateway and 3Com have both aimed their Web-surfing machines at tech-savvy homes, while Netpliance made the costly decision to pitch itself primarily at Web newbies.

Microsoft hopes that marketing to existing MSN subscribers will be an easier sell. "They already know what the value is," MSN product manager Sarah Lefko said.

Microsoft introduced the first Web Companions earlier this year with different models of the Web-surfing device coming from Compaq Computer and Emachines.

There is one major catch to the new deal: Existing MSN customers can't use the current $400 rebate that makes the Web companions so cheap. Without the subsidy, the machines cost $400 and up.

Still, IDC analyst Bryan Ma said that creating a pricing plan to appeal to households that already have PCs makes sense.

"It basically was incredibly discouraging for a current PC user to get one of these things," Ma said.

America Online has a similar deal that allows existing AOL subscribers to add its AOLTV service for an extra $14.95 monthly fee.

"The long-term vision is that you have one service provider that provides all your data needs," Ma said. "Ultimately, that is where AOL and MSN want to be."

Offering subscribers deals on multiple devices has several benefits to service providers: It gives them both additional monthly revenue and keeps people online longer, increasing the opportunities for advertising.

However, Ma said, two issues need to be tackled before most homes start to use more than one device to access the Internet simultaneously. First, there needs to be a wide availability of high-speed connections to the Internet, something that is still not a reality in many areas. Second, networking the multiple devices at home has to become extremely easy, if not brainless.

Although today's MSN Companions work only with dial-up access, Lefko said high-speed options are on their way.

"As we see MSN Companion becoming more and more prevalent as a second device," she said, "you will see some broadband capabilities over the coming year."

 

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