According to a report by market researcher IDC, Microsoft is once again fiddling with its MSN unit, in a gigantic strategy shift that will remake the online service as a co-branded Web portal that's marketed to broadband Internet suppliers. Microsoft, predictably, is downplaying the change, referring to it as a refinement of its existing strategy, but the changes are vast, and will eventually see the company leaving the online services market, a potentially calamitous situation for MSN's 8.7 million subscribers. On a different level, however, the strategy shift is most interesting because it marks the first time Microsoft will drop its long-held desire to unseat America Online (AOL) as the number one online service.
The plan now is for MSN to evolve into a co-branded portal site used by broadband Internet suppliers. Customers of these of these services would be able to access MSN services as well, and would access an MSN portal as their home page. Currently, Qwest high-speed customers are utilizing this service, and Microsoft recently signed a similar deal with Verizon. Both of these companies offer DSL-type services, not cable Internet; Microsoft has had trouble signing up any cable Internet suppliers to the service. One of the major players in the cable space, of course, is AOL parent company AOL Time Warner. In this market, Microsoft is seen largely as a competitor, and not a partner. The software giant hopes its strategy shift will change that perception.
Moving MSN from a dial-up access provider to a value-added broadband service makes some sense, as the company is simply following the natural evolution of Internet users, who are now adopting the higher-speed connections in droves. In this new market however, broadband access is controlled by telecommunications and cable giants, forcing Microsoft to partner with, rather than compete with, these companies. "The new strategy marks the eventual end of Microsoft's most visible foray into telecommunications," the IDC report reads. "MSN is .... increasingly likely to exit the market \[for dial-up access\]," though that could be years away. Microsoft, for its part, says that the company is committed to being a competitor in the dial-up space for as long as it's a viable market.
Microsoft has continuously tinkered with MSN, which originally went by the name The Microsoft Network. Launched as a controversial component of Windows 95 in August 1995, MSN was actually the focus of Microsoft's first major consent decree with the US government, because rivals felt that the software giant was going to use its Windows monopoly to gain unfair leverage in online services. But MSN, a proprietary online service similar to the old-school CompuServe service, bombed with users and garnered little market share. In late 1995, Microsoft embraced the Internet, and MSN was recast as an Internet-based, rather than proprietary, online service. Still, with constant changes to the service's user interface, and a misguided push into online content in the late 1990's, MSN continued to struggle. Microsoft finally hit on a successful model with the 2000 introduction of MSN Explorer, a consumer-oriented front-end to MSN's online services, that was later refined in last year's MSN 8 release. And recently, Microsoft shelved plans to integrate Office functionality into MSN 9, the next version of the online software. It's unclear now how MSN 9 will evolve, though the software is due late this year.