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September 25, 1995

MONTGOMERY

By CBR Staff Writer

Although new to on-line services, Microsoft Corp has been in San Francisco this week, attending the Montgomery Securities investment conference and another for on-line developers, to tell its rivals and the analysts about its plans, reports Reuters: Russell Siegelman, general manager of the new Microsoft Network, defended the company’s a la carte pricing system, which has been criticised for exorbitant UK prices, against its rivals’ flat fees, saying that charging subscribers extra for certain premium services is the model for the future and enables independent content providers to reap a larger percentage of the revenues their site draws than they would get working with other on-line services; the company grants content providers about 70% of thei r site’s revenues; but America Online Inc’s chief executive, Steve Case, asked 70% of what? – his company lets its content providers keep up to 20% of the revenues; A simple pricing plan will lure more subscribers and thus bring more revenues to content providers, he added; in the US the Microsoft Network charges $5.00 a month for up to three hours; that cost is ú6.00 in the UK; users pay $2.50 per additional hour and additional charges for particular services; America Online, Prodigy Services Co and CompuServe Inc, however, charge $10.00 a month for up to five hours, plus a flat fee of $3.00 per extra hour.

CompuServe Inc, owned by H&R Block Inc, certainly thinks it has got the right pricing scheme and has attributed its rapid growth, 40,000 new subcribers just last week, to the flat rate chrages it adopted recently, and president and chief executive Robert Massey said he expects subscriber numbers to grow to 5m by next summer from 3.5m now: before switching to the flat rate system, the service charged $10.00 a month and then tagged on additional fees for premium services.

Following up its summer statement that it was going on-line in Japan (CI No 2,696), America Online Inc’s president and chief executive, Steve Case, told Reuters that it is still pursuing a local partner but that no agreement was imminent, and it would be another few months until a deal was finalised: but its service in Germany, a venture with Bertelsmann AG, is in beta test.

A mere tiddler in the world of online giants, Bellevue, Washington-based Sierra On-Line Inc said it expects to increase sales as fast as the market is growing, that is 50% to 60%: executive vice-president and chief financial officer Michael Brochu said he was comfortable with analysts’ estimates of earnings of $0.14 a share for its second quarter; last fiscal year it grew 67% and finally broke even in the June quarter this year.

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