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September 30, 1997updated 03 Sep 2016 4:34pm

NEWS CORP’S KESMAI SUES AOL, TRIES TO BLOCK COMPUSERVE BUY

By CBR Staff Writer

News Corp’s Kesmai Corp games subsidiary has filed suit against America Online Inc alleging violation of federal antitrust laws, federal and state trademark laws and unfair competition. It is seeking monetary damages and to block AOL’s acquisition of the 2.7 million consumer subscribers of CompuServe Corp, which is part of the recently announced three-way deal also involving WorldCom Inc. Kesmai, along with all other game-playing software companies on AOL, were recently given an ultimatum by the company to either be subsumed under AOL’s new WorldPlay brand name – the result of AOL’s acquisition of games company ImagiNation Network, which it renamed WorldPlay – or get off the service altogether, AOL went ahead and made Kesmai games WorldPlay games, alleges Kesmai. AOL is offering so-called anchor tenancies for certain content providers on each of its areas and Kesmai was offered one between $5m and $10m. But a few days later AOL withdrew the offer and told Kesmai it could not have a tenancy at any price, alleges Kesmai. AOL also imposed a $2 per hour charge for all games on its service. Kesmai says at least 90% of its revenues come from AOL and as a result it is in dire financial straits at right now, says Chris Holden, chief executive of Kesmai. Moreover, Kesmai is alleging that AOL’s now-dominant position is a threat to all gaming companies because they don’t get the revenue they need to develop multi-player games that work over the web, which has not really been achieved yet. Kesmai says the latency of AOL’s network prevents potential web gamers using AOL as a web gateway. In other words, AOL is a threat to the web itself and as such should not be allowed to go through with its acquisition of the consumer subscribers of CompuServe Corp. Kesmai operates on AOL, CompuServe, MSN, Prodigy, AT&T WorldNet, Earthlink among the main players. Kesmai says its eight games accounted for around two percent of all AOL traffic this summer and was approaching 3 million hours a month in August. In August gaming company Meta Creations Corp was angered when AOL abruptly threw the company’s games off its service completely. It couldn’t afford the contract that AOL offered, which was close to $1m for a year, said Meta.

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