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Microsoft MSN Web service to offer 'premium' software

REDMOND, WASH. — REDMOND, Wash. - Microsoft Corp., whose MSN Internet service is losing money and customers, will sell subscriptions to use a new version of its software to bring in clients.

The service, called MSN Premium, will cost $9.95 a month or $80 a year for a set of e-mail, security, calendar and digital-photo programs, said Lisa Gurry, MSN Group product manager. A version without some of the programs will cost less, she said. Sales are to begin between December and February.

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The new software doesn't come with any type of Internet access. Customers who want to continue to get dial-up access from MSN can still pay $22 a month, Gurry said.

Microsoft, which primarily sells access over dial-up phone lines, has forecast a decline in MSN sales this year as clients switch to faster connections. Microsoft is avoiding selling high-speed access and is trying to collect a fee for MSN software from customers who get fast access from another company. Clients may be unwilling to pay the fee on top of access, analysts said.

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"With what's in the new version, I just don't see people paying $5 or $10 a month," said Matt Rosoff, an analyst at Directions on Microsoft, a research company in Kirkland, Wash.

"Microsoft is still testing the market and throwing in a few more things each time and saying to customers 'Will you pay for it now? How about now?' "

Microsoft's Gurry agreed it would take time to get consumers to pay for additional Internet services besides access.

"It's certainly a niche market at this time," she said. "It's going to be a big educational challenge. We do think there is consumer demand for this type of offering."

For the quarter that ended March 31, MSN accounted for 7.9 percent of Microsoft's total sales. The unit had a $92 million loss that quarter.

Microsoft has forecast a sales decline of 4 percent to 7 percent for its MSN unit in the fiscal year that started July 1 as dial-up customers switch to speedier access by cable-television or modified phone lines. The number of MSN subscribers declined by about 400,000 in the 12 months ended June 30.

MSN Premium is designed for families and households of multiple users with fast Web access. It will include programs for sharing a user's calendar and photos with friends and family, and the service will give customers extra storage for e-mail and accounts for family members.

The service also comes with a new program for blocking pop-up advertising and improved parental controls over what children view. Another feature lets customers check their personal MSN or Hotmail e-mail accounts using Microsoft's Outlook e-mail program, which is in use at many U.S. companies.

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Microsoft's shares rose 7 cents to close at $26.57 yesterday in Nasdaq stock market trading. They have risen 2.8 percent this year.


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