[Marketing-Public]Wall Street Journal Article

Jay Garcia marketing-public at mozilla.org
Tue, 14 Oct 2003 11:09:15 -0500

Sorry to post the whole thing but I don't have the link.

Any impact on Mozilla, F'bird, T'bird ??? Thoughts anyone?


AOL to Launch Dial-Up Service
Called Netscape at a Discount


In the face of increasingly aggressive price competition, AOL Time
Warner Inc.'s America Online is quietly readying another dial-up
Internet service that will be cheaper than its flagship $23.90-a-month
service, according to people familiar with the situation.

To protect the America Online brand name, the new service will carry the
Netscape name, and it won't offer as many features as America Online's
premium service, these people say.

For instance, Netscape users will get only one e-mail address instead of
the seven offered by America Online, plus a home page that includes news
and a Google search function. The Netscape service, which is expected to
cost $9.95 a month and will likely be launched early next year, is being
referred to as "raw Internet access" by some executives at the company's
Dulles, Va., headquarters.

By making a foray into the discount arena, America Online is making a
classic consumer marketing move: creating a subpremium brand that runs
the risk of cannibalizing its core business but potentially fends off
rivals from snapping up its customers. Over the years, a host of
marketers -- from Delta Airlines with its Song carrier to Gap with its
Old Navy chain -- have followed a similar strategy.

The move highlights the intensity of the competition facing America
Online, which is increasingly finding it difficult to justify the high
price of its dial-up service. AOL lost nearly two million subscribers
world-wide in the year ending June 30, 2003.

A raging price war among providers of high-speed broadband services,
which offer Internet access at speeds that can be more than 20 times
faster than America Online's dial-up connections, has driven down prices
at the top end of the market. Last month, the second-largest regional
Bell company, SBC Communications Inc., dropped the price for its
digital-subscriber-line service for some subscribers to $26.95 a month
from $29.95. The largest phone company, Verizon Communications Inc.,
lowered its price for DSL to as low as $29.95 a month from $39.95 for
certain telephone subscribers earlier this year. That means many people
can get broadband from their local phone company for just a few dollars
more than the price of AOL's slower dial-up connections.

At the same time, competitors offering dial-up Internet service for
$9.95-a-month have been nipping at America Online's heels. In the first
six months of this year, subscribers to discount Internet service
provider United Online Inc. rose 17% to 2.6 million, while subscribers
to America Online's services fell 6% to 33.3 million world-wide. Rival
EarthLink Inc. has stepped up the television advertising campaign for
its $10.95-a-month PeoplePC Internet service in the past three months.
Julian King, vice president of marketing for PeoplePC, says EarthLink
believes that discount services will eventually comprise 30% of the
Internet access market.

Even though the dial-up market is shrinking, most Americans still use
dial-up service, and the business is enormously profitable for America
Online, which needs the cash from that business to fund its turnaround

America Online's main strategy for keeping its subscribers from
defecting has been to add more exclusive features to its flagship
$23.90-a-month service, such as junk e-mail filters and sneak peeks at
new movies and TV shows. Another strategy has been providing access to
online magazines such as People and Entertainment Weekly owned by its
parent, which on Thursday will officially revert to the Time Warner Inc.
name and the TWX stock symbol it used prior to the 2001 merger with
America Online.

Efforts to craft a discount strategy have been under way for some time,
with the company quietly testing a product called "CompuServe Basic" for
$9.95 a month. It offered the service to customers who called up and
said they wanted to quit because the price was too high. People familiar
with the situation say the product was successful but research showed
that customers preferred Netscape to the CompuServe brand. CompuServe
was a pioneering Internet service that was bought by America Online in 1998.

Netscape Communications, which was bought by America Online in 1999,
created one of the first pieces of software that allowed consumers to
surf the Web. The company lost its technological lead in the
Web-browsing software market to Microsoft Corp. and fought a
well-publicized legal battle against Microsoft that was settled out of
court this year.

"The brand still has incredibly strong awareness, very strong positive
attributes with consumers," says an AOL executive familiar with the
situation. "We decided to go with it because the name recognition and
brand awareness gets us down the road so we don't have to do as much
advertising up front."

America Online is also hoping that using the Netscape brand will help it
avoid cannibalizing its own customers. According to people familiar with
the situation, the online unit was encouraged by the CompuServe test,
which showed that customers who signed up for the discount service would
have otherwise quit the service. "The AOL brand is not impacted by this
at all," the executive says.

Write to Julia Angwin at julia.angwin@wsj.com

Updated October 14, 2003 9:53 a.m.


Jay Garcia Netscape Champion - Mozilla Champion
UFAQ - http://www.UFAQ.org
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