The battle to be the top media company in cyberspace isn't being fought between New York and Hollywood moguls. This duel is between computer nerds in Dulles, Va., and Redmond, Wash.
Virginia-based America Online Inc. "relaunched" its service in September with a series of 30 street parties nationwide designed to highlight its new software. Rock musicians, clowns on stilts, and trailers packed with computers competed for the attention of AOL members and prospective customers.
A month later, Redmond-based Microsoft Corp. unveiled the "new" Microsoft Network with a glitzy advertising campaign. Against a backdrop of solid red, gold, or green, an icon of a hand with a pointing index finger floats in space.
"AOL has a savvy management and can roll with the punches," said Arlen Communications analyst Peter Kresalowski. "But it is unlikely to continue as the dominant player in the on-line business given the very strong competition."
The perception that AOL faces a run for its money comes from the hard-learned adage that it is unwise to bet against Microsoft.
The original Microsoft Network, or MSN, was launched as a button on the Windows 95 operating system screen. With a simple click, a user could gain access to the on-line service. That led AOL chief executive Steve Case, among others, to accuse Microsoft of anti-competitive behavior.
The new MSN emerged as part of Microsoft CEO Bill Gates' strategy to "embrace and extend" the Internet - announced on Pearl Harbor Day last year.
Typical of its parent, Microsoft's on-line service has taken one of the World Wide Web's most prominent features and turned it into a selling point. MSN and other company software programs were redesigned to take advantage of Internet connections.
"A lot of people say, 'You are trying to add to the confusion' " of the Internet, said Microsoft spokeswoman Telle Zeiler. "We believe we are trying to add value. There is going to be some original programming, but for the most part we are trying to editorialize it into bite size."
The new MSN operates behind a protective "firewall" on the World Wide Web so that only subscribers get access to it. The service is divided into sections for entertainment, research (on MSN and the Internet), E- mail, and shopping. Microsoft Investor tracks financial news and portfolios, but MSN hasn't established a separate banking center.
"On Stage," MSN's section for on-line entertainment, features six channels offering "shows" and "webzines" catering to what Ms. Zeiler called "psychographic and demographic models." One channel carries 24-hour news, including the Internet side of MSNBC cable television. Another features on- line game shows and soap operas. A third is to offer access to Michael Kinsley's magazine, Slate, and a travel webzine called Mungo Park.
MSN and AOL each says it is emulating cable TV and claims to see gold in that medium's successful market segmentation. AOL hired Robert Pittman, the man responsible for the slogan "I want my MTV," as president of one of its three newly formed operating units.
In light of his own company's 21-channel offering, AOL Studios president Ted Leonsis said of Microsoft: "Imitation is the sincerest form of flattery."
The $8 billion software giant is not sitting still. Over the next three years it expects to spend $1 billion on new media in the hope of recreating the Hollywood studio system in Bill Gates' image.
