MSN making money, will break even in 1998

The Microsoft Network (MSN), which was expected to lose money for several years, will likely break even next year, said Laura Jennings, the Microsoft VP in charge of the online service. The service has actually been making a profit for the past few months, though it lost as much as $250 million last year. Microsoft admits that its Interactive Media Group, which includes MSN, has lost "hundreds of millions" of dollars this fiscal year.

MSN was originally designed in 1995 as a proprietary online service, similar to the America Online and CompuServe offerings at the time. When Microsoft rallied around the Internet late that year, however, MSN was recast as an Internet gateway, offering unique content with a Web-like interface. The current version of MSN (2.5) is actually quite good, unlike earlier attempts, and it uses an effective Web-based interface. MSN 2.5 is "halfway" to the company's goal of full Internet integration, Jennings says.

MSN has stumbled several times in the past year, however, with major billing disasters and numerous email outages. The online service has gained 2.3 million subscribers nonetheless, Jennings says, because of its great "member experience."

"We're no different than the rest of the Internet, although we believe we have a mix of products that someday will be a great business," Jennings said.

Jennings compared the service to Yahoo!, which loses money every quarter (it has lost $19 million so far this year) but is valued at over $2.5 billion. Unlike Yahoo!, she says, MSN has valuable assets in its numerous services. She also said that Microsoft has no plans to sell MSN, but will continually renegotiate relationships with the companies that provide access for MSN users (Microsoft owns no network of its own).

"Bill \[Gates\] cares far, far more about member experience than making money--far more," she said. "It's more important to us that our members have a great experience with Microsoft and that we maintain those members and that relationship over time."

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