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March 14, 1996

Compuserve Plans Proprietary On-Line Service for Families, Novices

By PETER H. LEWIS

Compuserve Inc., going against the tide of the consumer on-line industry, Wednesday disclosed plans for a proprietary service aimed at families and novice computer users.

The Internet-based service, called Wow! from Compuserve, is scheduled to be available March 25 at a flat rate of $17.95 a month for unlimited access. It will offer a range of materials oriented for family and children; a child signing on would see a cartoon-directed interface, while an adult would see a more serious approach.

Wow! will also offer access to the World Wide Web through its own browser, along with a set of controls enabling parents to limit access to Internet sites for their children.

Officials at Compuserve, a unit of H&R Block Inc., made it clear Wednesday that they regard Wow! as a direct challenge to America Online Inc., the leader in the consumer on-line services market.

In addition, they hinted Wednesday that Compuserve was in talks with both AT&T Corp. and the Microsoft Network on-line division of Microsoft Corp. about securing distribution deals similar to the ones those companies announced with America Online this week. "Stay tuned," Scott Kauffman, general manager of the Wow! service, said.

The existing Compuserve Information Service has an estimated 4.3 million subscribers worldwide, mainly among businesses and technology enthusiasts. In contrast, Compuserve officials said, Wow! has been designed to appeal to users of home computers, especially those with children, and people who have found the Internet and on-line services too difficult to use.

"We believe the consumer market for on-line services is about to explode," said Compuserve president Robert J. Massey.

Analysts said it was unclear whether that was the case -- or whether the new service could explode in Compuserve's face.

"Wow! has made some improvements to existing on-line services, in terms of ease of use, pricing, and intuitive navigation," said Mary Doyle, senior analyst at IDC/Link, a market research company in New York. Still, she said, "I'm not entirely convinced that the world needs another on-line service."

In recent months, several consumer on-line services have either failed or abandoned their proprietary approach in favor of becoming open services within the Internet, including News Corp.'s Delphi, General Electric Co.'s Genie, AT&T's Interchange, and Microsoft's MSN.

Two weeks ago, Apple Computer Inc. said that it would shut its eWorld service March 31. And Sears, Roebuck & Co., a co-owner of the Prodigy service with IBM, has said it wants out of the on-line business.

"A lot of people think it's all over for the on-line services," said Nick Donatiello, president of Odyssey Ventures Ltd., a San Francisco research firm. "Just the opposite: The on-line services battle is in its infancy."

Donatiello said just 11 percent of U.S. households now subscribe to an on-line service. And of those households, two-fifths have switched on-line services at least once, while 16 percent have switched twice or more. "Clearly, there's lots of room for change," he said.

Ms. Doyle of IDC/Link said she believed that the 89 percent of households that have not subscribed stay unwired not because existing services are too difficult to use -- a problem Wow! feels it has addressed -- but because of a lack of a perceived need and value. "What is it going to do for them?" she asked.

Donatiello argued that "to see big increases in growth, we have to see a big increase in entertainment value. Entertainment is the 600-pound gorilla in the home, and information is just a little chihuahua."

Wow! will be available initially only for users of Microsoft's Windows 95 operating system. A version for Apple's Macintosh computers is expected later this year.


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