'Severe loss' at MSN - can it hang on?

The number of subscribers on the Microsoft Network has dropped nearly 20 percent, from 150,000 members in January, to 125,000 this month. No comment was available from Microsoft to explain the exodus.

MSN launched to much fanfare in August '95 when it promised the best online experience backed up by Microsoft's awesome array of tech-tools designed to keep the users coming back.

But while msn.co.uk remains one of the most visited portal sites in the UK, MSN's Internet access business has been wounded, perhaps fatally, by the free services which have reported huge growth during recent months. Mike Welch, senior consultant with industry analyst Inteco says Microsoft could do well by following their example: "Well they can't sell it. Who'd buy it?" he asks. "But we shouldn't rule out the possibility of them going free."

Another possible option for Microsoft is to offer the current user base to another ISP -- one of the most difficult obstacles faced by ISPs is to attract new customers. Microsoft could, for a fee, offer its remaining users to a startup. "That would be a good move" says Welch. "It would be invisible to the users and Microsoft gets an escape route without losing face."

Another, less likely outcome, is that Microsoft simply lets the access business dissolve but given that the world's largest and software house is in the midst of a PR battle already the last thing it needs is a group of disgruntled MSN customers complaining in the background.

James Eibisch, online analyst at IDC believes Welch's second option is most likely with Microsoft entering a "partnership with someone who can market the service properly".

MSN's demise comes as no surprise to other players who are united in saying the service lost its appeal after several changes were made to the focus of the product. "The industry has recognised for some time now that MSN has been having problems," says an AOL spoksperson. " It has very little to differentiate it from the free services."

Microsoft was unavailable for comment but Eibisch isn't convinced that they are busy doing nothing: "If MSN has lost that many subscribers the problem is urgent and needs immediate attention. That's a severe loss."