MSN concedes losses the result of serious mistakes

The Microsoft Network (MSN) is losing $200 million (#125 million) a year, Microsoft admitted last week. Senior representatives of the company also conceded the firm has made serious mistakes with the service. The comments came as Microsoft was forced to replace Version 2.0 of its MSN software, which vice president of the service Laura Jennings admitted was released prematurely. Over 20% of Version 2.0 installations are estimated to have failed. Jennings also conceded that the Exchange client was too complex for many users and that the MSN billing system has been plagued with problems. Exchange has now been replaced with Outlook Express. Despite MSN's heavy losses, Oliver Roll, group marketing manager for MSN, remains optimistic, citing the UK's performance over the last year as indicative of good times to come. "We're investing heavily in MSN and we're profitable in the UK," he declared. Asked if he thought the service could survive with such huge losses, Roll replied: "We are one of the busiest sites in the world and that is very promising. It is our fourth core business and there will be a considerable revenue stream in the future." Roll refused to say when he expected to see this stream." Adrian Smith, senior research analyst at Romtec, reckons Microsoft needs to "really look at how it is running this part of its business". He added: "The company needs to look at what makes people connect. Microsoft has admitted making mistakes with the MSN software and is losing a lot of cash, but to Microsoft it really isn't a lot. The money being lost is going into investment and that seems strategic." Jonathan Bulkeley, AOL's UK managing director, expressed surprise at MSN's losses. "When MSN was first announced we were girding for battle: we considered ourselves the underdogs," he commented. "But it is a strong brand and could pull back from being the number three service." On its launch in 1995, MSN was hotly tipped as Microsoft's knock-out punch in the on-line ring and now has a subscriber base of around 2.3 million worldwide. That is about a quarter of AOL's customer base.