Look out MSN, here comes MCI

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News Corp. online deal packs a one-two punch of content, networking

MCI Communications Corp. and News Corp. are close to giving birth to the first child of their alliance--not surprisingly, in cyberspace.

A yet-to-be-named Internet-based online service will fuse MCI's online businesses including networkMCI and internetMCI with News Corp.'s struggling Delphi Internet Services Co. It will roll out this fall with an estimated 200,000 subscribers, combining customers from Delphi and MCI's Internet services.

Analysts applaud the linkup, calling it an obvious first move in light of MCI's $1 billion investment in News Corp.

"It ought to be a relief for Delphi," said Emily Green, senior analyst with Forrester Research, Cambridge, Mass. "MCI has clearly shown people they understand the potential of the Internet for consumers as well as businesses."

Unlike other services like Prodigy, America Online, CompuServe and the upcoming Microsoft Network, which reside on proprietary servers and have gateways to the Internet, the News Corp./MCI service will lodge itself on the Internet's World Wide Web. While entry to the Web site will be free, going deeper within the site will demand subscription.

"This is all about News Corp. and MCI," said Scott Kurnit, who was named president-CEO of the new service, from the same post at MCI's Information Services Co. "It's about a brand new product that's never before been in the marketplace . . . It can't be compared to the old Delphi."

News Corp. acquired Delphi in 1993 for $15 million and has spent the past two years struggling to revitalize the service, which was never able to win more than 100,000 subscribers.

Anthea Disney, who left as editor of News Corp.'s TV Guide to become editor in chief of Delphi, will become editor in chief of the unnamed service. Alan Baratz, former chief executive of Delphi, will become president of News Technology Ventures, a new post at News Corp. And Vinton Cerf, senior VP-data architecture at MCI, will also be heavily involved in the technical side of the service.

Initially the service will tap existing News Corp. programming like TV Guide and various Fox network shows, including its coverage of National Football League games.

"Women and children have always been an underserved 'net population," Ms. Disney said. "We will definitely stress serving that target, but we know we'll need to reach everyone to grow this business."

With the strength of News Corp.'s content and the networking capabilities of MCI, the new online service could present a formidable threat to the existing services. AOL has told analysts it's concerned about only two competitors: Microsoft and MCI. Prodigy, however, is more cautious in its assessment.

"This new service will need three things to play in the online game: a great interface, a lot of content and a lot more money to market it," said Brian Ek, VP-government affairs at Prodigy. "It would have been a lot cheaper for them to introduce a new service a few months ago, because you can bet every online service is going to be spending really big bucks this fall to attract users."

Although advertising will play an important role, Mr. Kurnit said most revenue initially will come from subscribers. Subscription costs, ad rates and sponsorship deals for the venture are still under negotiation.

Both MCI's agency Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, and Bronner Slosberg Humphrey, Boston, Delphi's agency, will help launch and market the service. The specifics of the campaign were not disclosed.

"It's going to be an incredibly exciting year," said Forrester's Ms. Green. "I can't see defending any strong bet about who's going to be in the No. 1 spot [among online services] 18 months from now."

Debra Aho Williamson contributed to this story.

Copyright August 1995 Crain Communications Inc.

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