Netscape: We're in media, not browser business now
By Reshma Kapadia
NEW YORK, June 6 (Reuters) - AOL Time Warner Inc (NYSE:AOL - news) is remaking its pioneering Netscape software business into an Internet media hub brimming with Time Warner artists and publications, aimed at office workers and Web purists not already using AOL services.
``The browser is a crown jewel. However, six months from now, you won't consider Netscape to be a browser company,'' Netscape President Jim Bankoff told Reuters in an interview, referring to its early role in creating the first popular tool for surfing the Web.
The shift recognises the overwhelming dominance of the Internet Explorer (IE) browser produced by arch-rival Microsoft Corp (NasdaqNM:MSFT - news), and frees AOL to focus on new media markets now taking shape on computers, phones and television.
The revved-up Netscape media strategy signals that AOL Time Warner is stepping up the integration of its varied business units following the completion of AOL's $106.2 billion purchase of Time Warner Inc in January.
Netscape, which plans to embark on a brand advertising campaign later this year, wants to act as a hub for the wide array of core Time Warner media properties -- such as Fortune and Time magazines and the 24-hour cable news network CNN.
So far about 18 Time Warner publication and programming sites, including CNNfn financial news and CNN.com, have been embedded in the toolbar that runs along the top of the Netscape media site.
NETSCAPE SOFTWARE TO ACT AS COMPONENTS FOR MEDIA SERVICES
Netscape is by no means a rejection of its software legacy, as components of its browser technology will continue to power new features of Netscape's media services aimed at office workers, small businesses and sophisticated Web users.
``We have all been waiting to see if they stake the crown on the technology, on the name, or on the parent and it become more of an extension of a grander thing,'' said Lydia Loizides, analyst at Internet research firm Jupiter Media Metrix.
``It's not going to be Netscape, but rather Netscape.com,'' Loizides said.
AOL Time Warner's retreat from creating distinct Netscape browsing software figures in the on-again, off-again talks the company is holding with Microsoft to renegotiate its licence to embed the Internet Explorer in its AOL service.
The talks, which broke down last week but are said to have since resumed, would extend a five-year AOL-Microsoft browser deal that expired in January of this year, among other topics.
But in an industry that does not know how to stand still, the rivalry has shifted to instant-messaging services that incorporate browser-like Web surfing features with the capacity to swap messages rapidly among friends and colleagues.
Microsoft is incorporating an instant-message service it calls Windows Messenger into the next version of its operating system software known as Windows XP that offers audio and video conferencing, file transfers and text messaging. This change means customers of alternative instant messaging and Web browsers would have to go to extra effort to use such systems.
The expired Microsoft pact had allowed AOL's software to feature on the desktops of many Windows PCs, helping fuel the growth of AOL services. AOL still relies on Internet Explorer as the built-in browser for its now 29 million subscribers.
Bankoff said Netscape's strategy will not be altered regardless of which way the talks with Microsoft are resolved.
He confirmed that AOL has been testing ``Komodo'' software, which would let AOL and CompuServe Internet services support multiple Web browsers, including Netscape, as well as perform various other functions.
Netscape is also trying to increase the reach of its technology platform and has struck recent deals for its browser to be used in Sony Corp's PlayStation 2 and direct computer seller Gateway Inc's (NYSE:GTW - news) Touchpad.
``We are finding demand for more than the Internet browser in the marketplace,'' Bankoff said, contrasting Netscape's partnering moves to what he considers Microsoft's winner-take-all model. ``You will see more pacts like the one struck with PlayStation.''
NETSCAPE, THE ALTERNATIVE MEDIA BRAND IN THE AOL STABLE
The historic transformation of Netscape into media property has been underway since AOL bought Netscape in 1999 and Time Warner in 2000 to form the world's largest media company, with interests ranging from music to film and across the Internet.
Netscape.com's base of registered users has grown 37 percent to more than 40 million worldwide from 15 million in February 2000, the company said.
The Netscape target user typically surfs the Web at work, often on high-speed connections, and resists the packaged online experience AOL creates to draw mainstream audiences who find wide-open Web surfing confusing or overly complex.
``We call them the 'a la carte' crowd. (Netscape users) have a perceived interest in finding their own things,'' Bankoff said.
Bruce Kasrel, a Forrester Research analyst who had yet to be briefed on the new Netscape plans, said ahead of the announcement last week that Netscape needed to pursue a hybrid media and software akin to that of Microsoft's MSN Explorer.
MSN allows users to custom design the mix of Web searching, news updates, communication features and other services using Internet Explorer technology. Similarly, he predicted AOL Time Warner would fold Netscape software into its media properties.
The media hub strategy gives Netscape a chance to sell advertising across its many properties -- something AOL Time Warner is well known for doing -- and to test the waters for subscriptions rather than just free services, Loizides said.
``Because they are repositioning themselves, they are a bit freer to experiment than Yahoo! or other services,'' she added. ``Things they could test include subscriptions services'' for unique Time Warner programming or special Web software.
The formula of using Netscape to create a central Internet meeting place for Time Warner magazine readers and broadcast viewers echoes in certain respects the push by Time Warner in the first half of the 1990s to draw users to a single site. That site, known as Pathfinder, failed to keep Time Warner readers within the site and eventually closed.
Netscape can tap an unprecedented wealth of exclusive media content ranging from music pop star Madonna to the hit crime-family drama ``The Sopranos'' now running on U.S. cable television, Loizides said.