CompuServe Posts Loss, Refocuses
CompuServe Inc., one of the pioneers of the computer online services business, said Thursday that competition has become so intense that it’s abandoning efforts to chase a consumer mass market.
CompuServe executives said they doubted their service’s ability--and that of rivals such as America Online Inc. and Microsoft Corp.--to make money by aggressively recruiting subscribers through free trial offers and bargain pricing.
With its subscriber rolls shrinking, CompuServe said it will rein in its consumer-recruitment spending, cancel the Wow consumer service that it introduced last March and refocus attention on business customers, long its mainstay.
CompuServe’s parent company, H&R; Block Inc., posted a $74.1-million loss during its second quarter ended Oct. 31, mainly because of the service’s poor performance. The results were significantly below Wall Street expectations, but Block’s shares dipped just 37.5 cents to close at $28 on the New York Stock Exchange.
CompuServe’s moves were the latest sign of financial strain in the commercial online-service industry, where many companies are vying to build mass markets but none has established a way to make money consistently. Some subscribers are growing disillusioned with online services in general, and others are defecting to companies that specialize in direct access to the Internet global network of computers.
Established in 1969, CompuServe was one of the first companies to link personal computer users over a nationwide network, enabling them to send each other electronic mail, post messages about specialized topics on electronic bulletin boards and download information from extensive databases.
The company, based in Columbus, Ohio, now claims 3.3 million direct subscribers to its various services worldwide, including 2.2 million in North America.
But America Online, with 7 million subscribers, has come from behind to dominate the online-services business, relegating CompuServe to second place.
CompuServe Interactive, the company’s flagship service, shrank to 2,992,000 subscribers on Oct. 31 from 3,157,000 subscribers six months earlier. The company said that only 36% of the people who tried the service were staying with it for nine months, down from 45% as of July 31. Many dropped their subscriptions after taking advantage of the free one-month test drive.
“Like others in our industry, we were bringing new users in the front door and seeing many go out the back,” Chief Executive Bob Massey said in a statement.
Those who stayed were generating less revenue for the company--a monthly average of $15.06 per customer during the last quarter, down from $17.54 during the same period last year.
