Excite@Home Rolls Out Software Subscription Service

High-speed connections to the Internet are changing the way people listen to music. Now Excite@Home (ATHM) will find out if broadband changes how people pay for software, too.

The company, which has 2.3 million high-speed Internet subscribers worldwide, announced Monday it will offer all of its U.S. customers subscription services through which they can "rent" games and other programs via their broadband connections -- a substitute for the usual practice of purchasing software at retail.

Raising the Profile

The services, offered in partnership with the privately held firms Media Station and Into Networks, don't mark the first time that broadband subscribers, including Excite@Home's, have been able to use software by paying subscription fees. And among businesses, paying to use programs stored on application service providers' remote computers is becoming commonplace. But by offering households nationwide the service, Excite@Home is significantly raising the profile of subscription software as a consumer product. Excite's stock fell 59 cents, or 7.5%, to $7.31 Monday.

"This is going to change the way people experience software, both in purchasing it and using it," says Larry Berkin, Excite@Home's director of business development for premium services.

The announcement also indicates how Excite@Home is trying to sell additional services to its basic Internet-service subscribers, just as cable TV systems try to get basic cable customers to upgrade by ordering HBO. Excite@Home didn't disclose the financial terms of its deals with Media Station and Into Networks, but it's safe to assume that Excite@Home will get a cut of the fees paid to the software distributors.

As part of the agreements, Excite@Home customers can pay monthly fees of up to about $10 per month for access to dozens of games and other software programs at a time. Subscribers to Media Station's SelectPlay service can pay an additional $3.95 for 48-hour access to new game releases; customers can pay $2.99 to Into Networks for temporary access to single titles, even if they're not already subscribers. Programs that the companies offer include PC games such as Tomb Raider and Hasbro's (HAS) Rollercoaster Tycoon and Lotus office productivity software.

Reaching for the Stars

Despite past failures of other software rental ventures, the firms are optimistic that families that spend $40 or $50 for individual software titles will find it a value to get an annual gaming subscription for about $120. Berkin says limited rollouts of software subscription on Excite@Home have proved popular with customers. "They stay with it," he says. "The downloads are strong. The conversions [from free trials] to paid subscribers are strong."

All that are needed are more customers. Before this deal, Media Station had agreements to be marketed in more than half a million homes, and actual subscribers in tens of thousands of homes, according to senior vice president Allan McLennan. Into Networks has more than 30,000 subscribers; before linking up with Excite@Home, Into Networks' biggest affiliate was Time Warner's (TWX) RoadRunner broadband service, putting it in 1.1 million homes.

But the implications are much bigger than today's announcement. For starters, Berkin says Excite@Home plans to introduce software subscription worldwide. He also acknowledges that it's a blurry line between subscribing to a game library and subscribing to a music library -- something for people to consider as they try to sort out the future of the music business. "It's all digital content," Berkin says.

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