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AOL IN JAPAN: 'WE'RE NOT LATE TO THE PARTY' (int'l edition)

Stephen Case outlines his strategy for AOL in Japan

He already made it the No.1 online service in the U.S., and he's making big inroads in Europe. Now, America Online Inc. founder Stephen M. Case, 38, has designs on Japan. Backed by trading giant Mitsui & Co. and financial publisher Nihon Keizai Shimbun Inc., AOL launched a Japanese-language version on Apr. 15. Case discussed with Tokyo Bureau Chief Brian Bremner the challenges of turning AOL into a global brand.

Q: Japan already has hundreds of small Internet access providers and entrenched online services such as Nifty-Serve, a licensee of CompuServe Inc. Aren't you a little late for the party?

A: Not really. The market here reminds me of the U.S. Three years ago, about 5% of the households in the U.S. subscribed to an online service. That's where Japan is today. Three years ago, AOL was an emerging player in the market dominated by Prodigy and CompuServe. Today, AOL is larger than all our competitors combined. We're not late to the party. It's just beginning.

Q: You're pricing AOL Japan about $8 per month for three hours of usage, then tacking on $4 for each additional hour. Why aren't you offering the flat-fee system offered in the U.S?

A: At $8, it puts us at a level everybody could afford. That's the right market-entry strategy. Right now, a lot of people aren't familiar with what these services are all about. We need to make it easy. If we had unlimited pricing that resulted in a monthly fee that was much higher, plus the [higher] telecommunications costs in Japan, that would price the service at the high end of the market.

Q: Aside from pricing, what's AOL's edge when it comes to local content?

A: Services that are unique to AOL Japan, from 16 different partners. [Japanese content] is in every single category, whether it's financial news, sports, or entertainment. But it's not just about content. It's about navigation and making things easy to use, and building a community and connections through features only AOL has.

Q: With so much local Asian-language content available on the World Wide Web, why will consumers bother to join a proprietary outfit like AOL?

A: The Internet is really a tremendous opportunity for us, as opposed to a threat. It has boosted the interest in the concept of an interactive service. And the majority of members that have joined the Internet in recent years have chosen to connect through AOL. We really are the Internet and a whole lot more. People want a service that's fun, easy to use, and affordable.

Q: As you take AOL abroad in Asia, don't you face the marketing obstacle of being perceived as an American-centric online offering?

A: I had more of a concern about that in Europe, particularly in France. But we have had great success there. I think the decision to call it AOL and not America Online helps. I think the decision to set up a local company with local partners helps. In Japan, our software is written to be read in kanji. It's truly a local service with global reach.

Q: Just how serious is the market chatter about a possible merger of AOL with CompuServe?

A: [Grinning] I can't comment on market rumors.


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