Aol Service At Top Of Heap

To gauge how online service providers fared in 1997, look no further than America Online Inc.

After starting the year with three competitors, including a seemingly formidable adversary with deep pockets, AOL has emerged as essentially the only game in town, with 10 million subscribers and a new strategy to stay ahead of its rivals.

Largely out of the picture are Prodigy and CompuServe, which fell victim to 1997’s shakeout in the online world. AOL recently completed its acquisition of CompuServe’s consumer business.

Then there’s the Microsoft Network. Initially feared when it was launched in August 1995, MSN’s success has been hampered by technology stumbles and a lukewarm reception by consumers. MSN doesn’t reveal subscriber numbers, but reports put at it at more than 2 million.

However, AOL’s year can hardly be considered banner. After switching to a flat monthly subscription rate from an hourly one, AOL had more customers than it could handle, resulting in several blackouts. In March, it settled a class lawsuit connected with the shaky service. And AOL stumbled again this fall when its e-mail service went dark three times because of technical difficulties.

Those service woes occurred as a growing number of AOL subscribers bypassed AOL’s “channels” in favor of directly going to the Web.

In an attempt to catch a piece of that action, AOL is changing its focus from a distributor to a content provider. AOL this year threw more weight behind AOL Studios, a unit that develops and acquires Web sites that can generate ad fees that AOL can keep.