Internet Access May Spur PC Sales

Looking for a way to tap into the 45 million computerless U.S. homes, two
national Internet service providers have developed innovative marketing
strategies designed to increase demand for personal computers using
Internet access as the lure.

Prodigy Communications Corp. and Best Buy Co. are in the process of test
marketing free or discounted computers with long-term Internet access
contracts.

Meanwhile, America Online Inc. and eMachines Inc. Wednesday formed a strategic alliance designed to make getting online easier and more
affordable.

By pairing potentially free PCs with up to three years of Internet access, each
company expects to create a winning combination for consumers as well as
their sales and services.

Mary Matalobos, a Prodigy spokesperson, said Internet access is the
primary reason why people buy a personal computer.

“Research shows that the number one reason why people buy a
personal computer for their home use is to get access to the Internet. We
think that the combination of a computer with access is a great deal for
consumers,” she said.

Joy Harris, Best Buy spokesperson, said the company is offering the hardware and
access deal in three test markets for one week: Orlando, Fla., Charlotte, N.C. and Indianapolis, Ind., for one week.

Depending on the store location, consumers who sign up for Prodigy Internet service will receive a discount of up to $400 on certain desktop computers.

Harris said when computer buyers sign up for one, two or three-year
terms of Prodigy Internet access, they will respectively receive a $100,
$250 or $400 discount off from the price of select CPUs. The discounts are made at the cash register, so customers don’t have to fill out forms and wait for mail-in rebates.

Because Best Buy’s computer line-up starts at $399, some customers may
elect to get a computer for free, and pay just under $20 a month for
three years of Prodigy Internet access.

Harris said Best Buy would determine which offer worked the best at
the end of their test marketing and consider a national campaign with
Prodigy sometime later this year.

Under the AOL-eMachines agreement, CompuServe 2000 software will be
integrated into all eMachines personal computers. AOL will also make a
minority investment in eMachines.

eMachines and AOL’s CompuServe will offer a
limited-time retail promotion this summer. Under the promotion, consumers
signing up for a three-year term of service with CompuServe will receive a
$400 rebate off from the purchase price of three models of eMachines computers.

Colin Mahony, an analyst with the Yankee Group, said AOL is looking to cash in on newcomers to the online world.

“The PC as we know it, over the next five years, is going to change drastically, especially within the household,” he said. It’s very, very valuable for AOL right now to make sure that the newbies go with them.”

Right now, it’s a great time to be in the market for a new or second
computer. The market has evolved into a winning scenario for all parties
concerned.

Consumers get great price if not a nearly free home computer and long-term Internet access. Manufacturers and retailers can expect increased sales from computer accessories like monitors and printers, while ISPs are gaining long-term clients and enhanced advertising sales opportunities.

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