Several major ISP deals were brokered this week in a flurry of activity that saw top consumer electronics retailers teaming up with the leading online portals.
When the dust cleared, marriages were made between Best Buy and Microsoft, Circuit City and AOL, Wal-Mart and AOL, and Kmart and Yahoo!
It was the second go-around for Microsoft, which last month forged a comparable pact with RadioShack in what apparently is a non-exclusive arrangement.
In the latest alliance, Best Buy will also offer Microsoft’s MSN Internet access and other connectivity services in all of its stores and on its e-commerce site. In return, Microsoft will buy up $200 million in Best Buy stock, representing about 2% of the company, and will give the retailer and its Web site prominent placement across all of its online and cable properties, including MSNBC, Expedia.com, Hotmail, WebTV Network and MSN eShop. The agreement also includes profit sharing and joint marketing efforts that will appear in stores, online and in broadcast and print ads.
Tandy offered no comment on the announcement.
Best Buy chairman Dick Schulze said the alliance will position his company as the “preferred click & mortar provider” of entertainment and technology products and services, and will foster its mission of “improving people’s lives by making technology affordable and easy to use.”
Microsoft chairman Bill Gates described that mission as a good fit with his own “Everyday Web” strategy of making the Internet as prevalent as the telephone. He added that Best Buy’s ability to sign up more than half a million subscribers in five months through in-store rebates illustrates the power of the store’s brand.
Similarly, Circuit City said it will sell America Online’s services in its stores and will get preferential placement on all AOL shopping portals under terms of a strategic alliance that will hit the marketplace next spring. The deal had been widely expected after AOL lost out to Microsoft in its bid to be RadioShack’s exclusive ISP.
The Circuit deal calls for the nation’s second-largest CE chain to offer AOL-subscribed narrowband, DSL and satellite Internet access in dedicated sections of its stores, and to promote AOL and its services in its advertising and marketing campaigns. In return, circuitcity.com will become an anchor tenant in AOL’s CompuServe, Netscape and AOL.com shopping portals.
Circuit chairman Richard Sharp said the strategic alliance “opens wide our capacity to help consumers integrate the vast power and promise of the Internet in a personal way.” Added AOL president Bob Pittman: “We are confident that Circuit City’s world-class sales organization will be a great asset…to consumers.”
Within hours of the announcement, AOL and Wal-Mart confirmed a long-rumored partnership in which the world’s largest ISP and the world’s largest retailer would create a new co-branded Internet access business. The unnamed ISP will be promoted in Wal-Mart’s stores and advertising, while Wal-Mart’s overhauled e-commerce site, set to launch on January 1, will be promoted across all AOL-owned cyber malls.
The AOL deals follow a similar agreement forged last month with the Blockbuster video chain.
The AOL announcements also dovetailed with news that Kmart has teamed up with Yahoo! and Martha Stewart Living to offer free Internet access through a new e-commerce effort, BlueLight.com, which supercedes the discounter’s former selling site, kmart.com.
For previous TWICE Online coverage of this topic see.
Tandy, Microsoft Sign Five-Year ISP Agreement, 11-Nov-1999
TWICE’s 25 E-Tailers To Watch This Fall, 07-Sep-1999
ISP Rebates Squash Summer PC Sales Slump, 09-Aug-1999
OfficeMax And CompuServe Team Up To Offer $400 Rebate Program, 14-Jul-1999
Jury Is Out On Free PC, ISP Promos, 09-Jul-1999
CEMA Sees E-Sales At $14B By 2002, 24-May-1999
Brick-&-Mortars Pursuing Their Own Internet Action, 12-Apr-1999
Service Providers May Hold Key To The Future’s Product Sales, 05-Apr-1999