Microsoft Corp. yesterday said it will sell Sidewalk, its money-losing online entertainment guide, to one of its biggest competitors -- Ticketmaster Online-CitySearch Inc. -- in a stock deal estimated to be worth $238 million.
Although Microsoft has heavily promoted its Sidewalk site -- which offers information on restaurants, movies and entertainment events in 60 cities across the country -- since it launched the service four years ago, officials recently decided that creating entertainment content wasn't one of the company's strengths. Microsoft will now focus more on the e-commerce aspects of its online offerings, including its "yellow pages" directory of advertisers, buying guides and shopping services.
"It's a move to emphasize commerce services," said Matt Kursh, business unit manager of Microsoft Network, the unit that runs Sidewalk.
In exchange for selling the entertainment guide, Microsoft will get stock equal to 9 percent of the outstanding shares of Ticketmaster Online-CitySearch and warrants to purchase an additional 4 percent. When the deal is complete, in about 90 days, Sidewalk users will get sent automatically to a CitySearch site when they type the old Sidewalk address to view an event guide or other Sidewalk offering. In the Washington area, Sidewalk users will go to washingtonpost.com's "Style Live" site under a previously negotiated deal between Washingtonpost.Newsweek Interactive and CitySearch.
"It's a really big deal because it signifies Microsoft is exiting this segment of the content space," said Paul Merenbloom, an analyst with Prudential Securities in New York.
Microsoft officials said the sale will allow them to focus on what its users want. "Advertisers have told us they want more yellow pages from us," said Peter Atkins, general manager of strategy and planning for Microsoft Network. At the same time, he said, consumers are telling Microsoft they want more information on what they can buy over the Internet. Separating the entertainment guide from the e-commerce services, said Atkins, "allows us to focus on our core competencies."
Sidewalk "no longer fits the evolution of what we've been working on for the past four years," Atkins said.
Sidewalk was a strong competitor to sites attempting to become "local portals" -- that is, to be the online authority on everything that's happening in an area. Sidewalk competed not only with CitySearch's 33 regional sites, but also with America Online Inc.'s Digital Cities, Yahoo's "Get Local" sites, and online newspapers like The Washington Post's washingtonpost.com and the New York Times' nytoday.com.
Merenbloom said he considers Sidewalk to be "neck and neck" with AOL's Digital Cities. But although Sidewalk was gaining users, it, like most of its rivals, was losing money.
"They're not as well-suited to develop that space as the business side," Merenbloom said. "Perhaps they turn MSN into a commerce network instead of a consumer network."
In Washington, the "Style Live" site will be joined this fall by a site focusing on local entertainment and consumer information. The still-unnamed site will also be part of washingtonpost.com, although it will use different technology under a deal announced last week with Alta Vista. "Those two sites will co-exist as part of our offering for the local community," said Marc Teren, president of Washingtonpost.Newsweek Interactive.