Microsoft is launching on Thursday a subscription service that offers users a tight link between the company's MSN Hotmail Web mail service and its Outlook e-mail client PC software.

The new service, called Microsoft Office Outlook Live, costs US$59.95 per year and includes Office Outlook 2003 for Subscription Services, which is a new downloadable subscription version of Office Outlook 2003, 2G bytes of online storage, spam and virus protection and the ability to send 20M-byte attachments.

Outlook Live has been designed as a single interface to subscribers' Hotmail accounts so that they can use Outlook Live to access, send and receive e-mail messages and manage their contacts and calendars, said Karin Muskopf, MSN product manager. Changes made using Outlook Live are reflected in the Hotmail accounts.

Outlook Live currently is available only in the U.S., the U.K. and Canada, but Microsoft might consider making it available in other countries later, she said. More information about the service can be found at http://outlooklive.msn.com.

Microsoft has provided similar interaction between Hotmail and Outlook with an existing service called Outlook Connector, which is part of the MSN Premium suite, but Outlook Connector doesn't include a copy of Outlook. MSN Premium costs $9.95 per month.

The Web mail space is heating up and players such as Microsoft, Yahoo Inc. and Google Inc. are trying to differentiate their respective services, an analyst said.

"Microsoft's big advantage is that it has Outlook, which many people are familiar with, so Microsoft is trying to use that as an advantage to build some loyalty with their Hotmail subscribers," said Marcel Nienhuis, an analyst at The Radicati Group Inc., a market research company.

However, the $59.95 price seems a bit steep and could turn off potential subscribers who already own Outlook, which is included with the Office suite, Neinhuis said. Although Outlook Live will be more attractive to people who don't own Outlook, the subscription nature of the service means "there is no end in sight to how long you'll be paying for (Outlook)," he said.