Several analysts have said America Online, the Internet arm of AOL Time Warner Inc. (NYSE:AOL - News) that has been hit by the sharp advertising slump and federal probes into its accounting, may have to defend its No. 1 Internet services provider position.

The latest version of its service, which is being launched on Tuesday, has been billed as one of the company's biggest upgrades and as a key step in reviving the online giant. But rival MSN is not letting AOL have the stage to itself.

MSN, which is a distant No. 2 to AOL with 9 million subscribers, unveiled an aggressive $300 million marketing campaign to promote its newest version.

AOL has 35 million subscribers worldwide and 26.5 million in the United States.

"It's the next stage of the portal wars that were all about which retailer I can get. Now it's about which consumers I can get," Forrester analyst Charlene Li said.

LIKE A BATTLE OF THE BANDS

Analysts said they received invitations to AOL's and MSN's star-studded launches within days of each other, fueling the battle between the two rivals that started in the 1990s.

Rock star Alanis Morissette and comedian Dana Carvey will help AOL Time Warner executives, including Chairman Steve Case and Chief Executive Richard Parsons, launch AOL 8.0 in New York on Tuesday. AOL also plans to launch a multimillion-dollar print and television campaign to advertise the new version.

MSN, of course, has its own plans. Rock star Lenny Kravitz will kick off MSN's launch on Oct. 24 in Central Park. For the first time, Microsoft Chairman Bill Gates will be on hand for an MSN launch. They may also unveil new partners at the event.

"If you think of it as a slug fest, AOL is a defender. MSN is a strong contender and then we have Yahoo on the side saying, 'We want to get in there,"' Li said.

Last month, Yahoo Inc. (NasdaqNM:YHOO - News) unveiled its new high-speed access service with SBC Communications (NYSE:SBC - News), the No. 2 local U.S. telephone carrier. Yahoo is betting that its status as neither a software company nor a media giant will be in its favor.

"This is a 'coming of age' for MSN in that AOL, for the first time, has to acknowledge MSN as a contender for lead ISP," Li said. "AOL has a substantial lead, in terms of numbers of subscribers, but MSN is catching up rapidly."

TIDE MAY TURN WITH BROADBAND

Analysts said the emerging high-speed, or broadband, world offers rivals a chance to catch up and perhaps even turn the tables on AOL.

Merrill Lynch analyst Jessica Reif Cohen last week raised concerns that falling subscribers could become AOL's next problem and noted that its move into broadband -- while necessary -- could be a costly one.

"It is a very important time for us to get the word out," said Bob Visse, director of MSN marketing. "When customers on AOL are making this decision of whether they upgrade to AOL 8.0 or look into another ISP or move to broadband -- when they make that decision, we want to be there as a clear alternative. Given all the other issues AOL has on their plate, this is an excellent opportunity for us to reach out to customers."

To help get the word out, MSN is spending $300 million -- a hefty sum -- but less than the $1 billion it spent in 2000 when it also offered a $400 rebate. MSN's subscriber growth slowed a bit after it discontinued the rebate, analysts said.

"MSN has spent more than $1 billion since 2000 in marketing efforts against AOL, but AOL has outgrown MSN by 8 million net new subscribers over time," AOL spokesman Andrew Weinstein said. "We have always focused on members, not competition. Some of our competitors have been trying to imitate AOL for years."

GigaMedia analyst Rob Enderle said Microsoft and MSN often outspend their rivals in launches and this time, the spending is likely "several magnitudes" of what AOL would spend.

"But the product this time around is quite a bit better than the AOL offering. AOL -- largely as a result of merger and focus on other things -- has taken its eye off the ball and MSN has taken that ball and run with it," Enderle added.

Analysts said MSN has made more strides in preparing for the broadband world and has targeted some of AOL's strengths and gained ground in catching up to the online giant.

AOL has also made some inroads, fine-tuning the service and unveiling about 100 changes, emphasizing its members and its strengths, including community and chat, analysts said.

Despite the improvements in both services, Jupiter analyst David Card said neither was going to revolutionize the market.