The move applies to the MSN Encarta Web sites, which will go dark after Oct. 31, and the Microsoft Student and Encarta Premium products, sales of which will be discontinued at the end of June.
Microsoft said the move comes in response to changing consumer habits. "Encarta has been a popular product around the world for many years. However, the category of traditional encyclopedias and reference material has changed," the company said.
"People today seek and consume information in considerably different ways than in years past. As part of Microsoft's goal to deliver the most effective and engaging resources for today's consumer, it has made the decision to exit the Encarta business," Microsoft added.
Indeed, the traditional encyclopedia market and Internet-based versions such as Encarta have been hit hard by the growth of community-written reference sites -- most notably Wikipedia, which is now the seventh most popular site on the Web, according to traffic watchers at Alexa.com.
The so-called crowdsourcing techniques used by Web 2.0 sites such as Wikipedia facilitate the generation of a vast range of content at little cost. As a result, it's difficult for traditional reference houses, which rely on handfuls of paid experts, to keep up. The downside: Wikipedia has been frequently chastised for posting erroneous information.
Microsoft said it will issue prorated refund to customers who purchased subscriptions to its premium Encarta products. The refunds will apply to the period following April 30, though subscribers will still have access to the sites until the Oct. 31 shutoff date.
Microsoft's decision to kill Encarta is the latest sign that Redmond, which built its business in the client-server software world, is having difficulty adapting to the Web 2.0 era. The company has been eclipsed in categories such as search and social networking by rivals that were mere startups, or didn't even exist, as recently as a decade ago.
The daunting challenge for CEO Steve Ballmer is to find ways for Microsoft to better compete with the likes of Google, Facebook, and Amazon while maintaining revenue from the company's earthbound Windows operating system -- at least until it can become a more significant player on the Web.
Sales of Windows slumped 8% in Microsoft's most recent quarter.
InformationWeek has published an in-depth report on Windows 7. Download the report here (registration required).