Time Warner Reports AOL Revenue Drop, 15 Percent Cable Growth

The AOL division of Time Warner Inc. continued to lose money during the second quarter of 2006, while Time Warner’s cable unit recorded growth over the same period a year ago.

The NewYork-based cable and media company reported overall net income of $1.01 billion, or 24 cents a share. A year previously, Time Warner recorded a loss of $409 million, or 9 cents a share, because of litigation.

AOL’s revenue fell 2 percent, or $51 million, to $2 billion. Time Warner said the decrease was due to an 11 percent drop, or $188 million, in subscriptions. A number of consumers are switching to broadband and trading paid AOL subscriptions for free Internet e-mail from companies such as Google Inc. and Microsoft Corp. The earnings news came more than a week after former AOL CEO Steve Case told PBS’ Charlie Rose he regretted selling his Internet company to Time Warner.

AOL’s sluggish performance has been attributed not only to the defection of subscribers but to the rise of broadband users in the United States. To combat further losses, Time Warner announced on Wednesday it will distribute, for free, AOL software, e-mail and other products to dial-up users migrating to broadband in a bid to attract more advertising. Jeff Bewkes, Time Warner’s president and COO, said the move comes in response to customer feedback.

“We’ve listened to our customers, and many of them want to keep using these AOL products when they migrate to broadband but not pay extra for them. So now we can tell them: ‘You’ve Got Mail for Free.’ This is the next logical step for AOL to capitalize further on the explosive rise in broadband usage and online advertising. With its robust and rapidly expanding advertising operation, we expect to put AOL back on a growth path.”

Meanwhile, Time Warner’s cable operations recorded a 15 percent jump in earnings, from $364 million to $2.7 billion. The company said much of the growth stemmed from a 16 percent increase in cable subscriptions. Time Warner Cable also saw higher demand for its high-speed data, digital phone and digital video services. The company said average revenue per basic cable subscriber rose 14 percent to approximately $91.

Time Warner also completed its acquisition of Adelphia-Comcast on July 31, and executives said they will focus on aggressively deploying Time Warner Cable services to those new markets.

AOL LLC www.aol.com
Time Warner Cable www.timewarnercable.com
Time Warner Inc. www.timewarner.com

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