David, I can almost see it.....
Just like the tobacco industry, or Archer Daniels, some internal memo or some tape recording mysterious surface, warning management that there is no way the system can handle anticipated increased usage with the unlimited plan. Memo included industry standards such as the 10 to 1 ratio versus the 40 to 1 AOL ratio, etc etc.
I'm not an insider, but here is the message I posted to Usenet newsgroup alt.aol-sucks on October 29th 1996, the day of AOL's annoucement. You can retrieve this message from Dejanews at dejanews.com if you doubt the date.
-----------------------------------------------------------------------------------------------------------------
From: gbisc@ibm.net (Art Stone)
To:
Newsgroups: alt.aol-sucks
Subject: *** BIG AOL NEWS ***
Date: Wed, 30 Oct 1996 04:21:01 GMT
Message-ID: <3276cce8.305955@news-s01.ca.us.ibm.net>
References: <553k97$pk8@herald.concentric.net>
X-Newsreader: Forte Agent .99f/32.299
klgriff@cris.com (Griffin) wrote:
>This article can be found at:
>http://www.news.com/News/Item/0,4,4860,00.html
>
>Exclusive America Online (AOL) tomorrow is expected to
>announce a long-awaited $19.95 flat-rate pricing plan for unlimited
>access to both the Internet and AOL's private network, CNET learned
>today.
It's true.
It's probably worth mentioning that AOL's annual meeting is on October
31st :)
www-db.aol.com
==============================================
Highlights of the story:
AOL is ending its deferred subscriber acquisition cost accounting ploy.
Marketing costs will now be written of as they are paid. This will mean
a one-time writeoff of *** $385 Million ***
AOL will also be writing off an additional $75 million in costs related
to reorganizing for their new business model (I'm guessing this is
mostly writing off acquisitions and R&D in now defunct technologies)
==============================================
Ted Leonsis is "out". Robert Pittman has bas been appointed to replace
him, and Ted has a new job creating Content (on a service which now will
be less able to afford content).
Here is Mr. Pittman's bio, from the press release when he joined AOL's
board of directors one year ago:
>Robert W. Pittman has long been an innovative force in the
>entertainment business, charting new ground in radio,
>television and cable network programming, and most recently
>the theme park industry. In the 1980s, he created a
>variety of new cable networks including MTV, VH-1 and
>Nickelodeon. After serving as MTV Networks' President and
>CEO, he became President and CEO of Time Warner
>Enterprises, and he assumed the role of Chairman and CEO of
>Six Flags Entertainment in 1991. Pittman recently created
>an investment partnership, Pittman Holdings and has
>co-invested with Hospitality Franchise Systems, Inc. in the
>purchase of Century 21 Real Estate Corporation where Mr.
>Pittman will become managing partner and CEO.
MTV Sucks <heh><heh>
==============================================
Early Jetson results are in. AOL picked up 250,000 net new members in
October.
==============================================
New Pricing plan:
---------------------
3 hours/month for $4.95 + $2.50/hour
Unlimited dialup access for $19.95/month
Unlimited dialup for $14.95/month (2 year prepayment)
Unlimited dialup for $17.95/month (1 year prepayment)
TCP/IP-only access for $9.95/month
(Does this mean if I prepay 24 * $14.95, and AOL TOSes me, that AOL gets
to keep my $358.80 ?)
==============================================
AOL 3.0 for Win95 and Macintosh is ready.
==============================================
Here's AOL's new magical direction:
>Stated Pittman, "America Online is the most exciting company in the world today,
>best positioned to lead the interactive industry as it moves mainstream. I'm delighted
>to be joining the AOL team, and I am confident that the Company has an unusual
>opportunity to widen the gap with other online brands by leading the revolution as
>interactive services bring electronic commerce, media, communications, and
>recreation and to the mass market. For me, the 1980s were about "I Want My MTV,"
>and I'm proud of the success we had there in building one of the largest brands in
>cable. But that success pales to what I believe is possible as we leverage the
>powerful AOL brand, unmatched ease of use, unique features, and competitive
>price to get tens of tens of millions of people around the globe to say 'I Need My AOL'."
==============================================
The -fatal flaw- in this plan is That AOL currently has 170,000 modems,
and close to 7 million customers. Even with conservative estimates, to
avoid unending busy signals, AOL will need to install at least 400,000
new modems *right now*. Their recent modem deal to add 70,000
modems/year is costing AOL about $1,200/modem.
AOL does not have $480 million to buy modems
==============================================
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
ATDT555-4AOL
BUSY
A suggestion: Don't prepay 2 years in advance. |
