peacelover,
I would guess AOL management expects absolutely no less than 9.9 million of their unaudited member roster to remain (11 million X 90%). In other words, their reasoning must have been something like, "Well, let's see, if we raise prices 10% and we lose less than 10% of our clients, we come out ahead...". The equation is likely more complex than this, as it depends on which "kind" of clients bolt -- heavy/average/light time users, heavy/average/light ad readers, heavy/average/light commerce spenders, etc. -- but the basic logic seems about right.
Of course, they probably considered the effect the new rate would have on their growth in new subscribers and 1/4 to 1/4 and year to year ad and commerce growth, which all will be at least somewhat less than it would have been without the rate hike. Then again, if all the low hanging fruit had already been picked by them, maybe their subscriber growth is leveling off anyway and the price hike is immaterial.
IMHO, I would suppose they are hoping to lose not more than about 5% of their current members. Anything more than that and they goofed. In any event, the stock goes up anyway. :-) |
