AOL Time Warner units collaborate on AOL recovery
Monday November 25, 4:00 pm ET
By Reshma Kapadia
NEW YORK, Nov 25 (Reuters) - Almost three years after America Online announced its purchase of Time Warner, the divisions within the media giant are finally beginning to work together, sources familiar with the situation say.
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For nearly two years, efforts toward collaboration between AOL Time Warner's (NYSE:AOL - News) divisions, entrenched in a culture of fiefdoms, met with resistance. But a new management team is making some headway in developing new services and programs aimed at returning America Online to growth, the sources said.
"It's the first tangible evidence that the Time Warner people who took over AOL are running it as a company, versus warring factions," said Mark Edmiston, managing director of investment banking firm AdMedia Partners.
To curtail the slowdown in America Online's subscriber growth and offset sharp declines in advertising revenue, the company is expected to offer more news and programs by tapping into its other units. That is a move critics say should have started in the early days of the $106.2 billion merger.
In addition to highlighting new programming -- created in conjunction with divisions that are home to "The Sopranos," "Friends" and artists like Faith Hill and Madonna -- the sources say America Online also may charge for access to some specialized content.
The publishing unit, a major component of the former Time Warner, is also working with America Online. Web surfers who want to read stories from Time Inc. magazines such as People, Time and Sports Illustrated will likely have to be AOL subscribers or pay a fee, the sources said.
To maintain a relationship with those who switch to high-speed Internet service providers, America Online will more aggressively market plans that allow subscribers to keep AOL e-mail, messaging and content.
The company's recovery blueprint will be unveiled to investors at a meeting in New York on Dec. 3. AOL Time Warner executives hope the effort will help reverse a 65 percent decline in the stock since the deal closed in January 2001.
NEW REGIME SETS STAGE
A new senior team, filled with many Time Warner veterans, has played a central role in the recent efforts. It follows early efforts that tried to "force" synergies among the company's various businesses.
The new team, led by Chief Executive Richard Parsons, former HBO head Jeff Bewkes and former Time Inc. chief Don Logan, says operating each business is a priority. But it has also encouraged executives to cooperate more.
"It's a demonstrative commitment to the merger because despite the fact they were owned by the biggest online service, Time continued to its own Web thing," AdMedia's Edmiston said.
Moving the bulk of the content from Time Inc.'s Web sites to America Online will help cut costs. However, the move is largely a symbolic one -- at least at first -- since many people are unlikely to pay for repurposed content, he said.
While the effort is largely another perk for America Online's subscribers, it could turn into a platform for paid content if Time Inc. offers breaking news that is complementary to what appears on its magazine pages, analysts said.
BROADBAND STRATEGY
By offering more programming and perks, America Online is hoping its subscribers will stay with the service, even as they move to high-speed access.
In an effort to keep a relationship with those who switch to another access provider, America Online is expected to promote its "bring-your-own-access" plan more aggressively, sources said.
The plan, which executives have largely been indifferent toward until now, gives users AOL e-mail, messaging and content for a lower fee than that paid by subscribers who use AOL as their access provider.
"For AOL, so much of broadband strategy depends on what they are doing with BYOA," said Jupiter Research analyst Dylan Brooks. "What they are seeing in terms of success of that product is beyond their expectations and beyond what they are getting with broadband product itself.
"Then there is a layer on top of it because someone else swallows the telecoms costs. In a lot of ways, that's where they want to be right now," he said.
Brooks noted the BYOA option is an attractive strategy that AOL rival Microsoft Corp.'s MSN is also pursuing -- at least until broadband deals are more economical and it irons out all the wrinkles of providing its own service.
AOL also plans to offer gaming and auction services and may expand into dating and travel as it launches initiatives that will benefit from always-on high-speed broadband connections, sources said.
AOL's stock has been on an upward trend since early October. The shares gained 32 cents to $16.21 in late trading on Monday on the New York Stock exchange. |
