Valerie | 30 Apr 2009, 10:18
Time Warner, owner of the Warner Bros movie studio and CNN has announced it is nearing a decision to spin off its AOL internet division – the Financial Times reports.
Described by the New York Times as a move that will bring the media conglomerate closer to untangling what many consider one of the most unsuccessful mergers in American corporate history, the news came as the company reported a 14 per cent decline in quarterly net profit due to a drop in online and print advertising.
Revenue from publishing, AOL and Warner Brothers all declined, while revenue at the cable networks, which have been “the most durable segment of the media industry during the recession”, rose to $2.8 billion from $2.7 billion.
AOL’s $182bn purchase of Time Warner in 2001 was widely anticipated as “heralding the perfect marriage of offline content and online media delivery”. However, with AOL’s subscriber base consistently dropping since 2002, the deal led to some record losses as Time Warner has struggled to redefine itself as an internet content provider and adapted its business model from selling subscriptions for Web access to selling advertisements next to Web content. It has also faced competition from other ad-based businesses such as Yahoo and MSN as well as from an ever-growing array of smaller blogs and niche Web sites.
Reuters reports that chief executive Jeffrey Bewkes is investing more heavily into its growing content operations and trying to turn Time Warner back into a traditional media company consisting of cable networks like HBO, CNN and TNT, the Warner Bros film studio, and publishing units.
Many commentators broadly welcomed the move, asserting that “with Time Warner putting them on their own, there’s a chance that they’ll be able to rebuild a business”. Along with investing in new advertising technologies, analysts recommend that AOL rebuild its audience by “hunting down small but respected publishers with desirable audiences, like travel and finance blogs”:
“AOL has a franchise that could endure for a long time. It could thrive by connecting with all the buzz we see today in the blogosphere.“