- The Washington Times - Wednesday, December 4, 2002

America Online executives yesterday announced a plan to turn around the Internet division of AOL Time Warner Inc. and salvage the company's languishing stock.
AOL will introduce more products and services and increase the amount of Time Warner content available to high-speed subscribers to help stabilize the stagnant Internet unit.
But AOL is unlikely to rebound until 2004.
"We see 2003 as the year we bottom out," AOL Chief Executive Officer Jonathan Miller said yesterday during a presentation for investors in New York.
AOL bought Time Warner for $106 billion nearly two years ago. At the time, the purchase was hailed as a visionary union of a media giant with massive amounts of information and a fast-growing technology company with millions of subscribers.
But the deal has proven nightmarish for people such as AOL Time Warner Chairman Steve Case, who has deflected criticism for the poor performance of the new company.
So AOL Time Warner Inc. had Mr. Miller, who was hired in August, and a host of executives including Mr. Case outline a plan to revive the Internet unit. About 700 investors were on hand at a New York hotel to hear AOL officials describe the plan.
"AOL is a business in transition," Mr. Miller said.
AOL, which is based in Sterling, Va., has dragged down AOL Time Warner Inc. since the two companies joined, primarily because of a slumping advertising market. The division's revenue from advertising, which reached $2.3 billion in 2001, will fall to an estimated $1.6 billion this year.
AOL executives said yesterday that advertising revenue will continue to decline next year, and advertising sales will fall 40 percent to 50 percent.
"While we know these numbers are conservative, nobody expected the extent of the conservatism or implied depths of problems," SoundView Technology Group analyst Jordan Rohan wrote in a note to clients.
AOL laid off 90 workers last month from its marketing staff. The combined company's stock has fallen from $72 a share at the time of the merger to $14.21 a share yesterday on the New York Stock Exchange. It is signing up new Internet subscribers at a slower rate than in the past.
AOL Media and Communications Group Chairman Donald Logan sought to convince investors that the company would find new ways to sell ads and improve relationships with advertisers. The Justice Department and the U.S. Securities and Exchange Commission are investigating some of the company's advertising deals.
AOL executives said they are focused on improving services for its 22.1 million U.S. subscribers it has 35 million customers worldwide and persuade them to migrate to high-speed, or broadband, services.
Among the initiatives announced yesterday were plans to offer AOL subscribers video from Cable News Network for free. Content from Time Inc. magazines also will be offered exclusively to AOL members.
"AOL didn't believe in content like they do now," Mr. Logan said.
AOL also plans to introduce a voice-mail service and a cyber-commerce service, which it called an online liquidation marketplace. The goal is to create more shopping opportunities for AOL users and boost revenue through sales commissions.
AOL executives said they must work harder to persuade dial-up customers to purchase broadband service. AOL has an agreement with Time Warner Cable, the nation's second-largest cable company, to market AOL service to its subscribers. The company also has an agreement to market broadband to AT&T; Comcast customers, but that effort has not yet started.
Only 2.7 million AOL subscribers are broadband users. AOL estimates 74.8 million households will be subscribing to broadband by 2006.
"We largely missed the first wave of broadband," Mr. Miller said. "We were too focused on [signing up subscribers] and too timid about our strategy. That ends now."
AOL also hopes to attract and keep subscribers by marketing a service called "Bring Your Own Access." It costs $14.95 a month and provides access to AOL content, e-mail and other services to people who already have a high-speed subscription.
Courting broadband customers is essential not only because more people are subscribing to the service, but also because they spend more than dial-up subscribers do, AOL Broadband President Lisa Hook said.

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