In terms of the AOL division's financial performance, the division's EBITDA in the third quarter plummeted 30 percent while revenue declined 7 percent. AOL's advertising and commerce revenue took a huge hit, dropping 48 percent from last year to $321m. Advertising accounted for $267m of the total. Of the $267m in advertising, $164m came from long-term contracts that run out in 2003, the company said. AOL's primary business of selling online service subscriptions showed a 15 percent increase in revenue. Subscriber growth, however, remained essentially flat at 35.3 million, from 35.1 million last quarter. Of these subscribers, 26.7 million were from the US while 6.1 million were from Europe. However, subscribers in Latin America declined by 71,000. Out of the 26.7 million subscribers in the United States, 18.8 million are paying the full $23.90 a month fee, 3.6 million are paying reduced fares -- such as AOL's $14.95 a month "Bring Your Own Access" plan -- 1.4 million are on PC bundling arrangements and another 2.9 million subscribers are using the service for free, through promotions and trial period offers. AOL: the dent in the crown
The restatement will primarily hit AOL, which will have its revenue reduced by $168m. The remaining $22m will come from AOL Time Warner divisions that maintained internal advertising deals with AOL. The restatement amounts to about 1 percent of AOL's total revenue for the period, about 3.4 percent of its advertising and commerce revenue, and about 1.9 percent of total EBITDA for the division. Most of the revenue reduction, about $66m, will affect the period ending 30 September, 2000, which was shortly after AOL and Time Warner announced their intention to merge. During this period, AOL and Time Warner underwent a laborious merger review process by federal regulators who were concerned that the combination would create unfairness in the market for high-speed services. The deal reportedly was at risk of dissolving during this period. AOL Time Warner also is being investigated by the Securities and Exchange Commission and the Department of Justice over its accounting practices. The SEC has also been investigating AOL's former head of business affairs, David Colburn, who allegedly structured many of the questionable deals. Colburn left the company in August. Plugging holes in AOL
In an earnings conference call, AOL Time Warner's Parsons said the company plans to hold an all-day meeting for Wall Street analysts outlining AOL's recovery plans. Currently, division chief executive Jonathan Miller and Don Logan, the chairman of AOL Time Warner's media and communications group, are completing a strategic examination for the business. The results will be presented to analysts on 3 December. The meeting will be a "balanced mix of where we are today and the beginning of a roadmap of where we're going", Parsons said on Wednesday. Parsons also mentioned that AOL executives will offer a glimpse of a new broadband product. AOL has been in a quandary with its broadband efforts. On one hand, it risks losing its dial-up member base to competing broadband services offered by telephone and cable companies. However, by pushing its own broadband service it also risks cannibalising its dial-up business, which offers better margins than broadband because AOL must share revenue with cable systems such as AT&T Broadband. Still, Parsons said the company is developing a high-speed product that will hopefully convince potential broadband subscribers to sign up for AOL. "Having a viable broadband product is what's going to drive penetration," he said.
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