• by Paul Gough , December 10, 2002

A week after AOL Time Warner told analysts that its Internet unit would have a tough 2003, Chairman/CEO Richard D. Parsons said AOL is poised to grow in 2004 and won’t be spun off.

“Could it be spun off? Yes. Would that be a good idea? No,” Parsons said Tuesday afternoon at UBS Warburg’s MediaWeek Conference in New York.

AOL’s first order of business is to “fix” the business and improve its position. Parsons said AOL Time Warner’s future will include AOL.

“It does make an awful lot of sense within Time Warner as we think about the world we’re going into, which is increasingly going to be a broadband world,” he said.

Fixing AOL is one of a five-prong strategy to revive the media giant and regain the trust of shareholders and employees. At the same time, Parsons said there wouldn’t be any “transforming” deals involving AOL Time Warner. While not addressing the possible ABC/CNN merger, he promised there would be no “silly deals.”

Parsons predicted AOL’s business would bottom out next year following a backlog of ad and commerce deals that won’t be repeated.

While AOL has in the past depended on advertising to boost its fortunes, it has been moving away from that and toward content and subscription services. Parsons said that millions of AOL subscribers find value in its offerings and they’re engaged in finding out what they like “and then giving them more and more of it.”

Parsons said the mostly dialup-service AOL is embracing broadband. While about 3 million of AOL’s 27.5 million U.S. subscribers have both dialup and broadband service with AOL or some other provider, Parsons said the Internet unit is trying to appeal to broadband users who would want to either subscribe to AOL or access at a fee its premium services. He said AOL Time Warner’s line of companies bring a lot of content opportunities that will make AOL attractive, now and in the future.

“I can’t think of a business that’s better able to create the new world in terms of interesting, compelling, entertaining content, because that’s what we do,” said Parsons.

Parsons talked of reinventing AOL similar to the transformation by Time Warner sibling HBO. HBO, faced with a plethora of competition in the movie business including home video and DVD not to mention cable competitors, reinvented itself to more than movies.

“HBO reinvented itself as a vehicle … People want something they can’t get anyplace else. I think AOL is in the same place that HBO was,” Parsons said.