Just An Online Minute... AOL Spinoff?

by Tobi Elkin, Mar 19, 2004, 12:00 AM

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Multiple press reports are circulating (again) about the potential spinoff or sale of Time Warner's America Online division. These reports seem to ebb and flow driven by multiple factors---rumors swirling in the investment banking community, Time Warner earnings reports, the uphill slog for AOL in converting dial-up subscribers to broadband, ongoing federal probes into allegations of improper accounting, and the list goes on and on.

Jon Miller, AOL's chief executive officer, is set to brief Time Warner board members on the division next month. A few published reports indicate that Microsoft Corp. has been talking to Time Warner about AOL for several months with regard to a potential tie-up.

Take all the pot shots you want, AOL still has 24 million members. It also lost 2.2 million dial-up subscribers in 2003. Growth in the dial-up segment as we all know, has slowed considerably.

AOL has been extremely quiet on the ad sales front. I have seen some ads and sponsorships but it remains unclear to me and more importantly, to much of the marketplace, what the ad sales strategy is. I suspect that some decent packaging opportunities will come for AOL via the broadcast upfronts. The thing is, AOL has some decent programming and it's aggregating big audience numbers. That has to be worth something.

As for a spinoff, it sure looks like AOL is burnishing select products and services. That's probably a good thing. I hear the running man will return to advertising--also a good thing. I have been a proponent of a spinoff for more than two years. And while it appears that Time Warner units, particularly Time Inc., are collaborating more readily with AOL, I believe the division ultimately should go its own way.

But there's something else too. A missed opportunity at least four years ago when a decision ought to have been made to bundle AOL with Time Warner Cable's fabulous Road Runner service or its cable modems. I love my Time Warner cable modem. LOVE IT. Wouldn't trade it. But since I took a special promotion for broadband with TWC and Earthlink, I'm stuck with Earthlink. I would have been happy to have AOL as my email interface when I made the switch to broadband at home.

What a missed opportunity for millions.

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