Goodbye AOL, Time for Time Warner to Get Going

I’ve recently been reading about Time Warner in the Wall Street Journal.  The article is entitled, “Time Warner Profit Hurt by Time Inc., AOL” (11/5/09, Section B7).  Time Warner is an absolutely enormous company that is a part of every American’s life.  They own the magazines at your dentist’s office—People and Time.  They own the TV station playing while you work out at the gym—CNN.  They own successful film franchises such as Harry Potter and Batman.  And they own AOL, everyone’s ex-internet provider.  So overall, Time Warner plays a part in your life, like it or not.  And I’m sure that Chief Execute Jeff Bewkes likes that fact quite a bit.  But that said, Time Warner isn’t doing so hot these days.  Their advertising sales continue to fall (that’s seven consecutive quarters of negative gain if you’re keeping track).  In addition, they are still hampered by AOL, who merged with Time Warner in 2000.  I can say without hyperbole that this merger one of the worst business moves in history.  According to an article I found on the BBC’s website, in 2002 Time Warner lost $99 billion in a single year, which at the time was “the largest annual loss in US history.”  Wow, that’s a bad merger.  So what is Time Warner doing to try and turn it around?  Well, they’re getting rid of AOL for starters.  According to the Journal, “Time Warner plans to spin (AOL) off into a separate company before the end of the year.”  In my view, dumping AOL will be a financial, and perhaps more importantly, a psychological boost for Time Warner.  But that’s certainly not the end of their troubles.  Time Warner is heavily invested in magazines.  The Journal cites that they own over two dozen of them.  Print media isn’t exactly burning up the financial chart these days, and that is certainly the case here.  In addition, the aging Harry Potter didn’t do as well at the box office this last time around.  Also, add revue is down at CNN because there isn’t a Presidential election to cover this year.  Ratings have also fallen at TNT and TBS.  Of course, you could blame a lot of this on the economy, and they are.  Management has been cutting costs as a result.  They also see “some signs of strength in its film and cable-TV businesses,” according to the Journal.  But the article also states that after the AOL spinoff Time Warner will “rely on its cable-TV networks for the vast majority of its profits.”  This doesn’t seem to me to be a place where a diverse content provider like Time Warner should be—dependent upon one source for most of its profits.  Time Warner had the right idea to branch into the Internet with AOL, in my opinion; they just picked the wrong company to merge with.  I think that now that they are freeing themselves from AOL, it is time to look into the Internet again.  This will take guts, but there is no doubt that this is where the future resides.  Overall though, I’m confident that Time Warner will be able to figure out new ways of generating revenue.