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AOL-Time Warner
AOL Loses Customers

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By Goofyhoofy
February 5, 2003

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I've not seen it reported on the board, so I might as well say it:

In the most recent earnings report and for the first time in my memory, AOL reported a net loss of customers

In years past, shareholders could count on another million or so new subscribers being added every quarter. That ended a couple years ago, when the company announced that it would no longer give quarterly updates on customer counts. It was clear that the number of sign-ups was slowing down, and I recall one recent quarter where the number increased by a somewhat paltry 150,000 or so.

However in this report they noted a net loss of 170,000 customers, and that in spite of the launch of the new 8.0 version (and the attendant hoopla (?) and publicity and advertising.)

While AOL is still far and away the #1 service, it's worth noting that MSN seems to be making subscribers gains, and Earthlink is about flat (I think, I haven't seen much about them recently.)

I do not believe the losses are due to "cut rate" services, although there certainly could be some of that. I'm sure the losses are largely to "broadband", particularly in areas where AOL does not control the cable system. Although they have a decent footprint, their territory for "dial-up" was virtually the entire country; their territory for "cable" is 1/5 of that. It's hard to sell something when the guy who owns the wire coming into your home doesn't want you to sell it.

I must say that in a world of "instant content from anywhere", the AOL "organized content" is less compelling, although there will always be a market for "orderly", as well as for "parental controls" and other things which AOL offers. That will be small solace for those who have invested based on "future growth", and for those (including myself) who thought that AOL would be able to massage the TW media businesses into a content base from which to launch new and profitable services such as "music sharing" and "video sharing" and others.

The recalcitrance of the TW factions has killed any possibility of that happening, and perhaps it was a pipe dream anyway, given that you can't control the distribution unless you control the distribution (duh), and Time Warner Cable is too fragmented, and now too small (given the AT&T/Comcast/TCI combination) to have such clout.

At any rate, the small cable footprint coupled with declining customer base for their on-line service about seals it. Welcome back to Time Warner, which also has a dial-up online service now in decline, without a reasonable strategy to round the next corner.

It didn't have to be this way, but sometimes spit happens.

It's happened.


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